Europeans catch protectionist fever
posted at 2:50 pm on February 13, 2009 by Ed Morrissey
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At least Barack Obama shows a capacity to learn from his mistakes on trade policy. The Europeans apparently have changed their minds about trade wars after warning Obama away from the “Buy American” restrictions in Porkulus. Nicolas Sarkozy likes them so much, in fact, that he’s willing to start one within the EU:
French President Nicolas Sarkozy’s protectionism has enraged the European Union — and Germany in particular. Ironically, German Chancellor Angela Merkel was on a protectionist tone of her own until recently. The European Union should be speaking with a common voice in the downturn, but France and Germany are doing little to help. …
Last week Sarkozy upped the ante, saying: “We want to stop moving factories abroad, and perhaps we will bring them back. If we are to give financial assistance to the auto industry, we don’t want to see another factory being moved to the Czech Republic.”
Czech Prime Minister Mirek Topolanek, who was beside himself with rage, promptly announced a European special summit.
Sarkozy’s remarks proved, once and for all, that protectionism is alive and well in the EU. Moreover, there is no doubt that protectionism reduces Europe’s economic output. As we know, there are no winners in a protectionist race.
This calls into question the EU itself. The European Union started off as a common market, then grew in fits and starts into a quasi-governmental institution. At its heart, though, the EU exists to provide an single market that can compete with the US and other regions rather than each other. If they start building protectionist walls within the EU, why have an EU at all? Why have a common currency?
In fact, the Euro turns out to be a crucial component of the dispute. Both Germany and France unilaterally modified their monetary policies to rescue their bank systems, without gaining EU approval first (and for that matter, so did the Irish). Part of this came because the EU simply hasn’t responded well to the economic and banking crisis, but that stems from the top-heavy characteristics of the EU as a quasi-government. They’re practically built to avoid quick action, and in a severe recession, that model simply won’t work, at least not politically.
Der Spiegel blames the Germans for starting this, with their own subsidy program for domestic automakers. That prompted Sarkozy to do the same, only more baldly. Germany under Merkel has given protectionism a new life in Europe at the moment that the EU claims it wants Western nations to coordinate monetary and spending policy for maximum effect.
If the EU touches off an internal trade war, the US had better be prepared to quarantine it to the Continent. Obama learned the lesson quickly, and perhaps he can tutor our other trading partners. If not, expect the EU system to collapse entirely, and the Euro along with it.
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I thought we WANTED to be more like those enlightened Europeans?
Parlez vous francais, President Ogabe?
Bishop on February 13, 2009 at 2:53 PM
Isn’t that ‘Le Smoot d’Hawley’?
Vashta.Nerada on February 13, 2009 at 2:53 PM
As long as they don’t blame unions for the factories moving out of country, everything should be okay….. /
Vashta.Nerada on February 13, 2009 at 2:55 PM
How very……….’republican’ of them :-p
Defector01 on February 13, 2009 at 2:56 PM
The One must be upset now that they took the buy American provision out. Maybe it will end up stuffed in between the next 1000 page stimlus bill that our politicans will ask for.
Brat4life on February 13, 2009 at 2:56 PM
Way to go during the Czech presidency, Sarko!
misslizzi on February 13, 2009 at 3:00 PM
I may go just to watch the bloodbath erupt. I hope there’s cake!
Glenn Jericho on February 13, 2009 at 3:01 PM
Gonna be a rough few years here. I saw a Woodman’s ad for a half gallon jug of peanut butter for only $2.39. I’m heading there after work.
BadgerHawk on February 13, 2009 at 3:03 PM
‘Le Smoot du Hawley’. Yes, that’s it.
Vashta.Nerada on February 13, 2009 at 3:04 PM
It’s probably the salmonella special.
