President-elect, we talked briefly today about Europe. The National Security Council will be giving you detailed briefing about issues and personalities. You asked me for a background note on some of the basics: the state of the European Union today; whether, for the US, Europe is a good or bad thing; and since you are meeting the British prime minister, Tony Blair, informally in New York next month, the role which the British have played and how far we can rely on them today.
on europe today: the EU, as constituted by the Treaty of Aachen in the year 2000 is in effect a continental European federation. It comprises 11 countries-France, Germany, Italy and the Benelux countries (the original six of 1957), Austria, Ireland, Finland, Spain and Portugal-but minus four previous members-Britain, Denmark, Sweden and Greece. The latter have associate status, but no part in its decision making.
The 11 countries represent a formidable bloc: 300m people with a GNP of some $7 trillion. They have a president elected by popular vote; he appoints members of his executive (the commission), just as the US president does, in the case of the EU after consultation with the states. These retain their identities, like the Swiss cantons or the states of America. They also still exercise their powers on local issues, but for questions which have to be dealt with at the centre, power has passed to member state ministers in Brussels, subject to a European parliament.
A little history will explain the present set-up. The Treaty of Rome in 1957 established a customs union and by 1992 a programme to create a single market was mostly completed. In 1999 an inner group, around France and Germany, moved to a single currency. In the year 2000 it was joined by the rest of the union, minus Britain and Sweden, which were reluctant to contemplate this loss of sovereignty; Denmark, whose government wanted to join but was blocked by its parliament; and Greece, which wanted to join but was turned down. The rest went ahead to create a federation under the new Treaty of Aachen. In terms of:
Economics: the union is a single market with a common tariff against third countries. There is not only a single currency but also a single economic policy, with only minor variations between states. Economic policy meetings at head of government or finance minister level, the old G7, have been replaced by the G3, comprising the US, the EU and Japan.
Foreign policy: the union is a single unit with a common foreign policy. Its foreign ministry in Brussels and its missions in third countries are staffed by an amalgam of commission officials and former diplomats of its member states. At the EU mission in Washington there is apparently an informal agreement between France and Germany that its head should be French and the deputy German. In the UN security council the EU now has its own seat.
Defence: rapid progress is being made towards the merging of a substantial part of the union's armed forces, with a growing rapid reaction force based in Strasbourg and a union command in Brussels. The EU has declared its intention of leaving Nato, which it dislikes because, as it sees it, the Americans are top dogs; it has nevertheless offered a close alliance to combat terrorism. At the same time it seems to expect the use of our logistical facilities any time it wants. This will need tough discussions.
The EU should be enlarged next year by the entry of the Czech Republic, Hungary and Poland. Negotiations with the other states of central and eastern Europe are still in train.
is europe a good or bad thing for the US? European unification was spearheaded by France and Germany. The US supported it from the start. This was not without reservations from our private sector. Industry feared the tariff discrimination against third countries which would result from the abolition of European internal barriers; our farmers feared-rightly as it turned out-that a European common agricultural policy would be protectionist.
Our original support was based not simply on the feeling that the Europeans were taking the same federal road as we had taken two centuries before, but on the conviction that a divided and impoverished Europe would be an easier prey for communism than a united and prosperous one. Europe in the imme-diate postwar years was a pretty dangerous place-like Alabama after the civil war-and there was a real risk of takeover by Moscow.
But now that communism has perished, do we still need a united Europe? Many Americans, including Henry Kissinger, loathe the idea. Kissinger hardly mentions it in his classic book, Diplomacy. He preferred to divide and rule. He would pat the Brits on the head for their dog-like devotion, ignore the French and try to deal with the Germans. Would that not be in our interests today?
I submit it would not. To begin with, we have little choice. Europe, whether we like it or not, is united. The union does not just rest on a fading memory of the second world war. It is based on a realisation, which matured over many years, that a single market of hundreds of millions of people and a pooling of sovereignty could give Europeans something of the prosperity and the power in the world that we Americans have long enjoyed.
A united Europe has for us several pluses. It means political stability in that corner of the world. After all it was from a divided Europe that came two world wars and the murder of 6m Jews. The world remains a dangerous place. Islam and its fanatics are up to no good. Any moment, some mad dictator could buy for ?10,000 a nuclear missile from a down at heel Russian colonel and launch it at New York. America has not got so many friends in the world that it can afford to kick powerful allies in the teeth.
