B|Brief: A Second Obama Administration and Europe

NOVEMBER 7, 2012

A SECOND OBAMA ADMINISTRATION AND EUROPE

BY TYSON BARKER President Barack Obama’s re-election, albeit a victory much narrower from that in 2008, bodes for political consistency, at least in the near future. Second administrations are often about consolidating policies made during first terms; they prove moderating counterpoints to initial, ideologically charged initiatives. This was true for Ronald Reagan, Bill Clinton and George W. Bush. Obama will be no different.

Consistency will most likely mark the polarized domestic political climate that Obama will face. The hostility that he has confronted since the Tea Party wave of the 2010 mid-term election will most likely continue unabated. The return of a Republican House of Representatives means that wins at home and abroad will most likely be incremental based on executive orders, regulations and interpretations of existing legislation, rather than the product of bold, new legislative initiatives.

The recurrent meta-theme of the 2012 Obama campaign has been “balance”.1 In his debates with Governor Mitt Romney, the president spoke of a balanced approach to governance. This will be particularly true of his domestic economic policy, a blend of expenditure and revenue adjustment that he believes necessary for tackling the America’s fiscal crisis and anemic economic growth. But it will also apply to his international approach, particularly regarding Europe.

EXECUTIVE SUMMARY Obama’s second term will likely be defined by consolidation of policy achievements during his first term rather than bold, ideologically-charged initiatives.

The meta-theme of “balance” will define Obama’s approach to foreign and domestic policy.

The administration will continue to pressure eurozone, particularly German, leaders to promote growth, employment and banking-sector integration.

Europe should expect incremental accomplishments in energy efficiency and renewable energy.

Certain policy trends are likely to persist under a second Obama presidency, including the use of special-forces operations, drone strikes, and the pivot to Asia. th

The 113 Congress will see a further erosion of institutional memory on foreign policy and international economic issues.

1

See Transcript: First Presidential Debate. Retrieved from: http://online.wsj.com/article/SB10000872396390443768804578036062847454992.html

Continued eurozone engagement and economic initiatives to ignite growth President Obama’s theme of balance will continue to clash with Chancellor Angela Merkel’s approach to eurozone crisis management while meriting kudos from Paris, Rome, Madrid and the ECB. For the Democrats, the pursuit of austerity-based policies in the eurozone South has brought economic pain and political unrest with little prospect of near-term growth. This critique holds that the current institutional set-up within the eurozone robs governments in Greece, Spain and Italy of the policy tools necessary to animate their economies, put vast swaths of unemployed workers back to work, and, consequently, reignite growth. Moreover, the Obama administration’s Treasury Department believes the effects of austerity on growth undermine the ability of countries such as Greece to generate tax revenue. This stance sees the eurozone crisis as vindication for the Troubled Asset Relief Program (TARP), the 2009 American Reconstruction and Recovery Act and the subsequent banking stress tests, and deep bank oversight.2 The Democratic Party platform states that the US under Obama will “continue to be in frequent contact with our European allies to discuss best practices and share valuable lessons from our own experience reversing our economic downturn, helping them chart the best way forward.” 3 Translation: The second Obama administration wants a seat at the table and will side more with an approach that includes employment and demand-driven policies, especially for the young and those in the eurozone South.

Europe can expect President Obama’s administration to spend some of his political capital on its turf.

Heavily rooted in his stratospheric popularity on the continent, he will make the case, more publicly, for deeper, more resolute integration and coordinated fiscal expansion.

Heightened engagement will not take the form of broadened IMF credit lines that would mean more indirect US assistance to the eurozone South.4 House Republicans shut down this possibility in April, and the administration decided not to expend much energy to make the case for greater lending capacity.

