Swinging towards free trade?

James Gubb, 5 December 2006

The European Commission is due to launch plans tomorrow for a ‘new generation’ of free trade agreements with the fast-growing ASEAN countries, South Korea and India. It is being hailed as the epitome of Mandelson’s drive to ‘Lisbonise’ EU trade policy in line with the strategy paper ‘Global Europe: competing in the world’ (Oct 06), which called for the rejection of protectionism across the EU and for the EU to play an active role in opening up markets abroad.
One has, at least, got to credit him for trying. And trying fairly hard. The strategy is purposefully based on “more rigorous” calculation of the possible economic gains from such free trade deals; in the case of South Korea, for example, Mandelson’s office has calculated that there lies the opportunity to increase trade by 30 per cent. There is also little doubt that the Commission’s request for a mandate to negotiate these free trade deals has been presented ‘en masse’ to make it more difficult for member states to pick-and-choose individual countries or regions, thereby blocking the process.
Who knows, it might succeed. But the ‘Prince of Darkness’ will need all his cunning to negotiate through some of the more protectionist states in the EU camp.

To work, any free trade agreement will inevitably require reciprocity. Unlike the ACP countries, the EU won’t be able to bully the bigger boys like India into accepting something India doesn’t want.
This will cause problems. Just today, a survey released by the German Marshall Fund showed that 58% of French respondents thought freer trade costs more jobs than it creates. Unfortunately, this bias is very much in line with the government’s thinking. M. Sarkozy last month went so far as to say: “Europe needs protection. The word protection does not frighten me.” Mandelson’s office is honest enough to admit that, particularly where agricultural interests are concerned – as is the case particularly with the ASEAN countries – negotiations will be protracted and difficult. This is, after all, the very issue that has brought down the Doha Round.
But this is far from the only difficulty. The ‘Global Europe’ initiative promises to review existing sanctions such as anti-dumping measures, which, let’s be honest the Italians certainly won’t be too happy about. The Italian government was instrumental in pushing through tariffs on shoe imports from China and Vietnam earlier this year, pleading these were being ‘dumped’ on the EU at below their cost of production – despite the fact an EU investigation concluding they could not be sure how much it costs to produce shoes in either country! The EU has, in fact, launched a new investigation (most on the bequest of member states) into anti-dumping every 12 days over the last decade.
The free trade negotiations also seek to focus particularly on the so-called ‘Singapore issues’: investment, competition policy and public procurement. Certain EU member states aren’t exactly angels in this regard either. The Spanish government got itself in trouble just recently with the Commission for unlawfully imposing conditions on a takeover bid for the Spanish firm Endesa by the German energy giant E-on. Luxembourg’s President Jean-Claude Juncker was positively outraged earlier this year in blocking a takeover bid from Indian firm Mittal for the Luxembourg steel ‘champion’ Arcelor. And harsh words from the Commission President Jose Manuel Barosso and Commissioners such as Peter Mandelson and Charlie McCreevy have done nothing to inhibit de Villepan’s declaration of French ‘national champions’.
Good luck Mr. Mandelson!