Introduction.
"After listening, without uttering a single comment, to the US President repeatedly bash the wind power option in the sustainable energy portfolio, the leader of the international champion in claiming for cleaner energy generation fixed a so-called trade deal with the talkative president.
With the same face that she put on for the previous harangue, Mrs. von der Leyen signed and announced an agreement, crowning the super-tariffs’ affair, with a contrived smile; the dilated veins in her neck telling better than words the ordeal she had been through. Despite this and other physical signs –a subject for analysts other than those who write Flash Notes- the EU leader announced that it was a good agreement, securing –among other things- reliable and bon marché
energy -precisely one of the clay feet of the environmental champion.
The Von der Leyen Agreement allows US goods enter with zero tariffs in the EU zealous and over-regulated borders, while the other direction of the trade flows faces a 15 percent ad valorem tariff, when reaching the ‘indispensable nation’. Other constraints –to be detailed beloware added to this background, compounding a palco scenico of tame acquiescence.
The associated energy deal, in particular, made critics inside and outside the EU realm to wonder whether Mrs. von der Leyen was in due possession of her rational faculties. It led the usually rather professional and discreet Russian president to comment it with a diplomatic smile; her concept of good energy contracts was innovative.
Backing her announcements were arguments that the starting point for (her) negotiations was much worse –the first, usually coarse clarion call from the other side of the Atlantic, announced that 35 percent tariffs would be enforced because … well, because they wanted- than the final result, and the mantra that total decoupling from Russia, especially as regards energy dependence, was a major EU objective for the welfare of its citizens, the ultimate goal of her crusade.
To perhaps a feeble further excuse, Japan also ended with a 15, Vietnam with 20, and Indonesia and three other ASEAN members got 19. Only China stood to the challenge, and reciprocated with a wise move, by cutting the indispensable rare earth exports to the US. Negotiations continue, though the initial (universal) 10 percent flat rate has been maintained.
Grand strategy, as known, is driven by three factors: psychology, politics or rather geopolitics, and an objective evaluation of the balance of power. One wonders what is in the mind of the present European leaders who, while not listening to a large fraction of their citizens’ will, act out of a psychology of fear and completely disregard the (smart and soft) power assets built through great trouble and strife, during so many decades …
While these puzzling events were taking place, Brazil –like a South American Atlas- was holding on its shoulders the imminent weight of an imposition of 50 percent tariffs on all its exports to the great Northern Brother. Debated questionings on the country’s internal institutional and political life were also, in this case, part of the gift.
Will Brazil eventually close a fantastic –in von der Leyen’s logic- agreement, similar to the EU one, or will the country adopt a tropicalised Chinese-strategy and stand against the flamboyant President’s administration, not to say the economic power he commands?
This brief Note elaborates on this, outlining how catastrophic the EU deal was and the odds related to the Brazilian situation. It concludes by contrasting the two economies under duress and outlining a few preliminary policies for Brazil, both as regards its Eastern Atlantic margin partner and its trade policies in general."