Rather, lending will continue to be centered at the ECB and in large member states. This was reflected in the frequency of high-level Treasury consultation between 2010 and 2012.5 As a counterpoint to his eurozone-crisis policy, President Obama seems poised to offer renewed commitment to trans-Atlantic trade. Often overlooked even in domestic discussions on trade and investment, a trans-Atlantic free trade agreement has been the subject of quiet discussions between the administration and the European Commission. Their joint High Level Working Group on Jobs and Growth (HLWG) is expected to release a final report on the feasibility of an ambitious trade agreement in

During a June 8, 2012 press conference, President Obama said of German-led austerity: “If you are engaging in austerity too quickly, it makes it harder to pay off your debts. Markets respond…if you’re contracting, they bet you’re not going to pay off your debts.” Armistead, L. and Waterfield, B. (8 June 2012).

Debt Crisis: Barack Obama Demands Action as Eurozone Leaders Ponder Under Spanish Bank Rescue. The Daily Telegraph. Retrieved from: http://www.telegraph.co.uk/finance/financialcrisis/9320507/Debt-crisis-Barack-Obama-demands-action-as-eurozone-leaders-ponder-Spanish-bankrescue.html 3 See Moving America Forward: 2012 Democratic National Platform. Retrieved from: http://assets.dstatic.org/dnc-platform/2012-National-Platform.pdf 4 Boak. J. (20 April, 2012). House GOP Doesn’t Want IMF Funds to Go to Greece. Politico. Retrieved from: http://www.politico.com/news/stories/0312/74247.html 5 Of the 168 meetings and phone calls held with European leaders by Secretary Geithner during that period, most were either with the ECB president (58) or German Finance Minister Wolfgang Schäuble (36). While Geithner traveled to Europe 21 times over the course of the first Obama term, he made no visits to Brussels. Pisani-Ferry, J. (4 November, 2012). Tim Geitner and Europe’s Phone Number. (web log post) Bruegel. Retrieved from: http://www.bruegel.org/nc/blog/detail/article/934-tim-geithner-and-europes-phone-number/ 2

December.6 Earnest movement is expected in 2013. The movement forward with a TAFTA with accords on investment, services and agriculture would be welcomed in Berlin, London and at the European Commission, whose political leadership in the presidency and in Directorate-General Trade sees TAFTA as a potential legacy of the second Barroso term (2009-14).7 There are two potential challenges for a nascent TAFTA agenda in Obama’s second term. The first is the record on his signature first-term trade initiative, the National Export Initiative (NEI), launched in 2010.8 While the NEI was able to make substantial export gains from its 2009 point of departure, it will fall significantly short of meeting its headline goal of doubling US exports in five years.9 NEI and its investment-promotion counterpart, SelectUSA, have demonstrated growth in exports and FDI but have lacked the sustained political follow-through necessary to meet ambitious targets. It is important that a potential TAFTA does not suffer a similar fate.

The second, perhaps larger, challenge to a potential TAFTA is the implementation of trans-Pacific Partnership (TPP), the main economic-policy component of the US pivot to Asia.10 Simultaneously investing in separate comprehensive trade and investment deals with the world’s two largest economic regions — Europe and East Asia — would represent the most ambitious trade agenda in a generation and could prove challenging for the new administration given the divided Congress.

Finally, the second Obama administration will also be committed to pursuing policies to mitigate climate change in a resolute, albeit low-key fashion. This includes regulation and programs, such as trade financing and established tax credits, that have allowed for state-based industries such as wind-turbine factories in Iowa and smart-grid technology development Virginia.11 The president’s inability to shepherd through the Senate a comparable piece of legislation to the Waxman-Markey bill on a comprehensive cap-and-trade system demonstrated that a legislative approach to climate change in the US will require immense coalition-building and a sympathetic Congress similar to the conditions required for the passage of the Affordable Care Act in 2009.

However, the president’s successful management of emergency services during Hurricane Sandy and the subsequent reflection on the storm could allow the president to ratchet up his rhetoric on climate change as a significant policy challenge. He may begin to build a coalition for later legislative action.

