[DEBATE] : Protectionist forces bedevil EU

[Riaz K Tayob]

[Some people are more equal than others - when African industry 
collapsed under EU/US tutelage of the SAPs, this was "necessary 
adjustment costs" ...]


 BBC NEWS
Protectionist forces bedevil EU

By Ben Shore
Europe business reporter, BBC News, Brussels

"Protectionism" is like "terrorism". Now, before people get upset I 
should make myself clear. What I mean is the use of the two words is 
similar - one person's terrorism is another's freedom-fighting.

In the same way, what one government calls "protectionism" another may 
see simply as a way of safeguarding jobs.

On 1 March EU leaders will gather in Brussels for what is being billed 
as a "protectionism summit".

The idea is to head off what many see as a shift towards measures that 
incentivise large firms to favour investing in one member state over 
another, not for sound business reasons but because of the subsidies on 
offer. This is an abhorrent sin in the eyes of the eurocrats who run the 
EU. They believe the European single market is the main source of 
Europe's prosperity and that subsidies distort it.

The current distortionist-in-chief is supposed to be French President 
Nicolas Sarkozy. He has suggested that in order to secure French 
government aid, French companies like Renault and Peugeot-Citroen should 
move production out of their East European factories and back to France: 
"when a manufacturer, I won't say any names, sets up a factory in the 
Czech Republic to sell cars to French people, that's unjustified".

Such comments have caused consternation. The Czechs are in a 
particularly difficult position. Not only do they suddenly feel their 
factories are under threat, but as the current holders of the rotating 
EU presidency it falls to them to try and calm the troubled waters. It 
is they who have been the driving force behind the meeting on 1 March.

National priorities

In such situations in Europe, one would normally point to the difference 
between rhetoric and reality. President Sarkozy is known for speaking 
his mind, while the rest of the French government quietly gets on with 
making policy. But on this occasion there is a distinct overlap between 
what he says and the content of his proposals.

The basic idea is to lend 3bn euros (£2.6bn; $3.8bn) each to PSA 
Peugeot-Citroen and Renault, but on the condition that they avoid 
closing French production plants, or laying off French workers.

The trouble is, with demand for cars in Europe collapsing (new 
registrations were down 27% in January) something has to give - and that 
something might well be Czech workers.

The EU competition authority has formally requested details of the 
French scheme and is now studying the detail. But despite going through 
the correct procedures there is a clear concern at the drift of French 
policy.

EU Competition Commissioner Neelie Kroes, who must ultimately decide on 
the legality of the French programme, is making her position quite clear.

"We have to protect people by creating for them real jobs with real 
futures, not jobs that only exist as long as the taxpayers' money 
exists. That takes leadership. Leadership is not bribing multinationals 
and stealing jobs from one's neighbours," she said.

But while Ms Kroes has the luxury of not being answerable to voters the 
French government is ultimately responsible to French taxpayers.

Favoured banks

In the absence of a way of channelling money through central European 
institutions how is it going to look if the people running the country 
end up paying billions of euros into the coffers of their carmakers only 
for thousands of French jobs to disappear? Some might describe it as 
political suicide.

The sudden debate about protectionism tells us a lot about the nature of 
European politics, but it also tells us something about the financial 
crisis.

In the desperate autumn of 2008, as banks teetered on the edge of a 
catastrophic collapse, governments across Europe were forced to inject 
huge sums of cash into the banking system. Very often that cash came 
with strings: "you will lend money in your home market," banks were told.

These conditions were noted but not eliminated by the Commission, 
desperate to prove it was up to the task of managing the crisis.

But if a bank accepts, say, a 10bn-euro injection in exchange for 
focusing its lending on its home market - at the expense of lending 
elsewhere - is that not a market distortion similar to that which the 
French are accused of instigating in the car sector? National 
governments were in effect paying for preferential lending for their own 
citizens from their own banks.

But the panic of those days has passed and the industries under threat 
are not the internal organs of the European economy (the banks).

The car industry is a completely different beast, suffused with national 
pride but also synonymous with the ebb and flow of industrial relations.

Disputes about subsidies for carmakers are not new, but it is the fear 
of what is to come that has electrified the protectionist debate. Fear 
that the downturn could lead to a devastating de-industrialisation is 
clashing with a core principle of the European Union - that we're all 
competing in this market together.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/europe/7897342.stm

Published: 2009/02/19 08:15:54 GMT

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