Wednesday, April 27, 2005

From the Euro Ghetto - Chirac's Protectionist Rap

Over at A Fistful of Euros there has been some discussion on the scare mongering being used to encourage a “Yes” vote to the EU Constitution in France. See – We don’t have a Plan B

What is clear to EuroPolyphony is that all the scare mongering does is serve to enable Chirac to extract ever more concessions from the EU, and move it further down the road to economic wreckage. No doubt the road is paved with good intentions, but the reality is that politicians in some of the leading Euro Ghetto states are blind to anything but their own self-interest. Viewed from the perimeter it is clear that protecting walls are being built around the “€uro Ghetto”; they will attempt to keep out the legendary Chinese horde, and keep the inhabitants locked in to high prices and high taxes.

Protectionism is just a directive away and with it the continued hollowing out and decline of states like Germany and France which will attempt to drag the rest of the EU down to the same miserable level. Chirac and Schroeder are each truly deserving of the title "Arch Eurowrecker” – DJ’s Jacques and Gerd are spinning the protectionist rap in a disgusting attempt to capture votes.

Let’s look at what the Financial Times has to say on the matter this morning:

A group of Germany's top economists on Tuesday rounded on the government for setting aside its reform agenda in favour of protectionist policies aimed at insulating Germany from low-wage foreign competition.

Speaking at a press conference in Berlin, where the think-tanks presented their six-monthly assessment of Germany's economic prospects, Joachim Scheide of the IfW world economic institute in Kiel said that "introducing minimum wages, and trying to close the borders [to foreign workers] is not the answer" to Germany's economic problems.

The institutes expressed concern that Chancellor Gerhard Schröder's recent policy drive against an alleged rise in illegal eastern European workers in Germany, and his Social Democratic party's attacks on the German business community, signalled that the government had departed from its Agenda 2010 reform programme.

From - Economists accuse Schröder of protectionism
Fear of foreigners and foreign competition is as misplaced as it is reminiscent of a Germany that existed in the 1930’s.

On the matter of China the FT notes that:
Europe could broaden its investigation into Chinese textile exports, Peter Mandelson, its trade commissioner, indicated on Tuesday as pressure mounted on Brussels to prevent Chinese clothing from flooding the EU market

Mr Mandelson's comments coincided with the toughest call yet for action against China from Jacques Chirac, France's president. “We cannot accept that these textiles, the prices of which have recently dropped significantly, can invade our markets without regulation,” he said. Mr Chirac, at a joint press conference with Gerhard Schröder, the German chancellor, said the issue provided additional evidence of the need for Europe to adopt a united front in the face of globalisation.

China's textiles exports have emerged as a key issue in the run-up to next month's French referendum on the EU constitution. It is being presented by Mr Chirac, who is trying to persuade voters to support the constitution, as a test case of whether Brussels will stand up for French interests or has been captured by free-trade “neo-liberalists”.

See - EU warns on China textiles market
So Chirac and Schröder are against globalisation and in favour of protecting the higher prices in the EU against the lower prices offered by a developing economy. But, they are not alone even that confused cowboy who inhabits the White House is in favour of trade tariffs. It is hard to put it more succinctly than the editorial from today’s FT:
The clamour on both sides of the Atlantic for safeguards against rising imports of textiles from China should be exposed for what it is: self-interested pleading on the part of producer interests and shameful opportunism by politicians willing to play up to them. It should be resisted firmly.

Quotas are in effect taxes paid for by consumers through higher prices. Free trade brings lower prices. Reintroducing quotas in the guise of safeguards means imposing a tax, especially on poor families, who spend a large share of their income on products such as T-shirts and jeans.

Cheap clothes should be particularly welcome in continental Europe, which has largely missed out on them so far. Since January 1 2000 clothes prices have fallen 24 per cent in the UK, 7.5 per cent in the US and 6 per cent in Japan. But they have gone up by 7 per cent in the eurozone.

From - Protectionist piffle
Finally the FT reports on some recent OECD recommendations – the OECD is in Paris but fortunately seems to be isolated from the rabid ravings of Jacques Chirac
The Organisation for Economic Co-operation and Development on Tuesday urged governments to open up their countries' markets for services, arguing that the overall economic benefits of such a move would far outweigh job losses in some sectors.

The call, by the Paris-based think-tank for the world's richest countries, comes as several European Union countries are turning their backs on an ambitious plan to liberalise the bloc's services market.

The OECD said such reluctance was misguided, since liberalising the services economy benefited both high-income and low-income countries in the long run.
The offshoring of services allowed companies in rich countries to “focus on what they do best, freeing up capital for research and development and investment in more productive activities”. It also allowed cost savings.

Poorer countries, on the other hand, would benefit from technology transfers that helped bridge the “digital divide” the gulf between rich and poor countries in the field of information technology.

Full text @ OECD stresses benefits of freeing up services market
Free trade means just that. Freeing up trade and knocking down the barriers that make it difficult for poorer nations to sell their products. It isn’t about exploiting the poor to keep the rich fat, and it isn’t about making the poor poorer - if you want that then support paranoid protectionist reactionaries like Chirac and Schröder.

If Europe is to move into the future it must ditch the protectionist nonsense and get itself some new leaders who are forward thinking, ambitious, energetic, and willing to embrace the challenge and opportunity of the C21st. If Europe wishes to revisit the past, and descend into misery, then it should stick with people like Chirac, whose personal ambition, and selfish nostalgia for the world as it existed before the rise of the Asian tigers and the fall of the Iron Curtain inform his judgement, policy decisions, and vision of Europe.