A free blog dedicated to the free competition
Tuesday, October 23, 2012
Sunday, October 14, 2012
La tentation d'ouvrir la boite de Pandore (The temptation to open the Pandora's box)
The
recent proposals of Monsieur Arnaud Montebourg, the French minister for
productivity recovery (yes, there is such a position in the French government -
"redresseement productif", in original, in French), raised some eyes
brows.
M.Montebourg addressed a letter to the President of
the European Commission, in which it pleads for a change in attitude of the
Commission, in order to allow European undertakings to withstand, as
M.Montebourg puts it, "unfair competition" from companies in China,
India, Korea and elsewhere outside the European Union. It looks like the
letter has been endorsed by the corresponding ministers from Italy, Germany,
Spain, Portugal, Luxembourg and Romania - http://www.euractiv.com/innovation-enterprise/montebourg-china-us-industries-b-news-515372.
Mr.Montebourg would like the European Commission to
smooth the state aid rules and allow the states to subsidize "new
industrial sectors: nanotechnology, smart grids and new materials".
The purpose looks fine and the proposal seems to look ahead, trying to offer a
bright future to such new technologies.
Whilst speaking of "unfair trade", Mr.Montebourg
might refer, in fact, to levelling the playing field, a necessary endeavour in
the globalised world.
However, Mr.Montebourg seems rather to look back, into
the industrial past of Europe. He complains about the ”de-industrialisation of
Europe” and wants "protection from our global competitors". If
Mr.Montebourg would have said "we want to outpace our global
competitors", I could embrace (cautiously) his ideas for a reform of the
state aid legislation. But from his words, Mr.Montebourg seems to be a
nostalgic, rather than a forward-thinking politician. He seems to invite
to protectionism rather than to substantial solutions for boosting the productivity
of the EU manufacturing industries.
For these reasons, at least, such proposals deserve
attention and require careful consideration, so they do not become the road
paved with good intentions which would drive EU to hell.
In my practice, I met and I heard too many times the
expression "unfair competition", referring not to outrageous
situations where one or more companies enjoyed better market position due to subsidizes
or other state privileges. In most cases, the persons complaining of the
negative effects of an alleged unfair trade were companies which either refused
or were unable to adapt their business behaviour, so to withstand more
efficient competitors, through cutting costs or more innovation. From
this personal experience, I am reluctant to complaints of unfair trade, phrased
in general terms and not referring to specific situations and based on clear evidence
of actions counter to the principles of the fair trade.
I agree, however, that absence of state aid
restrictions and environmental obligations in countries such as China or India
would put EU companies at disadvantage. Obligations and liabilities
imposed through regulation are a cost for business but there is no evidence
that this is what makes EU industry less competitive. Although
Mr.Montebourg does not mention the United States as a villain, US companies
perform better than their European competitors but this is not necessarily due
to the fact that US does not have a system of control of the state aid
(agriculture and aircraft industry might be counter-examples to this
statement).
The answer to the challenge put by the mondialisation
and the lower standards applied in countries outside EU is not easy and should
not be based on solutions such as "let's do what they do".
Relaxing the rules may be a good idea, provided that it is about reducing
bureaucracy and that the reform is applied indiscriminately to business
undertakings, whether these are from EU or from other jurisdictions.
Lowering the standards in terms of environmental protection, on the other
hand, would produce more negative than positive effects. Raising barriers
to companies from outside the European Union may result in retaliatory measures
from the home countries of these companies.
Triggering (unnecessary or unwise) commercial wars could prove
detrimental to EU business and consumers.
Starting from this perspective and in the light of
proposals such as those put forward by Mr.Montebourg and the other minister, it
would be worth opening a discussion on what the European Union should do in
order to withstand the fierce competition from the new economies. The
solutions must be based on a sound understanding of the reasons of the weakness
of the EU economy and they must look at the long term effects of the policy which
should be adopted by the EU member states.
The debate and
the proposed solutions may develop around the proposals of the
European Commission, presented on 10 October 2012 - http://ec.europa.eu/enterprise/initiatives/mission-growth/index_en.htm. Although these proposals are presented as
general objectives, they intend to induce internal changes –”a sound and
profound reshape of the industrial base”, not just to raise barriers or relax
state aid rules.
The temptation
to open the Pandora’s box is strong.
It should be resisted.
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