Moderated by Adrian DEARNELL, Chairman, EuroBusiness Media                               

Politics and geopolitics have become effective risk factors in portfolio management. The rise of populism, the concretisation of a multipolar world, protectionist temptations, Brexit, the self-centrism of the United States, and the difficulty for Europe to build consensus on some international issues are all factors that disturb the geopolitical landscape.

The moderator launched the conversation with a question on the mind of many political analysts, “What does Trump really want?”

Enrico Letta responded that the “parenthesis” of Donald Trump in the campaign was longer than expected and the parenthesis of Trump in power has also been longer and could continue. There will be “fireworks” until November, so the EU has to develop a toolbox to understand him.


Although poverty has fallen sharply in the world for 40 years, income inequality has widened dramatically. Inequality has increased in almost every region, from Europe, Africa, and Asia, to the Americas. The rise in inequality has been greatest in the United States, but also in China and Russia, whose economies were only liberalized in the 1990s. From 1980 to 2016 the share of national income going to the top 10% in Russia increased from 21% to 46%, and in China from 27% to 41%. In the US and Canada the rise was from 34% to 47%, while in Europe it was more moderate from 33% to 37%. In 2016, the worst-in-class were Brazil and India, where 55% of national income is held by the richest 1%, and the Middle East where it is 61%.


Continuing the roundtable, Kishore Mahbubani mentioned the looming trade war. However, he cautioned that Europe should not focus so much on the negative that it forgets what is going right in the world, such as the decline in poverty and conflict. On trade, he praised China for not lashing out but acting strategically. It has recognized that Trump’s trade measures are a geopolitical gift, since they are dividing the West. Its retaliation will therefore be cautious.

Mr. Letta agreed, saying that China is reciprocating not escalating. He conceded that Trump has a point nthat China has abused the system, so it is time to take action, but not unilaterally and not also against allies. The recent G7 meeting was symbolic of this.

Asked whether Asia would take common action on trade, Mr. Mahbubani thought not. However, Trump is aware that Asia has the fastest growing economies, so that there will be an important shift in power over the next 30 years. His aggressive tone and actions have already led to implicit coordination among Asian countries, with relations between China and old rivals such as Japan and India improving.

Trump’s imposition of unilateral measures against China and the extension of those measures to other countries, including his closest political, security, and trading partners, seems to be a very unwise course of action because it is dividing the West.”  

Sir Simon Fraser

“Trump’s imposition of unilateral measures against China and the extension of those measures to other countries, including his closest political, security, and trading partners, seems to be a very unwise course of action because it is dividing the West.”  

Sir Simon Fraser


The 19th century American economist Henry George said that “protectionism is a means of inflicting in peacetime what our enemies do in times of war”. History shows that there are very few winners. Interdependence has led to greater opportunity but also to greater vulnerability. Protectionist measures have a negative impact on the global economy, including on the country imposing them. The worst-case scenario, an outright trade war, would create recessionary pressure on the world economy. 

However, in relative terms certain countries could do well:
• Those that have domestically-oriented economies.
• Those that used recent global growth to adjust their imbalances and increase the most productive public expenditures.
• Those that implemented reforms to improve their domestic and external business climates.
• Those that are less vulnerable to external shocks through an effective mix of monetary and fiscal policies.

The next US measures could increase tariffs European cars from 2.5% to 20- 25%. This would have uneven consequences on Eurozone countries, depending on their level of exports to the US. In Germany car exports to the US represent 20 billion euros, or 0.6% of GDP, while in France only 0.01%, in Spain 0.05%, and in Italy 0.25%. In addition, some smaller countries such as Slovakia and non-Eurozone EU countries that are in German supply chains could suffer.
Such an asymmetric shock could complicate the European response. For example, customs union and trade negotiations are at the EU level, not Eurozone. If the higher US tariffs are implemented, the Eurozone GDP forecast could fall by 0.1 percentage points for 2018 and 0.2 percentage points for 2019, with most of the losses carried by Germany. Escalation with another, broader round of US retaliation to Eurozone retaliation would have a larger impact. Gross exports of goods to the US from Europe represent between 1.5-3% of GDP for large countries. Germany would be the most impacted and Spain the least.


Mr. Letta then bemoaned Europe’s lost opportunity. Last year everything was going relatively well in the EU, so it would have been the time to “fix the roof” of the euro and coordinate a trade response to Trump. But it was wasted because of elections, difficulties in forming governments, and the focus on Brexit, among other things. Now it is too close to the end of the EU legislature. He proved worried that 2019 could become a turning point in EU history, with the European parliament elections taking power from the traditional duo of conservatives and social democrats, leading to even more fragmentation.

