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Anu Shah

Anu Shah is cofounder and CEO of UShift, a Rocket Internet company offering an on-demand staffing platform aiming to make it easier for businesses to post jobs and get matched with qualified and skilled workers looking for temporary work.

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EU Can Reinvent Itself by Making Canada Part of its Trade Block and Give Birth to Multipolar Trade Alliance

If the EU plays its cards more astutely and form an extended trade union with Canada, it can become a major game changer and gain a more powerful position for negotiations with the US.

During my time in the business school, I learnt that there are two popular negotiation styles -  first,  adopt an early anchor strategy, and second know and exploit the counterparty’s best (realistic) alternative. The first method is simply the means to set the bar and claim a highly favorable position to oneself. This method somewhere forces the other party to negotiate from our point of advantage and sway away from their core position. The second one is to analyze what the counterparty’s best realistic alternative is if a deal is not struck. One party needs to walk away from the deal, find another realistic alternative or improve on one’s position. When that is done, the trick is to re-engage with the other party by throwing out your own anchor. 

In recent times Trump has played out the first part of the negotiation tactic by imposing tariffs on steel and aluminum imports from Canada, Europe and Mexico, thus forcing them to come back to the negotiation table and re-discuss the tariffs. However, Canada, Europe and Mexico imposed their own penalizing tariffs, seeking an opportunity to negotiate and hoping, for all the parties involved, to come to middle ground; a hope inevitably thrashed by the Trump Administration. Conclusively this situation would only lead to economic slowdown, inflated consumer prices and possible loss of jobs, reinforcing the traditional wisdom that no one wins in a trade war. 

The President of United States has called into question both the military commitment and trade treaties it offers to its allies and closest neighbors, who are also amongst its most important trading partners. This ‘ill-thought through’ Trump policy is a golden historic opportunity handed on a platter to the EU. If the European countries and the EU decide to play its cards more astutely and form an extended trade union with Canada  – calling it EUXCanda, this can become a major game changer in global politics and substantially improve its odds to gain a more powerful position for negotiations with the US.  

Canadian cultural, political and economic outlook mimics that of Europe in several ways. In fact, it is frequently joked that Canada would feel more at home if it would be situated between Belgium and the Netherlands as opposed to being placed in north of the United States. President Trump has accidentally opened the door for a bold strike to shift Canada back to the sphere of influence in Europe. Instead of playing tit-for-tat on trade negotiation, EU can adopt a long term strategy and offer Canada the opportunity to apply for a fast track admission to the European trade block. As an immediate effect the lost trade relationships between Canada and the USA would be quickly replaced with access to an even larger consumer market in Europe, and on far more common cultural trading terms. 

The audacious invitation to Canada, to apply for membership in the European Union—triggered by America’s feckless declaration of a trade war on its own allies–would inevitably trigger an anguished, overdue, and fundamental foreign policy discussion (long overdue) in Washington about the influence of EU on its northern border. As NAFTA inevitably breaks up (due to a combination of the Trump administration’s impractical demands on Mexico, and its likely July election of leftist firebrand Andreas Manuel Lopez Obrador as president), it is plausible (and also in favour of EU) that Mexico might also seek to join this alliance over time. Geo-strategically, the world would be truly turned upside down, heralding the birth of the new multipolar era.

Even at the bare minimum, such an initiative would substantially shift the trade strategy in any future negotiations with the US; wherein Canada, Mexico and Europe would sit down with the US as negotiating equals, letting Donald Trump know that the alternative to sensible trade positions between the allies of the Cold War is an absolutely ruinous policy of geopolitical isolation, with the US finding itself surrounded by the European Union on its own continent.

In summary while Donald Trump would cause a national economic catastrophe by single handedly axing and alienating its closest allies, Europe would gain by expanding tremendously by this geopolitical strategic move on another continent, thus offsetting the risk of losing global influence through Brexit. 

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

Tags assigned to this article:
eu canada CETA US trade war Trump policy

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