Vashta.Nerada on February 13, 2009 at 3:05 PM
Let all of these socialists push there agenda. It will only swell the ranks of those who will fight against it. The dam’s broken now. It can’t be rebuilt until all the water is drained.
genso on February 13, 2009 at 3:10 PM
Progressives to Europeans hold still already, we are mapping out American’s futures based on your wise Governance:)
Sure we should elect a person who has been in the U.S. Senate for 18 months, I mean it isn’t important that he ever ran a business or a government before this way he didn’t form any bad habits see?/sarc. When asked to comment, President Obama replied “I like Pie”
Dr Evil on February 13, 2009 at 3:11 PM
Once again we see where the “free trade” theories so loved by Ed. Michelle, Limbaugh and other Ayn Rand disciples fall apart in reality.
Free trade would have been good for this country if those we trade with were trustworthy. The Asians have dumped products here for decades and staffed their manufacturing facilities with slave or near-slave labor, all the while putting up barriers to their own peoples’ purchases of our goods. Mexico built its advantages on paying starvation wages to its workers. We have competed with government-owned companies in Europe, whose subsidies made them competitive price-wise.
In doing so, we allowed our own industries to fail or move overseas because the wonderful theory of free trade said they didn’t deserve to stay in business.
Those of you who have loudly supported this concept never bothered to look at the details. You, personally, were saving/making money on the existing conditions.
Now, too many are competing for jobs flipping burgers, because the greedheads on Wall Street and in D.C. clamored for “free trade.”
Add in Osama Obama’s multi-trillion-dollar giveaways of nonexistent money, and the chances of the USA surviving grow slimmer by the day.
The economic collapse of Germany after WWI led to a “Fuhrer” taking power. We already have one in place to preside over our collapse.
MrScribbler on February 13, 2009 at 3:14 PM
That is untrue and unfair to those workers there. Another leftist lie to get people emotional about the issue. Send the unions into China or force them to have a minimum wage that you approve and you will destroy their economy and likely the world’s, given our present situation. Stop speaking on things you know nothing about except what the feel-good do-gooders tell you.
genso on February 13, 2009 at 3:18 PM
Le Smoot du Hawlet + der Schmüt-Haulie Gesetz + el ley de Smute Haulí + la Legge d’Smutte e Hallí + Šmůt Chalý Zákon = End of the EU
Still deciding if I like that or not.
Glenn Jericho on February 13, 2009 at 3:18 PM
In doing so, we allowed our own industries to fail or move overseas because the wonderful theory of free trade said they didn’t deserve to stay in business.
Nobody deserves to stay in business. But I would also submit that high taxes here also have something to do with businesses closing down or moving. We also have a minimum wage, very strict work laws, high legal liability, and a lot of other things that make staying in business very expensive vs. other countries.
theotherKate on February 13, 2009 at 3:19 PM
France and Germany, I forget what involvement did these two countries have in the Oil For Food Scandal in Iraq?
Dr Evil on February 13, 2009 at 3:22 PM
The Europeans are a drag on the rest of the world, both socially and economically. Note the influence they are having on our new administration. Just as in two world wars, we will have to save them to save ourselves from them.
genso on February 13, 2009 at 3:24 PM
Yep. With a side order of dry-roasted vermin parts.
AZCoyote on February 13, 2009 at 3:34 PM
It’s funny how liberals preach “buy american”.
Except for all the foreign oil we are held hostage to.
Liberals continue to ban us from “buying american” oil.
roninacreage on February 13, 2009 at 3:39 PM
Oh yessss. Please!! Faster, please.
Fortunata on February 13, 2009 at 3:41 PM
Interesting theory. You think that free trade looks good on paper but when you introduce the human factor into the equation it becomes unworkable like socialism. People just can’t play fair, I see your point. I don’t think that makes free trade unworkable, but it is the dark side that nobody wants to talk about.
DFCtomm on February 13, 2009 at 3:44 PM
Free trade is always good. Even when your trade partners aren’t free traders.
It is never a good idea to force your citizens to buy second rate, over priced goods.
MarkTheGreat on February 13, 2009 at 3:45 PM
Any factory that isn’t competitive, deserves to go out of business, I don’t care where that factory is located.
