BusinessDay 13 Jul 2018

Friday 13 July 2018
A4 BUSINESS DAY
C002D5556
FT
Trump knows Europe
needs America...
Continued from page A3
for nothing like 70 per cent of Europe’s
security budget. Its actual share, as the
International Institute for Strategic
Studies has set out, is a fraction of that.
Five per cent of America’s defence
budget goes directly on Europe. Nor is
Europe “delinquent” on its obligations.
Since pledging four years ago to meet
the 2 per cent of GDP target within a
decade, Europe’s Nato members have
increased their spending by $87bn in
real terms, which is more than double
what the US spends annually on European
security. So much for Mr Trump’s
relationship with the facts.
But quietly correcting Mr Trump
— even shrieking it from the rooftops
— will do nothing to change his mind.
Technocracy cannot compete with
diatribe. The most lethal demagogue is
one who grasps an underlying reality.
Mr Trump knows that Europe needs
America more than America needs
Europe. Every time Mr Trump meets
a Nato partner, or listens to many of
his advisers, he is told his actions are
weakening US security. That is true.
America’s power is magnified by alliances.
Wrecking them reduces Washington’s
global clout. But the bigger
loser is Europe. Its survival depends
on America’s guarantee. A resurgent
Russia poses deep threats to Europe’s
eastern borders, its internal cohesion
and ultimately its prosperity. With
America’s continued presence, Europe
can rebuff Vladimir Putin’s probing.
Without it, Europe would be dangerously
exposed.
Mr Trump needs no adviser to tell
him that America’s position gives it
greater room for complacency. The
US is flanked by the world’s two largest
oceans — the Atlantic and the Pacific.
In Mexico and Canada, it also has two
of the world’s most benign neighbours,
even taking into account Mr Trump’s
constant needling. Geography is Mr
Trump’s bottom line. Yet Europe is doing
its best imitation of Hillary Clinton.
Like Mrs Clinton, Europe’s leaders
believe that reason and public sentiment
are on their side. Like her, they
overestimate both.
Mr Trump has shown that unreason
— the constant repetition of caricature
and lies — can alter public opinion.
Worse, big shifts in worldview can be
pulled off quickly. Two years ago, most
Republicans believed firmly in Nato. Today
just 40 per cent of Republican voters
think America should remain a member
of the transatlantic alliance. More than
half of Republicans say that Mr Trump’s
relationship with Mr Putin is a good thing
for America. So much for the electorate’s
wisdom. What about Europe’s voters?
A year ago, Europe’s leaders could
be forgiven for misjudging Mr Trump.
There is no precedent for what he is
doing. All his predecessors, including
Barack Obama, called on America’s
Nato partners to increase their defence
spending. None of them would have
dreamt of undermining European
liberal democracy. Yet that is what Mr
Trump is doing.
On Monday, he travels to Helsinki to
meet Mr Putin. He joins Viktor Orban,
Hungary’s prime minister, and champion
of “illiberal democracy”, and Matteo
Salvini, Italy’s leading populist, in Mr
Putin’s growing western fan club. The
first time they met, which was almost
exactly a year ago, Mr Trump agreed
to set up a US-Russia task force on
cyber security. That was like a chicken
agreeing with the fox to patrol the night.
Mr Trump’s advisers persuaded him to
climb down. No one knows what the
two leaders informally agreed.
NATIONAL NEWS
Donald Trump at the Nato summit on Thursday. ‘The numbers are going up like a rocket ship,’ he said, referring to alliance members’ commitments
to defence spending © EPA
Donald Trump claims Nato allies have agreed to spending increase
Macron and Merkel challenge president’s assertion about additional commitment
DEMETRI SEVASTOPULO,
MICHAEL PEEL AND ADAM SAMSON
Donald Trump said fellow
Nato leaders on Thursday had
agreed to “substantially up”
their commitment to defence spending
although his assertion was swiftly
challenged by his French and German
counterparts.