Continued recasting of security operations Certain defense and security policy trends are also likely to continue under a second Obama term. NATO will remain an alliance whose operations will be constituted more in terms of pragmatic partnerships based on the assets that member states are able and willing to contribute. As such, the administration 6

See Interim Report to Leaders from the Co-Chairs:EU-U.S. High Level Working Group on Jobs and Growth. Retrieved from: http://trade.ec.europa.eu/doclib/docs/2012/june/tradoc_149557.pdf 7 See Speech by Chancellor Merkel at the 60th Anniversary Celebrations of the Atlantik-Bruecke. Retrieved from: http://www.germany.info/Vertretung/usa/en/__pr/P__Wash/2012/07/18-merkel-speech-at-bruecke-1.html 8 http://trade.gov/nei/ 9 See Progress Report on the National Export Initiative. Retrieved from: http://www.whitehouse.gov/sites/default/files/exports_progress_report.pdf 10 The White House Office of the Press Secretary. (12 November 2011). Fact Sheet: The United States in the Trans-Pacific Partnership. (Press Release).

Retrieved from: http://www.whitehouse.gov/the-press-office/2011/11/12/fact-sheet-united-states-trans-pacific-partnership 11 See White House Office of the Press Secretary. (14, August 2012). Remarks by the President on Wind Energy. Retrieved from: http://www.whitehouse.gov/the-press-office/2012/08/14/remarks-president-wind-energy

will most likely continue to approach the alliance through a more cerebral, less sentimental partnership framework. The alliance as such will not see the visionary renewal that some observers in Europe see as important, but it will continue to serve as an ad-hoc tool box for out-of-area operations.12 On Iran, some reports indicated a willingness on the part of US officials to hold bilateral negotiations over Iran’s nuclear program at the conclusion of the election. Administration officials had been quick to deny such reports prior to the elections, however, arguing that bilateral negotiations would undercut President Obama’s policy of mixing multilateral engagement with pressure on Tehran through economic sanctions. President Obama will instead hope to gain concessions from Tehran in its nuclearproliferation drive by maintaining an active role for the P5+1, an international coalition to which the European sanctions regime has been a centerpiece.

The Obama administration will continue to leverage relationships with rising middle powers. For the acute crisis in Syria, this means continual consultation with Turkey, an upgraded relationship that has started to yield modest but tangible dividends. Obama and Turkish Prime Minister Recep Tayyip Erdoğan have worked closely together over the last four years, and this has translated into more active US support for Ankara.13 During his first overseas trip as president, Obama called for a greater role for Turkey within NATO and outlined professed support for Turkish EU membership.14 The Obama administration also allowed Turkey to engage Kurdish militants in Iraq’s northern region, a move that reversed the policies of the previous Bush administration. In return, Obama has gained considerable concessions from Ankara, such as the 2011 agreement to host an early-warning radar system and acquiescence to NATO intervention in Libya. As Egypt grows increasingly distant from Washington and as Europe’s ongoing financial crisis continues to hamper its ability to coordinate a strong policy in the region, Washington and Ankara will increasingly turn to each other for support as security actors.

The pivot to Asia that began under George W. Bush will continue and perhaps accelerate, as it will become an indelible part of Obama’s legacy as the first “Pacific” president. Obama’s economic actions in the region will be coupled with a strategic US rotational deployment of 2,500 marines in Darwin, Australia and the presence of four littoral combat ships in Singapore.15 In this area, the administration has indicated a desire to see increased political cooperation with Europe. The Joint US-EU ASEAN Regional Forum statement released in Phnom Penh in July 2012 is a template for the potential future political balance between the US and Europe, where the US will play the lead role.16 As a compensatory measure, the administration will also continue to lean on the EU and its constituent member states to assume, eventually, the role of senior partner in the stabilization and transition efforts in Arab states, particularly those in North Africa.