On the economic front the EU means prosperity, not just for Europe, but also for us. Europe is now our biggest trading partner. It bought $150 billion of US goods last year, $10 billion more than we bought from them. EU firms have invested $350 billion in the US, give jobs to 3.5m Americans and pay $30 billion in taxes. World trade negotiations are more successful with one European voice and G3 meetings are shorter and more effective than G7 ones.
All this has a downside, as Kissinger saw. We often disagree with the Europeans, especially over defence, where we may be heading towards a major row. They tend to be protectionist on agriculture and the arms industry, and determined to befriend countries such as Iran, which shelter terrorists. The commission is a feisty interlocutor, but we have found that dealing with one gunslinger is more effective than dealing with an unruly mob.
Once the union has settled on a policy, we have found that going behind the commission's back and doing deals with separate member states may sound attractive but does not work. As Bob Strauss, that prince of US negotiators told you years ago, what one member state may promise you will be repudiated by the others. We do best dealing with the commission.
Formulation of policy inside the union is essentially a trilateral affair-between the commission, France and Germany. Indeed on foreign affairs, the policy is essentially a Franco-German one. The two countries are inextricably linked. Germany needs to be bound into a system which will prevent the tragedies of the past. France is terrified of Germany drifting off to the east, and wants, through the union, to be able to exercise some control on it.
You will need to establish a good working relationship with the union's president (a tough and able Finn), while at the same time keeping discreetly in touch with the German chancellor and the French president. I understand that you plan to invite all three to Washington early next year. When you do go to Europe (I appreciate that you want to go to Asia first), you will need to touch down first in Brussels, and then in Berlin and Paris.
the british role. More than 100 years ago Bernard von B?low, shortly to become chancellor of Germany, wrote: "British politicians know little of the continent. They know as much about our affairs as we know about Peru."
Yet up to the outbreak of the first world war in 1914, this did not greatly matter. Britain was protected by the Royal Navy, the biggest fleet in the world; it was the centre of a great empire; its major interests were worldwide. British policy towards Europe was simple. If any European country sought to dominate the continent, whether Philip II of Spain, Napoleon or Kaiser Wilhelm, Britain would ally itself with those fighting them. This policy was effective and cheap.
In 1914 the world blew up. In that war Britain lost 750,000 people. The Royal Navy was no longer a secure shield. Air power had made its appearance on the world stage. A British army was stationed on the continent, garrisoning the Rhineland until 1930. Britain became bound up with Europe in a way it had never been before. It was then that, lacking any understanding of Europe, its troubles began.
At the end of the war in 1919 Britain and France forced on the defeated Germany a vindictive peace. When a fragile German democracy was tottering under the blows of the great depression, Britain refused to give it any help. When Adolf Hitler came to power in 1933, British politicians totally misjudged him. They refused to join the French in facing him down in 1933 over his illegal rearmament or in 1936 when he marched into the Rhineland. This would have destroyed him and saved the world from another war. Instead, Neville Chamberlain foolishly got into a war over Poland. Had he kept out, Hitler would have turned on Russia and, in the end, would have been defeated by Russia's boundless terrain.
Britain, after its victory in 1945, was on a high. It had won the war. It was the centre of a great empire. It had a special relationship with the US. But these were delusions of grandeur. It was the US and the Soviet Union which had played the decisive role in the war. Britain was broke. The empire was dissolving like a morning mist. As for the special relationship, Britain has always presumed far too much on sentimental memories.
None the less, buoyed up by these illusions, Britain regarded with some disdain the continental European countries, which had all been defeated and occupied. Forming a close association with them was ruled out. Britain refused to sign the Treaty of Rome in 1957. In 1961, when some of its illusions began to fade, Britain made a half-hearted attempt to join the then EEC, but was rightly rebuffed by General de Gaulle. It was not until 1973 that the only convinced European among postwar British prime ministers, Edward Heath, brought Britain into Europe. But he fell from power the next year and there followed 24 years of British obstructionism.
Relations between Britain and its partners grew steadily worse, as the mood in Britain on Europe soured. There were three contributing factors: the first was Margaret Thatcher, prime minister from 1979 to 1990, who may be held in high regard in the US, but whose attitude towards Europe was (according to her treasury secretary) one of "saloon bar xenophobia." In fact her downfall in 1990 was caused by an outburst against Europe in the House of Commons. Second, in the 1980s, two non-British, non-resident press barons extended their ownership to two thirds of the British press and the tone became markedly, at times violently, anti-European. Headlines such as "Hun Scum Boo Queen Mum" set the tone. Third, the intake of Conservative MPs in the elections of 1992, 1997 and 2002 included a growing proportion of the ignorant and insular.