After a series of blistering attacks
by the US president on members of
the alliance over defence outlays, Mr
Trump said there had been “substantial
progress” on the second day of
Nato summit in Brussels.
He said leaders agreed to lift their
spending to “levels they have never
thought of before”.
“The numbers are going up like a
rocket ship,” Mr Trump said, hours
after he wrote on Twitter that the allies
should go further than their spending
target of 2 per cent of gross domestic
product on defence and should aim
to reach 4 per cent.
However, Mr Trump’s comments
on spending appeared to be quickly
contradicted by French President
Emmanuel Macron, who said Nato
allies had not agreed to spend more
than the existing target.
“There is a communiqué that
was published yesterday. It’s very
detailed,” he said, according to the
Associated Press. “It confirms the
goal of 2 per cent by 2024. That’s all.”
Angela Merkel, the German chancellor,
acknowledged the need to
address the issue, but indicated there
had been no additional spending
commitment. “We presented the
current situation,” she said. “But
considering the discussion among
the European allies, not only the
Americans, I think we need to ask
ourselves consistently what more
we can do.”
Mr Trump played down suggestions
that he had threatened to
withdraw the US from Nato, saying
the commitment to the decades-old
military alliance remained “very
strong”. When asked if he believed
he could withdraw the US from the
alliance without Congressional approval,
he said: “I probably can but
that’s unnecessary.”
Only hours earlier, Mr Trump
launched another stinging attack on
Germany.
“Presidents have been trying unsuccessfully
for years to get Germany
Unilever shareholders warn on HQ move to Netherlands
Top investor says leaving the FTSE 100 index could lead to forced selling of stock
ATTRACTA MOONEY AND
SCHEHERAZADE DANESHKHU
One of Unilever’s biggest
shareholders has warned
of the forced selling of the
consumer group’s shares as unrest
grows among British investors over
the decision to move its headquarters
to the Netherlands.
Unilever has embarked on a
charm offensive among its UK
shareholders, which have been
alarmed by the likely ejection of
the company from the FTSE 100
index that many use as a benchmark.
The company has attempted
to woo investors through a series
of meetings ahead of a crucial
vote on abandoning the company’s
89-year-old Anglo-Dutch
structure.
Nick Train, joint founder of
Lindsell Train, a top-five shareholder
with a 2.5 per cent Unilever
stake, urged holders of Unilever’s
UK-listed stock to “give serious
consideration over the summer
as to whether the proposal is in
their interest”.
His comments to the Financial
Times highlight the tough
battle Unilever faces in garnering
the required 75 per cent of UK
shareholders to vote in favour of
the move, alongside 50 per cent
of Dutch shareholders. Unilever
will seek a premium London listing
but is expected to fail index
compiler FTSE Russell’s liquidity
criteria for FTSE 100 inclusion.
Mr Train, whose investments
tend to be long-term, warned of
possible “inconveniences and increased
risks for our clients” linked
to the move, including the “likelihood
that we will become forced
sellers of the shares for some of our
clients at a time and a price not of
our choosing”.
Three large shareholders said
that the company had not given
satisfactory responses to concerns
during meetings. A top-10
shareholder, who has spoken with
the board twice about the plans,
said Unilever had been “almost
belligerently unreceptive” to the
concerns of British investors.
“They showed no intent to listen
to shareholders — almost the
opposite. I don’t see how they are
confident that will get it through
[the vote passed]. I think they are
in trouble.”
“The vote is finely balanced. It’s
and other rich NATO Nations to pay
more toward their protection from
Russia. They pay only a fraction of
their cost. The U.S. pays tens of Billions
of Dollars too much to subsidise
Europe, and loses Big on Trade!” he
wrote on Twitter.
The US president had stunned
leaders at the annual Nato summit
on Wednesday by saying Germany
was “captive” to Moscow because of
its Russian gas imports, in televised
remarks that he would have known
would be widely broadcast.
In early Thursday posts on Twitter,
Mr Trump repeated his criticism that
Nato was protecting its members from
Russia while Germany was paying
Moscow “billions of dollars” for gas
imports. “Not acceptable!” he wrote.
