Henry Farrell: prediction

Transcript context

…But take, say, New York as a banking center. Maybe half of Deutsche Bank’s business is in New York. Assume the US often cares about foreign policy issues more than Europe does, and we have a potential first-mover advantage if we choose to use it. So if we say to European companies, banks, whatever, “If you do business with the US financial system, you must adhere to some long list of restrictions that may be as simple as Iranian sanctions,” what does the equilibrium actually look like where they can just say, “No, we’re going to go ahead and trade with Iran”? Isn’t that really quite distant, given the importance of New York as a banking center? The way I would push back against that a bit is to not assume what you’re assuming, which is to say that under many circumstances, it is going to be true that the United States is going to care about this stuff much more than the European Union is. And Iran, I think, is a great case of that. The EU trade with Iran — it’s not insignificant, but it isn’t anything enormous either. But there are other things which Europe is much, much more worried about. In particular what they’re worried about is Russia. I think that the counterexample to what you say is assume, for example, that we have a 2020 election in which Donald Trump is ignominiously defeated. What we are going to see then, plausibly, is a situation where a presidency and a Congress, even if the Republicans still have the majority in the Senate — they are going to be loaded for bear. They are going to go after Russia with sanctions of one sort or another. Many of those sanctions are plausibly going to implicate the European Union. So, when one looks at the policy debate in the EU at the moment, a lot of that policy debate is gearing up for perceived likely fights with the United States over the relationship between Europe and the Russian economy because, of course, Europe depends much more heavily on Russia for energy and has a wide variety of other economic relations with Russia. I think that’s the situation in which Europe would care much more substantially than the United States, or would care as substantially as the United States and would be prepared to push back hard. Those are the circumstances under which there has been a recent paper by the European Council on Foreign Relations, which has talked about ways in which Europe could deter United States actions. One of the actions that is proposed there is that the European Union think about licensing requirements for US firms that want to operate in Europe, such that if they cooperate with sanctions against European entities that Europe doesn’t like, that these licenses to operate would be withdrawn. That’s the kind of circumstance in which I could see actual, at the very least, posturing happening at a very, very substantial scale between Europe and the United States and perhaps actual low-level economic warfare if the US steps in to try to push back against what Europe regards as being its core interests. Now, we’re chatting in early October, and there were two huge stories today, both about weaponized interdependence. The first is that the European Union seems to be insisting that Facebook take down material posted on internets outside the European Union. What’s your view? Is that a good decision or a bad decision?…

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