All this made it increasingly difficult for John Major, prime minister from 1990 to 1997, to avoid a series of clashes with his European partners. Disputes included: the number of votes required to block union decisions, fish, the powers of the European court and an export ban on British beef. In this latter dispute Major outraged his partners by a futile and short-lived attempt to force the lifting of the ban by blocking union business.
Above all Britain steadfastly refused to consider any further integration of the union, for example by the restriction of the use of the veto or the adoption of a single currency. When Blair was elected prime minister in 1997 he had to explain to his partners that, given the public mood, it would be some years before he could either move to a single currency or agree to any significant further political integration. Discussions continued inconclusively for a year. Then the patience of the French and the Germans snapped. Pointing out that the union institutions could not service two separate groups of countries-those who wanted further integration and those who did not-they proposed the negotiation of a separate treaty. This led to the treaty signed in Aachen, in effect the constitution of the present union. Britain, Sweden, Denmark and Greece negotiated with it a free trade agreement, as did Cyprus.
This move was downplayed in Britain; there was a widespread sense that perhaps it was not a glorious victory. In fact less and less attention was being paid to foreign news; the country was becoming steadily more inward-looking. Many hoped that, untrammelled by continental red tape on working conditions, and with some of the lowest wages in Europe, more and more investment from overseas would be attracted to Britain; and the City of London would continue to be the banking centre of the world.
It did not work out like that. The interbank settlement system for the Euro (Target) discriminated, despite British protests, against non-members. So business began to flow from London to Frankfurt.
Remembering the tendency of the British economy for the last 50 years to boom, inflate and then devalue, and noticing Britain's refusal to give any guarantee of exchange rate stability, speculators began to sell sterling, which depreciated by 20 per cent against the Euro in 1999.
As it had warned, the union then took action. It imposed a surcharge of 20 per cent against British exports. This caused a big row, but the union, as the far bigger partner, had the whip hand. Foreign investors, alarmed at the prospect of being excluded from the EU market, began to turn to the continent.
This caused renewed difficulties for Blair. He had hoped to bring Britain into the union after winning a second general election in 2002. But as it turned out his majority was perilously narrow. The great mass of the Conservative party in the House of Commons had become increasingly hostile to Europe. So were many of his own backbenchers. The row over the union's surcharge on British exports had soured the popular mood even more. In any case, rising social expenditure had led to a budget deficit which would not enable Britain to meet the convergence criteria for a single currency. So the British are now going through a tough time. But the argument, that they should swallow their pride and join the union, does not seem popular at present.
so what do you say to Blair? He is a slick talker. He will be friendship personified: hands across the sea, blood thicker than water, Britain the only country that the US can count on when the chips are down. He will ask you to fix a date for a visit to London-cheering crowds, address to the joint houses of parliament, dinner with King Charles. The full treatment. And he will angle for an early official visit to Washington.
His purpose throughout will be to be seen in the British media as one world leader talking to another. But this is baloney. Britain now, on the international stage, is a busted flush. Britain has no role at all in any of the decisions of the EU. Its role in the G7 has vanished and it no longer has a permanent seat on the UN security council. The Commonwealth is simply a talking shop. And Britain's military capability-marginally useful to us during the Gulf war-has vanished with successive budget cuts.
The only issues now between us, beyond the bread and butter issues of trade and investment, are Northern Ireland and our downgrading of the intelligence information which we have given Britain since the second world war. But these can safely be left to state and defence departments; they are not worth a meeting between you and the prime minister.
Of course if Britain were a fully paid up member of the EU they would have a good deal of clout in union decision making and they would be worth talking to. And with a Brit, once you get used to that funny accent, and provided they are not too snooty, you can level better than with the French or the Club Med. But it has been and is their choice.
I suggest that: first, you turn Blair down flat on any commitments now to further meetings (too early, must review my schedule when I am in the White House, and so on). Second, tell your press secretary to make sure to shoot down any fantasies on this theme which Blair's spin doctors might put to the press. Third, if he raises specific issues, such as Northern Ireland or intelligence information, suggest these be discussed through the usual channels. Fourth, indicate to him politely that Britain's influence in Washington for the last half century has depended, and must depend, on Britain's influence in Europe.
