The pressures of the present recession are giving rise to cries of protectionism around the globe. There is a watered down buy American provision in the stimulus bill. In Europe British oil workers are engaging in wildcat strikes over Italian construction workers and President Sarkozy of France is demanding that French car companies stop building cars in other parts of Europe.
The European Union is based on the idea of economic union between all of its member states. There is supposed to be completely free movement of capital and labor within the EU. Citizens of member states are supposed to be free to travel, live and work in any other member state in much the same way that residents of states within the USA have full access to all other states. However, this has never been fully realized in practice.
When the much poorer nations of Eastern Europe were admitted to membership "temporary" restrictions were placed on the freedom of their citizens to work in most of the states of Western Europe. The fear was that there would be a flood of eastern workers willing to work for wages substantially below those prevailing in the west. The theory was that the economies of the new members would rise as a result of EU membership and that the restrictions would eventually be lifted.
Now what is likely the worst economic crisis since the depression of the 1930s has reared its ugly head. The economies many EU member countries are in free fall and even the strongest Germany is experiencing major difficulties. The Union is experiencing serious strains.
The Financial Times reports on the air of crisis that prevails.
The European Union on Wednesday scheduled two emergency anti-recession summits in an effort to suppress protectionism, sustain employment and prevent the bloc’s political fragmentation into old and new member states.
EU heads of state and government will convene in Brussels on March 1 to discuss their latest steps to counter the financial sector crisis. They will meet again in Prague in May to consider the recession’s impact on the 27-nation bloc’s job market. This is in addition to a previously scheduled summit of EU leaders on March 19-20 in Brussels that will also deal mainly with economic issues.
The dispute broke out last week when Mr Sarkozy suggested that French car manufacturers operating in new EU member-states, such as the Czech Republic and Slovakia, should switch production to France and protect French jobs.
Tensions rose on Tuesday when Mr Topolanek accused unnamed eurozone governments of "deforming" the project of European monetary union with misguided responses to the financial crisis.
This will be a major test for the EU. Even in prosperous times it has been difficult to achieve many of its noble aims for economic equity. Hard times have a way of putting good intentions to the acid test. Externally the EU must contend with protectionist threats from its global trading partners such as the US.
I would like to assure any European readers of this diary that I do not intend to bash the EU. As an American, one of my concerns is that Americans have a strong tendency to think that we are the center of the economic universe and that what happens to America is all that matters. As these same issues get debated in the US we need to be aware that they are problems elsewhere.
I am inclined to agree with the analysis of many economic historians that protectionist reactions stifled world trade during the great depression and made it considerably worse than it had to be. We seem to have a case of history attempting to repeat itself.