MarkTheGreat on February 13, 2009 at 3:47 PM
Thank you. Caveat Emptor should be the rule, not some stupid guarantee against failure backed by protectionism.
genso on February 13, 2009 at 3:48 PM
If a country wants to subsidize exports. That’s good for the US. Their citizens get taxed, and we get cheap goods. A double win.
MarkTheGreat on February 13, 2009 at 3:48 PM
DFCtomm on February 13, 2009 at 3:49 PM
Soooo… a factory that is made unprofitable BECAUSE of government regulations, laws, and rules, deserves to go out of business?
Level playing field? I agree… problem is that we don’t have a level playing field.
Romeo13 on February 13, 2009 at 3:52 PM
Which is why I applaud, and invest in, those companies smart enough to move their manufacturing overseas where they are appreciated.
genso on February 13, 2009 at 3:54 PM
Ed, you say this like it’s a bad thing!
I would be delighted if the EU collapsed and the Euro along with it!
It’s way past time for these independent countries to stop play-acting that they’re united and that the EUro is propped up by anything but hot air!
Celebrate diversity, Europe, and go back to being nationalistic and productive!
Jenfidel on February 13, 2009 at 3:57 PM
Well I wonder what the WTO will do now?
I see your point. Unfortunately this does nothing for family businesses like mine.
All it does is screw us over.
So the entrepreneur at the small level is screwed from the beginning.
We should never involve ourselves in protectionism.
But there is something wrong when companies are allowed to get so freaking huge that nobody knows who owns what anymore.
Doing business in ‘bulk’ has advantages, but those advantages to the consumer start to disappear when the company gets so big they no longer care about a few disgruntled consumers. This leads to giving the consumer anything & if it’s substandard, so what. Where else do you have to go & get this product? Nowhere? Yeah. That’s right. Bcs now only a few guys sell it.
I don’t know what the solution for these problems are, but ‘free-trade’ deals are really unfair to people like me in the cattle business. The meat we produce is not marked as to its origin.
So when you go & buy a hamburger or steak, you have no idea where it comes from. And bcs 3 packers monopolize the market, they can give you anything to eat & you basically have to shut up & eat it, go to the farmer/rancher next door, raise it yourself, or become a vegetarian.
I think labeling laws are important for all products so Americans can make better informed choices about the clothes they wear & the food they put into their bodies.
I am confident in my superior product, but when it’s blended with inferior product from 2 other countries, you don’t know what you’re getting.
This may seem unimportant to some, but it illustrates to me how unbalanced trade & agreements can be.
Mexico & Canada etc can use drugs on their animals that I can’t (& wouldn’t want to) increasing pounds, but an inferior-tasting product.
I raise the tastier more efficient product, but at a higher cost bcs of American laws & taxes.
So why do they get to sell their product here in competition with me & never telling you what you’re eating?
Badger40 on February 13, 2009 at 4:08 PM
Hey, all we need now is a charismatic demagogue to stir up some nationalistic fervor within the EU countries. That’s how things always seem to end up on The Continent.
innominatus on February 13, 2009 at 4:20 PM
The euro is going to collapse, period.
The internal stresses it mainfests are nearing the point of being totally unsustainable. You have, what, 13 countries with vastly different economies all trying to share a common currency and the basket cases have already disposed of the stability framework.
It is only a matter of time.
Ares on February 13, 2009 at 4:25 PM
I haven’t said — and don’t believe — that free trade is a bad thing. What’s bad is when we get “free trade” agreements that sell our own workers and industries out. Those who have negotiated trade deals for this country simply haven’t had the guts to use the leverage we have (or used to have) to ensure that what is fair to one side is fair to the other.
And yes, the tax/regulatory structures here don’t help. That’s especially true when the trade “partners” impose dranconian measures against us, and not their own industries.
But saying U.S. companies “deserve to fail” because they can’t compete with the deck stacked against them is sheer hypocrisy.
And the minimum wage — or even the concept of paying decent wages — has less to do with the cost of production than most people think. It’s an effective red flag to wave, though.
