As the world sours on trade, the EU sweetens on it

WHAT a difference a few months makes. Barely half a year ago the European Union’s (EU’s) trade policy was a mess. A much-touted trade and investment partnership (TTIP) with the United States was on life support, trashed by NGOs and consumer groups, and disowned by some of the politicians who had asked for it in the first place. A deal with cuddly Canada (CETA) barely survived an encounter with a preening regional parliament in Belgium. Governments were scrapping over how to respond to state-subsidised Chinese steel, and Britain, among the club’s weightiest pro-trade voices, had voted to leave the EU, a decision made flesh by the government’s Article 50 letter this week.

And now? Trade is “going to be huge in the coming months”, says a European diplomat. His word choice is a reminder of the reason for the change: Donald J. Trump. One of the American president’s first acts was to withdraw from the Trans-Pacific Partnership (TPP), a trade deal covering a dozen countries around the Pacific Rim. Mr Trump complains about Germany’s trade surplus, and his administration hints that it will ignore rulings from the World Trade Organisation. The leader of the free world is pulling up the drawbridge, and the EU (which negotiates trade deals on behalf of its member governments) has spotted an opportunity.

Better still, Mr Trump’s inward turn has left America’s other spurned partners seeking new friends. The prime candidate is Japan, the world’s third-largest national economy. Bitterly disappointed by Mr Trump’s decision to quit the TPP, Japan happens to have been negotiating a trade deal with the EU since 2013. Cue an unexpected burst of Japanese Europhilia. Last week Shinzo Abe, the prime minister, toured European capitals to gladhand his counterparts and tout the virtues of globalisation. Japan and the EU, he said in Brussels before his delighted hosts, would “show to the world the flag of free trade as a model”. The two sides hope to conclude their talks this year. If the boost to growth would be less than stellar—the EU projects a long-term GDP increase of 0.76%—a deal between two economic giants would still demonstrate to the world that globalisation can survive an American retreat.

And why stop with Japan? Mr Trump’s election may have placed TTIP in the deep freeze, but there are plenty more potential partners for Europe waiting in the wings, including Mercosur, a Latin American grouping. Mexico, never far from a Trumpian tongue-lashing, is another candidate. Nor is such optimism limited to trade. If Mr Trump, who this week scrapped some of Barack Obama’s clean-energy rules, withdraws from the Paris climate-change deal, Europe may seek to deepen its environmental partnership with China. “Positive globalisation” is the new mantra.

True, Europe’s trade naysayers have hardly given up the fight; EU deals with Singapore and Vietnam will face tricky votes in the European Parliament later this year. Cecilia Malmstrom, the EU’s doughty trade commissioner, is touring the EU making the case for deals that uphold European values. But officials quietly harbour the hope that America’s president has helped their case by turning opposition to trade toxic. Thanks to Mr Trump’s influence the public mood in Germany, in particular, has become much less anti-trade since last year.

But hold the exuberance. It is “utter tosh” to imagine that strategic interests trump plain mercantilism in EU trade talks, says Hosuk Lee-Makiyama, director of the European Centre for International Political Economy, a think-tank in Brussels. Japanese diplomats agree that Mr Trump’s election has pushed them closer to Europe, but doubt that it will have a material effect on the negotiations (which resume next week). Mr Abe’s government stared down Japan’s coddle farmers during the TPP talks, but may not be willing to take them on again. Other outstanding issues in the talks, from car tariffs to data flows, are no easier to solve in the shadow of The Donald. And raising expectations carries its own risks for the Europeans. One trade official says he fears the EU might now be tempted to go for quick rather than ambitious deals. If so, bad news for those European dairy farmers gazing longingly at the Japanese consumer market.

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More importantly, Mr Abe is hedging his bets rather than executing a strategic pivot. His jaunt around Europe follows two visits to America, including a jolly golfing weekend at Mr Trump’s Florida resort that culminated in a joint pledge to deepen economic co-operation. His government, reasonably or otherwise, hopes this will lead to a bilateral trade deal. Contrast Angela Merkel’s recent trip to the White House. At a frosty joint press conference Mr Trump carped about German trade negotiators before sending the chancellor packing with a couple of petulant tweets about defence spending. Officials in Berlin were furious.

All this complicates Japan’s negotiations with Europe, for Mr Abe may not want to make the EU a generous offer that becomes a template for the more important American talks to come. Moreover, America’s government can credibly link trade to broader issues, including its Asian security posture—which matters when North Korea is once again lobbing ballistic missiles into the Sea of Japan. Such grand bargains are harder to strike for the EU, a club in which trade talks are handled by Brussels but national governments remain in charge of military matters.

Europe should understand this. It backed TTIP not just to create jobs and growth, but to cement the transatlantic alliance and set mutual standards that much of the rest of the world would have been forced to follow. That the transatlantic talks were floundering long before Mr Trump took office said something about the EU’s ability to conduct foreign policy through trade agreements. As for Japan, the two sides’ efforts are genuine and the chances of a deal look better than ever. But do not be fooled: it would be a consolation for American withdrawal, not a triumph for the liberal world order.