PISM Bulletin

In the escalation of the U.S.-China trade war, the EU is trying to remain neutral. However, the consequences of the conflict and the immediate risk of a trade dispute with the U.S. threaten the economic growth of the Union, strongly dependent on exports. This is especially true for the euro area. At the same time, protectionist measures taken by the U.S. mobilise the EU to accelerate work on concluding free-trade agreements with other partners.

The U.S. administration under President Donald Trump has completed the renegotiation of the trade agreement with Mexico and Canada. At the same time, it has escalated the tariffs battle with another important partner—China. The strategy of concluding new deals under the pressure of protectionist measures is meant to maximise the benefits for the U.S. at the expense of its partners. The Trump administration has been successfully implementing this policy, but in the long term, the trade conflict may hinder American enterprises, including those in the agricultural sector, and increase the trade deficit, in effect contributing to the decline of support for the Republicans and the president.

Negotiations on the creation of common bank deposit insurance for the EU have been underway for more than three years. The deadlock is mainly due to Germany’s reluctance, afraid of the creation of a new financial transfer mechanism at the expense of its own economy. An opportunity for compromise is the December Euro Summit. If an agreement is reached, it would mean the finalisation of the banking union—a key area for the future of the eurozone.

The Arctic’s growing significance for Russia stems not only from the extraction and potential of the natural resources in the region but also the country’s strategic goal of taking advantage of rising maritime transport via the Northern Sea Route (NSR). To benefit from the region, Russia is developing its fleet of nuclear icebreakers and has leveraged Chinese investments in the region. Cooperation in the region seems to be advantageous for Russia to achieve its goals, but the growing dependence of Europe on transport via the NSR may help Russia achieve political goals as well.

Despite the significant reduction of irregular migration to the European Union, the number of migrants arriving to Spain is increasing. In the national debate on this issue, the Socialist government of Pedro Sanchez faces growing criticism from both the right and the left. Maintaining the current course in migration policy will require intensifying cooperation with Spain’s European partners. The Spanish authorities will reinforce the pressure on them to increase EU financial support for southern European countries and to find a European solution to asylum.

The signing of a formal peace treaty between Russia and Japan is questionable in the near term, but negotiations on this issue have become a platform for political rapprochement and deepening economic relations. Energy cooperation between the two weakens the sanctions on Russia by NATO and EU countries. It may also undermine one of their most important instruments of putting pressure on Russia, which is obstructing access to new mining technology.

The approaches of the EU and India to the connectivity between Asia and Europe largely converge. Both the Union and the country emphasize the importance of maintaining the highest international standards in infrastructure projects, share similar concerns regarding China’s Belt and Road Initiative (BRI), and implement their own ambitious transregional transport projects in their respective neighbourhood. Comprehensive cooperation on connectivity may become a key element of their strategic partnership, help promote regulatory standards, and boost economic cooperation. Better connectivity between Europe and India is also in Poland’s interest.

The parliamentary elections in Latvia scheduled for 6 October will probably lead to a change of government. Due to the dynamics of the political scene, the Harmony party, representing mainly the interests of the Russian minority, may have a chance to enter the government coalition. This would not cause a fundamental change in Latvian foreign policy but could introduce new elements to it in relations with Russia, mainly in the economic dimension.

The increase in labour demand is prompting the German authorities to introduce immigration policy reforms. However, the changes must take into account the growing social concerns related to the inflow of foreigners. The government plans to open the country’s labour market to selected citizens of countries outside the EU, but with distinct restrictions. Work on the new regulations and implementation may be a valuable source of experience for Poland, which also faces a dilemma of how to open up to labour immigration.