We have too many easily bribed political hacks and people like “genso” who are willing to put their own nation’s prosperity at risk to save/make a buck.
MrScribbler on February 13, 2009 at 4:25 PM
Free trade is the equivalent of rape. That’s an interesting take.
MarkTheGreat on February 13, 2009 at 4:27 PM
If the people won’t reform the govt to get rid of the govt created problems, then yes, the factory deserves to go out of business.
MarkTheGreat on February 13, 2009 at 4:28 PM
When a company gets so big that it starts to forget about it’s customers, then it goes out of business. Unless the govt steps in to lock out the competition.
Look at Detroit back in the 70’s and 80’s. They made crappy, over priced cars. And didn’t care, because they belived the consumers had no choice. The consumers disagreed, because they started buying Japanese.
Detroits response was not to improve their product, but rather go crying to Washington to eliminate the unfair competition.
MarkTheGreat on February 13, 2009 at 4:31 PM
Badger40…man I feel for you guys in the beef industry. You’ve been beaten up by everyone from vegans to environmentalists. To be sure you cannot pick up and move overseas for a level playing field.
You represent the problems we have with government intrusion. The USDA, as do all government agencies, give preferential treatment to the big guys of the industry and write regulations that add another burden on you. I guess those guys are too big to fail or something. I didn’t realize that you couldn’t label your product so that your beef could stand out against others. That does take a competitive advantage from you. One bit of amusing advice, start growing wagyu beef. I understand a new market has sprung up unexpectedly.
But intense regulations cause problems for all small businesses who can not afford to lobby and sue and pay off officials.
genso on February 13, 2009 at 4:32 PM
If there are no companies on the market that provide what you want, the odds are you are the only one demanding it.
MarkTheGreat on February 13, 2009 at 4:32 PM
So WW III will start about, oh, say the end of The One’s first term?
PattyJ on February 13, 2009 at 4:34 PM
The only one here putting this countries prosperity at risk is you. Because you care more about your job than you do about the condition of the American consumer.
MarkTheGreat on February 13, 2009 at 4:34 PM
Good point. Many craftsmen are in business today because they can supply the small demands.
genso on February 13, 2009 at 4:34 PM
I feel for you, but what sacrifice are you expecting me to make for you? Would you feel better if I only invested in American companies even though my profit potential is less? More importantly, will it increase your profits?
genso on February 13, 2009 at 4:38 PM
“The European Union started off as a common market,” limited to coal if memory serves.
burt on February 13, 2009 at 4:40 PM
What people like you don’t understand is that growth can not exist in a closed system. It needs to discard some things and refresh itself from outside. “people like” me, if I make profits from overseas, actually help the process by returning money back into the US. Or is that only something that should be left to the government to handle for us. At the rate they are selling our dollars abroad I would say that it would be a bad investment.
genso on February 13, 2009 at 4:45 PM
Get your popcorn, get yer hot popcorn right here.
GarandFan on February 13, 2009 at 4:51 PM
It’s too funny how the USDA is weird.
You know we also have to pay a $1/head per cow/calf sold to go toward the checkoff fund which promotes Beef in various ways AKA advertising. This amounts to free advertising for ALL people who sell beef products.
The mushroom producers got the courts to label this as ’speech’ & that the govt was taking their right away from free speech when their checkoff $$ were being used to promote foreign products. We producers want our checkoff dollars used for American Beef-nothing else. Which is why COOL is so important to us.
I think my husband would drink all the beer it takes to make this product!
I do have one cow I can massage. But she’s my old bottle calf. I don’t think I can eat her quite yet.
She’s my sweetie!
Badger40 on February 13, 2009 at 4:58 PM
God bless and good luck.
genso on February 13, 2009 at 5:49 PM
No you miss the point. Free trade is the equivalent of sex and being abused by your trade partners is the equivalent of rape.
DFCtomm on February 13, 2009 at 6:10 PM
I still have some Deutchmarks…..
Maybe I will be able to use them soon.
cobrakai99 on February 13, 2009 at 6:45 PM
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