North Atlantic Treaty Organization. (20 May, 2012). Chicago Summit Declaration Issued by the Heads of State and Government Participating in the Meeting of the North Atlantic Council in Chicago on 20 May 2012. (Press Release). Retrieved from: http://www.nato.int/cps/en/natolive/official_texts_87593.htm?mode=pressrelease 13 Ignatius, D. (7 June, 2012). Obama’s Friend in Turkey. Washington Post. Retrieved from: http://www.washingtonpost.com/opinions/david-ignatiusobamas-friend-in-turkey/2012/06/07/gJQAAhqCMV_story.html 14 Champion, M. and Fassihi, F. (6 April 2009). Obama Urges EU to Accept Turkey, But Member Nations Remain Cool.” The Wall Street Journal. Retrieved from: http://online.wsj.com/article/SB123897560753691203.html 15 See Siegel, M. (4 April 2012). As Part of Pact, U.S. Marines Arrive in Australia, In China’s Strategic Backyard. The New York Times. Retrieved from: http://www.nytimes.com/2012/04/05/world/asia/us-marines-arrive-darwin-australia.html 16 See Joint EU-US Statement on the Asia-Pacific Region. Retrieved from: http://eeas.europa.eu/delegations/india/documents/press_corner/press_release_13_07_2012.pdf 12

Intervention fatigue is strong in the US after the protracted conflicts in Iraq and Afghanistan. War weariness transcends both parties despite rhetorical attempts to create distinctions in the campaign, and Obama will remain reticent to commit to massive overseas military operations. When commitments are made, they will involve highly specialized deployments such as special forces and military technical assistance such as intelligence, surveillance and reconnaissance (ISR) capabilities.17 And he will continue the heightened use of drone strikes in Pakistan and Yemen as an anti-terrorism tool. With overwhelming support from the American electorate (62 percent approve), such strikes will likely remain a mainstay of US counterterrorism policy.18

New foreign-policy leadership in Congress, but depleted institutional memory of Europe Congress will most likely emerge from the election with a similar composition. When the lame-duck session begins on November 13, lawmakers will have just five weeks — about 16 legislative days — to address a range of issues, including sequestration and the expiration of the Bush tax cuts. For President Obama winning the election is a vote of confidence for his balanced19 approach, but Speaker of the House John Boehner (R-OH) has stated he intends to pursue short-term deals, rather than grand bargains, during the lame-duck session.20 Ultimately, though Obama’s re-election does carry leverage for Democratic lawmakers, Republicans will continue to promote a divided government over an Obama mandate.21 The lame-duck session will focus on achievements with broad-based Congressional consensus, some of which will have repercussions for Europe. House sources are certain that EU Emission Trading Scheme (ETS) Prohibition legislation – a provision that will authorize the Department of Transportation to determine whether or not US airline carriers will be compelled to participate in the ETS – will be taken up with the House’s adopting the Senate version of the bill. A relatively uncontroversial bill to repeal the Jackson-Vanik Amendment and grant permanent normal trade-relations status to Russia may also be brought to the floor. This bill will be packaged with Magnitsky legislation that will restrict travel to the US for Russian human-rights violators. Senate Majority Leader Harry Reid also plans to bring cybersecurity legislation to the floor. However, congressional sources indicate that this may not be a strong effort. But it opens the door for an executive order. Even if Senate legislation is passed, Congress will have to act quickly to conference the House and Senate bills.

The 113th Congress will produce a group of elected officials lacking institutional memory on foreign policy and international economics, continuing the erosion of experienced foreign policy hands in Congress that began with the 2010 wave election. High committee-leadership turnover will bring challenges for Europe and opportunities to develop new influential allies on the Hill.

The Senate Foreign Relations Committee (SFRC) and the House Foreign Affairs Committee (HFAC) will have leadership changes. Ileana Ros-Lehtinen (R-FL), HFAC chairwoman and stalwart anti-Castro crusader, is term-

See Bumiller, E. and Shanker, T. (5 January 2012). Obama Puts His Stamp on Strategy for a Leaner Military. The New York Times. Retrieved from: http://www.nytimes.com/2012/01/06/us/obama-at-pentagon-to-outline-cuts-and-strategic-shifts.html 18 Pew Research Center (13 June, 2012). Global Opinion of Obama Slips, International Policies Faulted. (Report). Retrieved from: http://www.pewglobal.org/files/2012/06/Pew-Global-Attitudes-U.S.-Image-Report-FINAL-June-13-2012.pdf 19 Vasilogambros, M. (2012) http://www.nationaljournal.com/2012-presidential-campaign/obama-with-win-mandate-for-balanced-debt-approach20121029 20 Hunter, K (2012) “Boehner: No Interest in Taxes for Lame-Duck Fiscal Cliff Deal” http://go.bloomberg.com/political-capital/2012-11-05/boehner-nointerest-in-taxes-for-lame-duck-fiscal-cliff-deal/ 21 Berman, R. (2012) “Election Day marks beginning of mad political scramble in Congress” http://thehill.com/homenews/campaign/265667-election-daymarks-beginning-of-mad-political-scramble 17

