Why the Centrist Victory in France is Good for America
The victory of Emmanuel Macron, the centrist candidate who defeated populist, far-right contender Marine Le Pen in the recent French elections, is being touted by pundits as a victory for moderation in French politics.
By all accounts, Macron was indeed the most moderate candidate among the original 11 whose names appeared on ballots in the first round of France’s elections in late April. He was also the only candidate in favor of political and economic multilateralism, which was purported to have fallen out of vogue among Europe’s, and specifically France’s, increasingly disenfranchised masses.
Granted, the new president’s economic policies may raise eyebrows among free-market purists. He has called Europe’s approach to globalization imperfect and suggested a stronger stand must be taken with respect to the implementation of antidumping policies targeting Asian nations that compete unfairly within Europe. He has also favored a Buy European approach that would limit EU procurement to companies that maintain at least half their production within the EU.
But he has also been openly opposed to the blanket protectionism proposed by his main opponent, Marine Le Pen, whose platform included a three percent tax on all imports and favored French companies for any public procurement projects. Macron, conversely, is in favor of CETA, the contentious free-trade deal signed between Brussels and Ottawa, and has expressed a general openness toward trade that may not just be all talk. According to the Japan Times, the first bilateral summit between Macron and Japanese Prime Minister Shinzo Abe on May 27 was heavily focused on fighting protectionism and finding a path toward free trade between Europe and Japan.
The prevalence of moderation in the outcome of the French election is not only a win for France, but also one for the United States and a number of other G7 nations. France is the kind of country whose economic impact on this side of the Atlantic often falls under the radar of economic observers, but is actually quite substantial. Last year, France was our eighth largest trading partner, accountable for some $77 billion in goods trade, according to the US Census Bureau, representing a 44 percent increase since 2000.
Perhaps most noteworthy is French industry’s willingness to inject much needed foreign investment into the US economy. Foreign direct investment from France into the U.S. reached $234 billion in 2015 (on a historical-cost basis), making the US one of France’s top destinations for FDI. That investment generates an estimated 500,000 high-wage jobs in the US. In fact, according to the US. Bureau of Economic Analysis, investment from French-owned companies produced the second-highest number of FDI-related jobs in the U.S. in 2015 (after Canada). Similarly, the US invests heavily in France with America representing the fourth-highest inflows of FDI into France.
With that kind of economic reciprocity, there’s good cause to keep relations with France (and many other European nations) friendly and trade activity relatively unfettered. Such close economic ties between the U.S. and European nations served as the basis for the ongoing negotiations for T-TIP (the Transatlantic Trade & Investment Partnership). That free trade deal between the two entities has been on hold since last year when protectionist and populist movements in Europe began to call into question the value of pursuing trade talks.
But things are beginning to look up for trade and multilateralism. When Republican House Speaker Paul Ryan visited London in late April, there was much chatter about the potential for a US-UK trade deal and similar possibilities around trade talks with Europe, though there was strong emphasis around fair trade and smart trade agreements. Similar sentiments were expressed by US Commerce Secretary Wilbur Ross, though he emphasized that the immediate focus would be on revisiting NAFTA.
Such comments are encouraging from a US administration that had previously expressed a rigid desire to negotiate bilateral agreements with individual European states, and bodes well for transatlantic relations.
Together, the victory of centrist forces in France on the heels of a similar anti-populist vote in the Netherlands last month, and the newfound willingness of Washington to talk trade with Europe, offers a dramatic shift in sentiment toward trade policy relative to what was prevalent just a few months ago. Even within North America, talk of NAFTA being scrapped has been shelved and replaced with a tripartite desire for a renegotiated agreement.
The fact that cooler heads are prevailing among key players in the industrialized world is an indication that the historic value of trade and its positive impact on industrialization, employment and innovation is being recognized by policymakers, even in those constituencies with strong populist movements.
However, to really win over hearts and minds, it will be incumbent upon policymakers to craft trade agreements that take into account the concerns raised by populist voices, so that they are able to benefit from trade and foreign investment, rather than feel alienated by it.
Such a feat is neither simple nor impossible, but it will require a new approach to trade negotiation than what had been employed in the past. Failing to do so will simply result in a vicious cycle of trade advancement, followed by anti-trade populism and anti-trade politics, the last of which is detrimental to economic growth, business investment and gainful employment.
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