Troubled partnership.

President Clinton's recent trip to Europe was supposed to be a stage-managed display of affection among the G-7 leaders. Instead, it ended on a note of discord, as President Mitterrand rejected Mr. Clinton's surprise proposal for further trade liberalization. The tiff, while small in itself, highlights worrisome trends which, unless countered by decisive action, could drive America and Europe apart.

Foremost among these trends is the emergence of a European Union with socialist inclinations. Many of the Common Market's original supporters conceived of it as a liberalizing force, which indeed it was and could be again. Their reasoning was that free trade and free movement of capital among member states would allow their citizens, in their roles as consumers and investors, to vote with their wallets against parasitic government. But in an illustration of O'Sullivan's Law ("All organizations that are not explicitly right-wing become left-wing over time"), the European Union, by imposing identical regulations and spending programs on all its members, now promotes the very statism it had the potential to restrain. The European nomenklatura has stealthily expanded the central government, creating a multilayered bureaucracy to manage product standards, corporatist industrial policies, minimum wages, collective bargaining, and handouts to the EU's "poor" countries.

Such Eurosocialism is likely to vitiate any economic stimulus produced by reductions in internal trade barriers. As Angelo Codevilla has written in these pages (June 8, 1992), a post-integration Europe could well have "labor costs on the level of Germany, trade-union activity on the level of 1970s Britain, bureaucracy as punctilious as in France and as honest as in Greece, and citizens who, to get along, will have to learn to act like Italians."

While proponents of integration tout it as a cure for Europe's historical divisions, in fact it presents opportunities galore for internal and external political conflict. To begin with, it would impose the same regulations on all member countries, regardless of their level of economic development. A labor regulation that does only modest damage in France could wreak havoc in Portugal. Europe's relatively poor countries will therefore demand bigger handouts (already, nine of the EU's twelve countries are net subsidy recipients), which will do nothing to solve their problems but which will foster division.

And that is only half the problem. Just as foisting socialism on all member states is the only way to prevent regulatory competition among governments within the EU, so protectionism is the only way to prevent such competition from outside it, albeit an expensive way. The socialist project in Europe simply cannot be sustained without it. In addition, as the 1989 fight between Europe and America over hormone-treated beef revealed, many European leaders see trade conflict with the U.S. as a way of strengthening their control over the continent. Quite correctly, too: high-profile trade disputes with other countries, no matter how absurd or trivial, do tend to promote internal solidarity - as well as to divert attention from the assault on consumers that trade barriers represent.

While Europe's leaders continually insist that they do not intend to construct a Fortress Europe, their trade policies are building it brick by foolish brick. In what ought to be a scandal, Eastern European exporters have been shut out of many EU markets (although the EU has been embarrassed into a slight opening in recent months). Martin Wolf of the Financial Times, points out in a recent pamphlet (published jointly by AEI Press and the Centre for Policy Studies) that EU trade policy "has, in effect, been creating a trading empire on seventeenth- and eighteenth-century lines, with carefully delimited trade preferences being used to cement relations, influence the positions of weaker foreign countries, and win a favorable position for European firms. Meanwhile, the principal role of the GATT, from the Union's point of view, has been not so much to create a global system of equal treatment, as to manage trade relations with the other great economic power, the U.S."

A Europe that erected trade barriers against the U.S. would adopt an anti-American foreign policy in short order. It would be tempted in this direction in any case, first by its position as a rival superpower, and second by the absence of any common enemy to cement the Atlantic Alliance. But protectionism would add immeasurably to these pressures. It would inspire defensive action by the U.S. - indeed, it already has done so in mild form, NAFTA being partly a response to regional trade blocs elsewhere. Moreover, the logic of protectionism promotes geopolitical competition; an autarchic government must expand its sphere of influence in order to derive the same economic benefits that free trade allows to flow across borders.

If this scenario came to pass - and if East Asia were to form a "yen bloc" in response - the structure of global commerce could well break into three insular blocs. These blocs would organize politically around three superstates, each pursuing rival ambitions and interests but all run for the convenience of their rulers. Orwell's 1984, if not quite on schedule, would prove prescient, even optimistic. For the U.S., although today's sole superpower, might not on its own have the resources, population, and economic clout to match up to a China-led Asian bloc at the end of the twenty-first century.

These are alarming prospects. Rendering them merely bad dreams should be one of America's top foreign-policy goals. Current U.S. policies, however, could not be better calculated to make this dystopia our future.

Since 1949 the U.S. State Department has been a tireless cheerleader for tight, bureaucratic European integration. That policy, whatever merit it had as a means of strengthening a Cold War ally, needs to be revised now. The future of the EU is the subject of multiple debates within Europe, between dirigistes and free-marketeers, Europe-firsters and Atlanticists, "wideners" (who want to let more countries join the club) and "deepeners" (who want integration to take priority over enlargement). In these conflicts we should not hesitate to side with the parties promoting our interest in a larger, more open, more Atlanticist EU. Eastern European nations, for instance, could benefit dramatically from easier access to EU markets, and they would be a voice for a less constrictive confederation; it is hard to picture the Czech Republic's Vaclav Klaus going along with Fortress Europe.

President Clinton's policies toward Europe drift in the opposite direction. His urging of German leadership of a more integrated Europe tends to promote the protectionist vision of the dirigistes and deepeners. His "draw-down" of U.S. defense capabilities in general and U.S. troop levels in NATO in particular strengthens European fears and hence the pressure for a separate European defense organization. And his erratic performance in foreign policy, especially over Bosnia, has weakened respect for American leadership. The only way to make sense of this combination of policies is as a crabwise isolationism circling toward a Fortress America.