Is Ukraine Destined to Join a U.S.-led “Economic NATO”?

November 7, 2013
Anthony T. Salvia
Director, American Institute in Ukraine

The United States is pushing Europe to enter into a sweeping free trade pact known as TAFTA (the Transatlantic Free Trade Area). It is not dissimilar to the Association Agreement Kiev may or may not sign in Vilnius later this month.

Although European governments – including Germany – made a public show of welcoming Washington’s initiative when it was announced by President Obama last February, privately they harbor grave misgivings about having to consume quantities of genetically engineered American corn, and American beef that has been shot through with hormones. (NSA electronic spying on some of America’s closest allies hardly helps to make TAFTA any more palatable.)

More seriously, Europeans abhor the prospect of heightened competition with US farmers and manufacturers, the inevitable disruption of established trade ties with countries outside of the free trade zone, and the betrayal of their traditional commitment to multilateral trade agreements implicit in their embrace of the exclusive TAFTA trading bloc.

A study conducted by researchers at the University of Munich and commissioned by Germany’s prestigious Ifo Institute shows that TAFTA will result in diminished intra-European trade, and reduced trade between the EU and non-EU emerging market countries.

In the words of Ifo’s Ulrich Schoof, under TAFTA, “the US gains substantially more than the EU,” not least because it will not result in reduced internal US commercial activity, whereas it will have precisely that affect inside an EU whose growth rate, year on year, is now -0.6%.

No wonder the Europeans are such unhappy campers, but then that’s what you get when you cast your lot with the US imperium – the short end of the stick.

There is more than a little hypocrisy in Brussels’ insistence that Ukraine lovingly embrace the much bruited Association Agreement, which contains the very kinds of things that Europeans find most objectionable in TAFTA – above all heightened trade competition with no guarantee of success, and the disruption of trade patterns with traditional partners.

The spectacle is too rich: Europe, with a GDP per capita on a par with America’s ($32,000 vs. the US’s $43,000) hesitates – out of fear of the economic and political fallout -- to drop tariff and non-tariff barriers to trade with the United States. Meanwhile, it expects Ukraine, with a per capita GDP of $2,000, to welcome European competition with open arms, and countenance with equanimity the prospect of reduced access to the growing Eurasian market.

To add insult to injury, it assures Ukrainians, just as it did the Cypriots, the Bulgarians, the Croats, and a host of others – including the British – that Euro-integration is just the thing for Ukraine’s ailing economy.

The TAFTA negotiations are far from complete. They are expected to last for years, and may yet go the way of the Doha round of global free trade talks – the way of the dodo bird. If so, Europe will have dodged a bullet.

That remains to be seen. Meanwhile, it should come as no surprise that there is a geo-strategic dimension to Washington’s trade gambit. As US journalist David Ignatius pointed out recently in the Washington Post, America’s push for “a comprehensive agreement covering trade in goods, services, investment and agriculture,” constitutes an “economic NATO.”

He says that with the disappearance, since the end of the Cold War, of an overarching military and security threat to Europe, and in view of the (at best) ambiguous results of Western military campaigns, whether NATO-led or in the guise of “coalitions of the willing" (in Yugoslavia, Iraq, Afghanistan, Libya, and Mali), the hyper-interventionism of the Western camp is increasingly untenable. Both the US and Europe, says Ignatius, are battle-weary and have a lot of “nation-building” to do at home. As military interventionism can no longer be counted on to hold the Western alliance together, economics must play that role. Quoting US foreign policy expert Charles Kupchan, approvingly, he says our task now is to turn “the world’s premier security alliance into the world’s premier economic pact.”

Zaki Laidi, professor at the Institut d'études politiques in Paris, sees TAFTA as a bid “to contain China.” Possibly, but why range so far afield? It could just as well be part of a bid to end German economic hegemony in Europe and contribute to the encirclement of Russia by encouraging the EU to absorb Ukraine through the Association Agreement.

That explains the oft-overlooked, but significant Title II of the agreement, which commits Ukraine to work for “gradual convergence on foreign and security matters with the aim of Ukraine’s ever deeper involvement in the European security area.” There is no question who would be the hegemon in a converged economic/security structure, with the U.S. perhaps even displacing Germany’s economic leadership.

The penchant of the Washington establishment to set up Europe as the fall guy for U.S. dominance has a venerable pedigree.

After 1995, it became a truism on both sides of the Atlantic that the U.S. stepped in to “fix” the Bosnia conflict at Dayton only after the bumbling Europeans had failed. Forgotten are how the U.S. helped kick off the war in 1992 by urging Muslims to reject a power-sharing plan with Serbs and Croats, and kept the war going for two bloody years by arming the Muslims in concert with Iran and a-Qaeda, while sabotaging repeated UN- and European-sponsored peace plans. The same scenario played out later in Kosovo, where the US armed the terrorist “Kosovo Liberation Army” (the local branch of the Albanian mafia), to create a pretext for NATO military intervention. The result: the US retained unquestioned security dominance in Europe (and established one of its largest military bases -- Camp Bondsteel, in Kosovo), while the Europeans got stuck with supporting two economically dysfunctional statelets.

Thus, TAFTA and the EU-Ukraine AA can be seen as the latest permutation of the classic description of NATO’s mission as -- in the words of one of the alliance’s former Secretaries General -- keeping the "Americans in, the Germans down, and the Russians out."

As for Ukraine, it is very likely in for a rough ride. It’s economy is tanking, its reserves are depleted and it has chosen, in its wisdom, to embark on a collision course with its largest trading partner in exchange (it hopes) for a better deal from the “Euro-Atlantic community.” But that community has only one interest in Ukraine: using it as a pawn in its ill-conceived and counterproductive plans to encircle Russia.

Can the Yanukovich administration at least expect gratitude from the West as he prepares for his re-election campaign in 2015? Apparently not. A US State Department official said last week that Kiev must release Mrs. Timoshenko immediately and place no restrictions on her political activities -- hardly a message Bankova wanted to hear.

Ukrainians – both the current administration and the population at large -- should be under no illusions about what they are getting into.