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Saturday, April 21, 2012 12:24 PM


New "Temporary" Border Controls a Vote of No Confidence in Europe; In France, Old Protectionist Idea Reawakened; Disastrous Global Trade Wars Coming Up


New border controls are another sign of increasing protectionism in European states. It was not supposed to be this way, yet these controls represent a Vote of No Confidence in Europe

Germany and France are serious this time. During next week's meeting of European Union interior ministers, the two countries plan to start a discussion about reintroducing national border controls within the Schengen zone. According to the German daily Süddeutsche Zeitung, German Interior Minister Hans-Peter Friedrich and his French counterpart, Claude Guéant, have formulated a letter to their colleagues in which they call for governments to once again be allowed to control their borders as "an ultima ratio" -- that is, measure of last resort -- "and for a limited period of time." They reportedly go on to recommend 30-days for the period.

Of course, using catchphrases like "ultima ratio" and "limited period of time" is supposed to make such policies sound reasonable and proportionate. After all, the reasoning goes, it's just a few occasional border controls for up to 30 days. What's the big deal, right?

But the proposal is far from harmless and would throw Europe back decades. Since 1995, the citizens of Schengen-zone countries have gotten used to freely traveling within Continental Europe. Next to the euro common currency, free movement is probably the strongest symbol of European unity. Indeed, for many people, it's what makes this abstract idea tangible in the first place.

To throw this achievement into doubt now is a vote of no confidence in Europe. The fact that this proposal is coming in the middle of the French election campaign makes it even more suspicious. With his back to the wall, French President Nicolas Sarkozy is pretending to take a tough-guy stance toward immigrants. And the fact that Germany's interior minister is allowing himself to get caught up in this charade is regrettable. Still, if you take a look at his party affiliations -- as a member of the center-right Christian Social Union (CSU), the Bavarian sister party to Chancellor Angela Merkel's Christian Democratic Union (CDU) -- it's hardly surprising. 

But this symbolic act could have drastic consequences. It is a relapse into the type of nationalist thinking that many viewed as part of the past. And it brings to mind a country that continental Europeans like to make fun of for its obsession with its own borders: Great Britain.
Border controls are not the only form of protectionism rearing its ugly head. The New York Times reports In France, Old Protectionist Idea Reawakened
An old French idea is blossoming again in the Paris springtime.

The Socialist Party has embraced a form of European trade protectionism in its manifesto, a shift from its previous endorsement of globalization as a win-win proposition for French workers.

The shift matters both because the Socialists and their Green allies have a good chance of unseating the center-right president, Nicolas Sarkozy, in the election next year, and because France has a way of setting the political agenda in Europe.

“Europe is the only continent that imposes free trade on itself in a world that is constantly making exceptions,” according to the Socialists’ program, adopted April 9.

Declaring that Europe should be neither a fortress nor a sieve, the Socialists want international labor, environmental and health and safety standards built into world trade rules.

Failing that, “we will propose putting in place tariff locks at Europe’s borders” until exporting countries adopt norms applied in Europe to issues like trade union rights, child labor and carbon emissions.

Furthermore, the Socialists want the European Union to insert tougher “fair trade” safeguard clauses in agreements with third countries, enabling the Union to reimpose tariffs to halt any import surge threatening European industry.

And they demand that the European Commission publish a study assessing the effects of each new trade agreement on European industry and employment before it is signed.

Free trade has little political constituency in France. While the seafaring British and Dutch have long been free traders, the French have a protectionist tradition reaching back at least to the 17th-century mercantilist Jean-Baptiste Colbert, Louis XIV’s finance minister.

More recently, Maurice Allais, the Nobel economics laureate, published diatribes against free trade with emerging economies until his death last year, warning that it would cause mass unemployment and depression in Europe.

Another contrarian intellectual, the demographer Emmanuel Todd, is campaigning for European protectionism and an exit from the euro, saying the loss of jobs would otherwise tear French society apart.
Disastrous Global Trade Wars Coming Up

The New York Times article stated "the drift toward protectionism has no support in Germany, France’s vital partner in E.U. leadership."

It appears the author needs to read Der Speigel article on border controls at the top of this post. More importantly, once Sarkozy is booted, there is not going to much left of the German-French alliance.

The Times also states "The Socialists’ U-turn on trade is largely driven by domestic politics, and while it resembles positions taken by the Democratic Party in the United States, it has little support so far in other European countries, except perhaps Italy."

"Except perhaps Italy" is quite the exclusion. France and Italy just happen to be the second and third largest eurozone economies.

The last thing Europe can afford is a disastrous round of increased protectionism on top of insane tax hikes, yet insane tax hikes are the norm and signs suggest more protectionism is on the way.

Moreover, Mitt Romney has stated on numerous occasions that if elected he would declare China a currency manipulator. Such an act coupled with increased protectionism in Europe would likely start a disastrous, unwinnable, global trade war.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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