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An EU-US trade war in the making? March 31, 2009

Posted by Sverre in : Political economy, World politics , trackback

I was listening to an LSE podcast of a lecture by French Minister of State for European Affairs Bruno Le Maire, when I heard some surprising statements made. He was talking about how it was important for European nations not to resort to protectionism in the face of the current crisis when he happened to make some interesting, possibly disturbing, statements. He talks about the difference between protecting your industries and protectionism. I can’t spot the difference, can you?  (from approiximate 1h10min into the speech):

[…]so I am not in favour of protectionism, as I just said, I am just in favour of European measures – measures decided at the European level – that would prove to our citizens that we are taking into account their fears and worries and that we are trying to protect our European economy, that we are trying to protect our industries. This is a very difficult balance we have to find, but this is not protectionism. Protectionism means today that the UK would take some very concrete measures just to protect one of its plants, in New Hampshire for example, or London. Or that France would take some very national measures just to protect one of its industries or one of its plants in Normandie or the south of France without taking into account the interest of the UK and Germany and Spain and Italy. That’s the difference between the two ways of protectin industries and protecting our economies[…]

I just give a concrete example. The concrete example that is to me the best example of what we need today, si the automotive industry. If we don’t take any kind of measure to support the automotive industry in France, the UK, and also in Italy with Fiat, the automotive industry in Europe will disappear in a few months, or let’s say in two years. Just because the US on their side, has decided to give more than twenty-five billion dollars to General Motors, in direct help to General Motors: Twenty-five billion dollars. If we just say that’s a problem with the US. They should not give twenty-five billion dollars to the GM, that’s unacceptable and I’m not happy with that measure. If we just say this, letting our automotive industry die in a few months, I can assure you we run the risk of having very big political troubles in a few months or a few weeks.

That is why we need to support our automotive industry, even if it is not allowed by the Commission to day, we have to find the right balance, but we have to support our automotive industry. That is really the line we need to draw between saving our industries, doing our best so that no industry disappears in the coming months and doing things that would only mean that we are attached, and that we are in favour of protectionism.

I know the difference is very hard to see and that the line is very hard to draw, but this is the difference between protectionism as such and defending our industry.

You are quite right, Mr. Le Mair. The difference is difficult to see. In fact, what you’re describing sounds like the definition of a trade war. Or was the difference that measures to protect EU industries from US competition is not protectionism since it allows intra-EU competition? A trade war over automobiles between the EU and the US is for some reason not the same as a trade war between the US and France?

Domestic political pressures seems to have politicians grasping at straws and scrambling towards protectionist measures. That doesn’t seem like a good way for the world economy to pull itself out of the pinch it’s in.


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