Simon Fraser agreed that how Eurozone members interact and reconcile their differences is crucial for the future of the zone and for Europe, along with Brexit (for some members) and the pressures from migration. How, he wondered, will Europe be able to reconcile the free movement of people with putting up internal border controls against migrants?

Mr. Mahbubani again responded that “you Europeans are too hard on yourselves, Europe is still the most peaceful and prosperous region.” There is zero prospect of war, which cannot be matched in Asia, not even in ASEAN. “You are the mother of multilateralism,” he said, “and should continue to export it”.


Turning to rising populism, including in his native Italy, Mr. Letta said it is not irreversible. It is winning for now because the establishment is failing its citizens. Mr. Fraser added that populism is a cultural phenomenon that occurs when people feel that their personal and national identities are under threat, especially from migration.

Mr. Mahbubani emphasized that leaders need to explain to their citizens that what is happening is not just a short-term shift but a long-term structural shift, so long-term strategies must be implemented, not quick fixes. For migration maybe Europe should “press the pause” button while searching for a durable solution. Mr. Letta added that since the zero migrants option is now on the table in the Visigrad countries negotiations will become even more difficult.

Mr. Fraser then wondered whether Trump also represents a structural shift, and whether the US, China and Russia are playing by different non-multilateral rules. If that is the case, the EU will have to change strategy. Mr. Mahbubani responded that China, for one, does not want to destabilize the world’s rules based order, since it is the chief beneficiary. China has “a 2000-year reason” for valuing stability and predictability more than freedom and liberty. It also needs another 30 years to fully develop, so it wants to assure that the rules based order will not break down in the meantime.

Concerning Russia, Mr. Fraser stressed that it is a concern, and that Europe must be firm, while keeping it in the debate. Mr. Mahbubani went further, stating that the West needs to become more Machiavellian. Russia’s biggest worry is not Europe but its long border with China, which will someday have an economy twice the size of America’s. So in the long term Russia may look to Europe for security.

Asked to summarize the chief geopolitical risks in a few words, Mr. Letta named the US-China relationship, as well as the environment and migration. Mr. Fraser, an Englishman, added Brexit. Mr. Mahbubani just said Trump.

“Europe should also see itself as retaining faith in the processes of multilateralism and continue to export them to the rest of the world. So, don’t be too hard on yourselves. Be nice. 

Kishore Mahbubani

“Europe should also see itself as retaining faith in the processes of multilateralism and continue to export them to the rest of the world. So, don’t be too hard on yourselves. Be nice. 

Kishore Mahbubani


Power is an absolute concept but also a relative one, and in many cases has historical roots. It is common to distinguish “hard power” (the economic and military powers), “soft power” (the attractiveness of political values, the perception of foreign policy and cultural influence, for example) and “smart power” (a combination of the two). But at the end, the objectives are similar, and it is important to identify countries as regard different kinds of power, highlighting the multipolar and evolving nature of our world:

• The hegemonic power of the United States has all the ingredients of power economic, military, wealth, technology, demography, natural resources, but also diplomacy, culture etc.
 • The “old” powers of Europe, such as Spain, Portugal, Netherlands, England, and France have had global power at one time based on similar criteria, but this has waned significantly and is further threatened by the rise of the BRICS. This is also true for Japan, the old Asian power. The challenge for the 28 EU countries is to turn their collective wealth into power.
 • The “continent” powers such as Canada, Russia, and Australia have significant influence due to their geographic size and, in the case of Russia, growing military weight.
 • The “soft” powers, such as Switzerland and the Scandinavian countries, are highly developed with strong social cohesion and can exercise discreet, best-practice influence, thanks to the attractiveness of political values.  
 • The “rival” power of China is more recent and not as complete as the US, but still rising.
 • The emerging powers, such as India, Brazil, Mexico, and Indonesia have large territories or populations or strategic geographic positions.
 • The rising Asian powers, such as the Philippines, Thailand, Korea, Vietnam, and Malaysia are not yet real powers, but their strong economic performance is increasing their influence.
 • The “energy” powers such as Gulf states have varying and intermittent power depending on the price of commodities such as gas and oil.
 • The ancient powers of the Middle East, such as Turkey and Iran, have ambitions that go beyond their means and lead to large military investments and regional adventurism.

In summary, with the spread of power around the world, the dominant countries of recent times, while not having lost their power, now have to share it.