France flirts with ‘Euro-protectionism’

Socialists want tariffs linked to trade union rights in exporting countries
By Paul Taylor
||Last Updated: 04/18/2011

PARIS (Reuters) — An old French idea is blossoming again in the Paris springtime.

France's Socialists have just embraced a form of European trade protectionism in their manifesto, a shift from their previous endorsement of globalization as a win-win proposition for French workers.

The shift matters both because the Socialists and their Green allies have a good chance of unseating centre-right President Nicolas Sarkozy in next year's election, and because France has a way of setting the political agenda in Europe.

"Europe is the only continent that imposes free trade on itself in a world that is constantly making exceptions," the programme adopted by the Socialist party on April 9 said.

Declaring that Europe should be neither a fortress nor a sieve, the Socialists want international labour, environmental and health and safety standards built into world trade rules.

Failing that, "we will propose putting in place tariff locks at Europe's borders" until exporting countries adopt norms applied in Europe to issues such as trade union rights, child labour and carbon emissions.

Furthermore, the Socialists want the European Union to insert tougher "fair trade" safeguard clauses in agreements with third countries, enabling the EU to reimpose tariffs to halt any import surge threatening European industry.

And they demand that the executive European Commission publish a study assessing the impact of each new trade agreement on European industry and employment before it is signed.

The Socialists' U-turn on trade is largely driven by domestic politics, and while it resembles positions taken by the Democratic Party in the United States, it has little support so far in other European countries, except perhaps Italy.

It is an attempt to win back the "losers of globalization" — the unemployed, remnants of the industrial working class and middle-class voters who fear their living standards are falling.

Some of these voters are defecting to the far-right National Front under new leader Marine Le Pen, who has made inroads by attacking immigration and Islam but also advocating dumping the euro and re-erecting customs barriers at France's borders.

On the hard left, Communists, Trotskyists and the Left Party siphon off up to 15 per cent of the vote with anti-globalization rhetoric.

The ecologist Greens also see themselves as part of the "altermondialiste" movement, a French term that implies they favour some alternative model of globalization, but not the existing one.

In fact, free trade has little political constituency in France. While the seafaring British and Dutch have long been free traders, the French boast a protectionist tradition reaching back at least to the 17th century mercantilist Jean-Baptiste Colbert, Louis XIV's finance minister.

More recently, Maurice Allais, one of France's rare Nobel economics prizewinners, published diatribes against free trade with emerging economies until his death last year, warning that it would cause mass unemployment and depression in Europe.

Another contrarian intellectual, demographer Emmanuel Todd, is campaigning for European protectionism — and an exit from the euro — saying the loss of jobs will otherwise tear apart the fabric of French society.

Yet Europe has few natural resources and relies for its prosperity on exporting high added-value goods and services. The rising middle classes of China and India want to drive German cars, wear French or Italian fashions and fly European planes.

European tariffs might perpetuate yesterday's industrial jobs at the expense of tomorrow's knowledge economy. And Asian nations would almost certainly retaliate if Europe started closing its markets because their wage bargaining or carbon emissions were not up to scratch.

However, French trade unions and businesses seek protection when offshoring, outsourcing, cheap imports or a strong euro threaten jobs, while world-leading French companies may be reluctant to advertise the benefits of globalization for fear of attracting confiscatory taxation at home.

The interests of producers have long outweighed those of consumers in France, where an influential farmers' lobby is a bedrock of support for Sarkozy's Gaullist UMP party.

The president himself has flirted with the language of European protectionism, branding EU trade policy "naive" and calling for a "Community preference" in trade. But he has done little about it in practice since he took office in 2007.

With no political mileage in free trade, he spurned calls to make concluding the World Trade Organization's long-stalled Doha round of negotiations a priority of France's presidency of the G20 group of major economies this year.

While the French public discourse is clearly set to turn more protectionist in the run-up to next April's presidential election, there are good grounds for putting your fingers in your ears and waiting for it to blow over.

For one thing, Dominique Strauss-Kahn, the frontrunner to be Socialist candidate, is no protectionist. As head of the International Monetary Fund, he has resisted pressure to roll back globalization since the onset of the global financial crisis in 2008.

Secondly, trade policy is anchored in EU treaties and run by the European Commission, which is firmly in the free-trade camp, although it is more concerned than in the past to win reciprocal market access from trading partners.

And thirdly, the French drift towards protectionism has no support in Germany, Paris' vital partner in EU leadership.

"For the Social Democratic Party, this would be considered sheer madness," says Ernst Hillbrand of the Friedrich Ebert Foundation, a think tank close to Germany's opposition SPD.

Some Germans fret about EU rules that allow cheap contract labour from new member states in eastern Europe to work in Germany, undercutting union-negotiated wages.

"But the general mood among the German population is still that we are benefiting more from globalization than we are losing out," he said, quoting a German industrialist as saying: "China will become the factory of the world, but we will build that factory."

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