Saturday, February 14, 2009

Economic crisis and protectionism in the EU

The EU is often said to be based on “four freedoms,” i.e. the freedom of movement of goods, persons, services and capital. This is not surprising considering the fact that the establishment of a European internal market, an area without internal borders in which the free movement of goods, persons, services and capital must be ensured (see Articles 3 and 14 of the EC Treaty), has been one of the original objectives of the EU. As a result, Member States are prohibited from maintaining national rules and measures discriminating on account of nationality.

Regrettably, these “four freedoms” are now under attack although their contribution to European prosperity for the past 50 years has been both undeniable and decisive.

First of all, a series of strikes were recently organized in Britain to complain over the use of “foreign” – EU – workers on the ground that some firms were “importing” foreign workers accepting lower pay than Britons. This is a genuine problem but one for which EU cannot be blamed. It is difficult to do full justice to this issue in a few words.

The most important point is that it is the responsibility of the host Member State to conduct inspections and to enforce its employment and working rules as well as the relevant EU standards. While it cannot be denied that some EU firms have been trying to bring in “cheap labor” in the most “expensive” Member States, the main problem, today, is the unwillingness of most national governments to enforce national and EU rules on working time, minimum paid, etc. even in situations where violations of these rules are committed by or on behalf of national companies. My suggestion to the trade unions is therefore to fight for the hiring of more workplace inspectors rather than using fellow workers from other countries as scapegoats.

Secondly, most national governments are now busy trying to financially “bailout” their own banks and industries. This led Mr. Topolanek, the Czech Prime minister, to warn that the economic crisis is prompting protectionist and xenophobic reactions in the largest EU Member States (read France and Germany), reactions which obviously threaten the European single market.

The Czech Prime minister had a point. Sarkozy’s bailout plan to aid the French car industry on the condition that no jobs are outsourced to other countries may indeed lead to a vicious circle and the adoption of more beggar-thy-neighbor policies. From a legal point of view, the European Commission has the power to monitor “state aid” to make sure no Member State uses public funds to favor national firms or artificially keep a loss-making national firm in business (see Article 87 of the EC Treaty). The trouble is that the Commission has apparently made the political decision to set aside EU competition law for the duration of the current crisis.

That being said, the Czech Prime minister is, unfortunately, in no position to lecture. His political party has repeatedly and ridiculously postponed the ratification of the Lisbon Treaty for reasons of pure domestic politics. His government has further tolerated the continuous utterance of mad anti-EU remarks by Mr. Klaus, the President of the Czech Republic. This disgraceful situation is made worse by the fact that the Czech Republic now holds the EU 6-month rotating presidency. To put it concisely, one should be exemplary before complaining about a lack of European solidarity.   

Laurent Pech

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Sadly the strains are telling. The former Franch-German motor of integration has become the national car (engine) firms to protect. This is going to be a hard nut to crack both for the Commission (which I believe is doing what it can) and politically (Council).

But you are quite right about the Czech Presidency's absurd position to postpone the Lisbon Treaty vote and its contradictory obligation to drive the EU forward.

The Lisbon Treaty would not address these problems satisfactorily, so the EU is in need of profound reform even if the heads of state and government are fed up with the stalled efforts since Nice.

Posted by: Ralf Grahn | Feb 14, 2009 10:29:13 AM

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