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Text File | 1993-04-08 | 6KB | 125 lines

                                                                                ESSAY, Page 78

Europe's Future: Go West, Old Man


By Charles Krauthammer


    When the ground began shaking under East Germany more than
three years ago, the race was on between the unification of
Germany and the unification of Western Europe. Last month the
results came in. Germany won.

    West European unification was premised on the cold war: a
divided Europe and a diminished (West) Germany held within the
bounds of a deep, strong, European union. Given time, this might
have come about. Had the cold war persisted another decade or
so, a federal Western Europe might have been established in the
shelter, as it were, of the Berlin Wall.

    But the Wall came down and time ran out. The new Germany
became preoccupied with the task of absorbing the east.
Moreover, the new Germany grew too large to be swallowed by a
federal Europe. The Maastricht treaty, the penultimate stop on
the road to a federal Europe, was a last-ditch attempt to deny
that reality.

    Last month denial became impossible. Europe's
exchange-rate mechanism exploded, and somewhere in the rubble
lies Maastricht. What happened? The ERM tied E.C. currencies to
the German mark. But much of Europe -- notably Britain and Italy
-- was unable to keep up. The German central bank had jacked up
interest rates to dampen the inflation caused by huge deficit
spending on eastern Germany. The weaker E.C. countries had a
choice: a) match Germany's high interest rates and risk both
deep recession and political suicide; or b) drop out of the ERM.
Not surprisingly, they chose b).

    Amid the chaos of the currency crisis, it became clear
that German political vision is as yet no match for its
economic dynamism. Germany is Europe's de facto leader, but will
not act the part. As Americans have learned to their constant
chagrin, leadership means sacrificing some measure of national
interest to the greater alliance interest. Germany knows that
its interest rates set the standard for the rest of Europe. By
setting its rates ruinously high, Germany was announcing that
in fighting domestic inflation it was quite prepared to lead the
rest of Europe into recession. The rest of Europe has just
announced that it will not be so led.

    After the ERM debacle, it is clear that the grand vision
of a federal Europe is an illusion. What then does Europe do?

    Do more of what it does best: free trade. The E.C.'s
single-market project will soon allow the virtual free flow of
capital, goods and labor within the Twelve. Speaking last month
in Washington, Margaret Thatcher made the case for a rapid
widening of the single market. First, east to its European
neighbors. And then boldly west -- to North America.

    Free trade between Europe and America has been bruited
about before. It was raised by National Security Adviser Brent
Scowcroft, unfortunately without result. But with the fading of
visions of a federal Europe, it acquires a new urgency. Today,
two potentially antagonistic trade blocs are going up on both
sides of the Atlantic. The U.S. is afraid that a Fortress Europe
will shut its trade doors. Europe looks warily at the budding
North American Free Trade Agreement, which would create a
trading zone demographically larger than the E.C.

    A transatlantic free-trade area merging the two would not
just prevent a trade war and increase prosperity on both sides
of the Atlantic. It would have a profound global effect. As
Thatcher pointed out, Europe and North America together account
for more than half of world GNP. They would dictate the terms
of the world economy. Given the fact that at the core of the
transatlantic union would be America, Britain and other
free-market countries, it could dictate a world of free trade.

    Why is that good? Because common markets make not only for
general prosperity but also for the kind of comity and
nonbelligerency that flow naturally from uncoerced commercial
relations. Moreover, a transatlantic free-trade zone would
signal Japan that if it had thoughts of creating a rival Asian
bloc or did not modify its predatory drive for market dominance,
it might find itself shut out of the new world economic order.

    Almost 50 years ago, another deposed British Tory Prime
Minister journeyed from Britain to America to propose union with
America. The major -- and forgotten -- point of Churchill's Iron
Curtain speech was his call for a "fraternal association of the
English-speaking peoples," an association so close between
America and the British Empire that "eventually there may come
the principle of common citizenship."

    President Truman responded with a looser but wider idea,
an alliance not just with Britain but with all of Western
Europe. The result was NATO, America's first ever peacetime
alliance and arguably the most successful alliance in history.

    Today again there is need for alliance, not military this
time but economic. The threat is not the Soviet empire but
growing economic nationalism and protectionism threatening 50
years of unparalleled world prosperity. The answer is a
transatlantic pact, a free-trade zone embracing like-minded,
market-oriented, democratic peoples stretching ultimately from
Vancouver to Vladivostok.

    Political union is a project best left to our children.
Perhaps by their time, differences of language, that engine of
nationalism, will have lost their salience. A world speaking in
Macintosh icons -- a world in which video has rendered language
obsolete -- may come to see its political divisions as archaic
and encumbering as did the American states of 1789.

    Tomorrow, Utopia. Today, a more modest goal: a
Transatlantic Free Trade Zone.