Nato members had played down
tensions on Wednesday but the US
president was widely condemned for
the way he had attacked Germany in
public. At a press conference, Jens
Stoltenberg, Nato secretary-general,
highlighted some of the issues that
the alliance members had agreed.
“For a quarter of a century, many of
our countries have been cutting billions
from their [defence] budgets,
now they are adding billions,” he said.
not a slam dunk,” said Samuel Johar,
of Buchanan Harvey, a board
advisory firm, who has spoken to
several large shareholders.
The vote on the move is due to
take place before the end of September,
and investors are waiting
for a circular with more details
about how the process of simplifying
the two sets of shares will work.
Unilever said: “Unilever will
remain listed in London; and as
we continue to engage extensively
with our investors and shareholders,
we remain very confident of
the outcome of the vote on simplification.”
Graeme Pitkethly, Unilever’s
finance director, said last month
that the company was “extremely”
unlikely to stay in the UK’s FTSE
100 index were it to become a
Dutch NV company.
He acknowledged that ejection
from the index — in which Unilever’s
£123bn market value makes
it the fourth-largest company —
would have “negative implications
for some investors that are benchmarked
to it”. But he added that
“simplification is the right thing for
the company and our shareholders
as a whole”.
Rust spots emerge in US
manufacturing surge
Midwest factories fear chilling effect
of tariffs as revival gathers pace
PATTI WALDMEIR AND ED CROOKS
When Tesla rival SF Motors
chose a place to manufacture
its upmarket electric
cars for the US market, it bypassed
the US west coast and the manufacturing-friendly
southern Sun Belt to
head straight for the crossroads of
the American Rust Belt.
The area around South Bend,
Indiana, which includes the town
of Mishawaka where the Chinesebacked
company will start making
electric cars for sale next year, has
had decades of practice manufacturing
automobiles, and a skilled
labour force that can be quickly
trained to make the greener vehicles
of the future.
Workers in South Bend were
making electric horseless carriages
for the legendary US carmaker
Studebaker back in 1902. That
legacy of manufacturing skills, and
the presence of physical infrastructure
such as the old Humvee factory,
gave the small Indiana town the
edge with SF Motors, a privately
held company whose largest investor
is Chongqing-based Sokon, a
Chinese sport utility and commercial
vehicle maker.
SF Motors has promised to invest
at least $160m to equip an advanced
factory on the site — hiring back
most of the 330 workers who lost
their jobs when the same plant
closed last year — to create 467
jobs by 2020.
That is less than half the roughly
1,000 employees who worked at
the site in its heyday at the start
of the 21st century when it made
Humvees. But it is nearly 50 per
cent more than worked there in
recent years, when it made Mercedes
SUVs.
The plant’s revival is part of a
trend that has put several Midwestern
US states in the top tier for
factory job gains in the US since the
2016 election of President Donald
Trump, an avowed champion of
American manufacturing.
The strength of manufacturing
job gains in states that include key
battlegrounds for congressional
elections in November is good
news for Mr Trump’s Republican
party. The biggest threat to that
revival in the Midwest, however, is
Mr Trump’s trade policy.
Manufacturing jobs in Mishawaka
plummeted after the financial
crisis but since then factory job
growth here has handily outpaced
the US average.
“They know how to build quality
vehicles, we want those people
working for us”, said Jason Wallace,
marketing and branding director
of SF Motors. “A lot of the skills that
you need to make a quality vehicle
and the partners that you need are
still in the Midwest.”
“Indiana: a state that works,”
said SF’s founder and chief executive
John Zhang, echoing the state’s
motto, at a ceremony to celebrate
the investment. “For us to build a
plant from zero up is not that easy,
it takes time. All the workers here
are highly trained, and we have
good support from the UAW [the
United Auto Workers union], so we
can build this plant to full capacity
in a much shorter time”, he told
the Financial Times in an on-site
interview.