EU summit to challenge protectionism

Civitas, 24 February 2009

The Eastern members of the European Union are holding a mini-summit prior to all EU Heads of States and Governments convening an emergency summit on 1st March 2009 to discuss protectionism, writes Kyial Arabaeva.  Mr. Mikolaj Dowgielewicz, Poland’s Europe Minister, told Poland’s PAP news agency: ‘We want to send a clear message that we support the European Union’s position in favour of defending the common market and that we are against protectionism.”

The mini-summit is set to be held following the announcements made by Spain, Italy and France in recent weeks  to spend billions of Euros from public funds to support their domestic car industries. The European Commission has had little to comment on this, although it is in the process of investigating the support measures for car companies in France, Spain and Italy.

The summit participants will also discuss the situation of banks in the region. Unlike their western counterparts, the governments of these states were not able to provide re-capitalisation or loan guarantees for their banks. To make things worse, western parent banks in the region have substantially reduced credit. The accession of Eastern European countries into the EU brought about many political and economic benefits to these countries in terms of stability, democracy and improved living standards. According to a Commission report, new member states’ income per capita rose to 52% of the old Member States’ average in 2008 from 40% in 1999. Average economic growth in new Member States in 2004-2008 was 5.5% per year compared to 3.5% in 1999-2003. In terms of trade, about 80% of the exports of new member states were to the rest of the EU. Furthermore, 2007 saw a decline in unemployment in new Member States by 7%. In 2009, the twelve new EU members will receive communal development aid amounting to €7 billion and a further €11.5 billion from the European Investment Bank.

However, the economic downturn is challenging the unity of the 27-nation bloc, triggering protectionist tendencies which could undermine the benefits of the single market. Poor Member States have concerns over the rise of protectionism in Western Member States, which are spending billion of Euros on providing protection to their industries and banks. Joaquin Almunia, European Affairs Commissioner noted  “We should not let the crisis overshadow this uncontested success. United, we can shape the solution to global issues such as climate change or a new international financial governance … divided we will achieve nothing.”

It is not an easy task to bring all the member states together on this issue and many EU actors, including the current EU President Vaclav Klaus, are sceptical about whether the EU summit will bring concrete results on the issue of protectionism. For example, France is to provide €6 billion support measures for Renault and Peugeot-Citroen car companies; promoting French companies to produce solely in France. A further example is the recent events at the Oil Refinery in Lindsey in the UK, where thousands protested against the employment of Italian and Portuguese workers, displaying protesters containing concerns about British jobs being taken away from British workers and the need for promoting free market ideals amongst the wider public.

As warned by European Commission President, Jose Manuel Barroso and Mirek Topolanek, Czech Prime Minister, Member States should not take a single interest approach to tackling the current global economic crisis because the protectionist measures are likely to worsen the current financial problems. Protectionist measures by one country might be followed by another, gathering momentum and ultimately leading to the loss of the single market.