limited and indicated she will step down.22 Chris Smith (R-NJ), who holds HFAC seniority, will face off against Ed Royce (R-CA) for the top spot. Royce is rumored to have the edge due to his role as deputy chairman of the National Republican Congressional Committee and questions about Smith’s party loyalty. The retirement of Dan Burton (R-IN) also leaves a chairmanship vacancy on the Europe and Eurasia Subcommittee. On the Democratic side, HFAC Ranking Member Howard Berman (D-CA) and senior HFAC committee member Brad Sherman (D-CA) battled it out in a vicious race for the Los Angeles seat due to re-districting. Sherman’s loss means the jockeying for his position will begin with the next Congressional session.23 The SFRC could have two new leaders by the end of 2013. Bob Corker is expected to replace outgoing ranking Republican Richard Lugar (R-IN), who lost his primary in May. On the Democratic side, current Chairman John Kerry (D-MA) may be nominated to replace Secretary of State Hillary Clinton. Senator Barbara Boxer (D-CA), who has SFRC seniority, would likely decline the position to hold on to her chairmanship of the Senate Environment and Public Works Committee, leaving Robert Menendez (D-NJ) to take the gavel.

Senator Chairman Joseph Lieberman’s (D-CT) retirement leaves vacant the chairmanship of the Senate Homeland Security and Governmental Affairs Committee (HSGA). Tom Carper (D-DE) is Lieberman’s likely successor.

Current House Committee on Homeland Security Chairman Peter King (R-NY) has reached his term limit and has not announced whether he will ask for a waiver to allow him to remain. But a race for his leadership role has already begun among Michael McCaul (R-TX), Candice Miller (R-MI) and Mike Rogers (R-AL). Jeb Hesarling (R-TX) is expected to replace Spencer Bachus (R-AL) as chairman of the Financial Services Committee. His term ends in January. Maxine Waters (D-CA) is likely to ascend to ranking member as Barney Frank (D-MA) retires.

With the exit of more experienced lawmakers, this new class of Congressional leaders will be looking to develop legislative portfolios and will be less inclined to cooperate across the aisle.

More work to do President Obama’s re-election will be greeted with relief on the European street. A recent poll by the international market research agency YouGov has indicated that, if Europeans could have voted, 90 percent of them would have supported President Obama.24 But the genuine elation that accompanied his initial election in 2008 will be lacking. European expectations for a second Obama presidency will be modest.

Obama will continue his cerebral approach to Europe, drained of the sentimentality that has often been a hallmark of the relationship. His engagement with the continent will increase. But European leaders will continue to be willing to express prominently their policy differences with the president. That said, both sides will also be interested in demonstrating an early willingness to create a constructive relationship.

Tyson Barker is director of trans-Atlantic relations at the Bertelsmann Foundation. He can be reached at tyson.barker@bfna.org.

22

Newhauser, D (2012) “Term Limits Heat Up GOP Gavel Contests” http://www.rollcall.com/issues/58_25/Term-Limits-Heat-Up-GOP-Gavel-Contests-217918-1.html Rogin, J. (2012) “Whoever, wins, Congress is headed for a shakeup on foreign policy.” http://thecable.foreignpolicy.com/posts/2012/11/02/whoever_wins_congress_is_headed_for_a_shakeup_on_foreign_policy 24 YouGov. (31 October 2012). If Europeans Could Vote in the US Election, Obama Would Win by 90%. (Press Release). Retrieved from: http://cdn.yougov.com/cumulus_uploads/document/b718r6cplo/Romney%20EuroTrack%20release.pdf 23