Dangerous currents advocating protectionism are alive and well on both sides of the Atlantic. A “Buy American” clause in the latest U.S. stimulus package may have been eased to avoid violation of bilateral trade agreements, but its protectionist intentions remain. But the European Union is in no position to lecture America about protectionism. In what the Financial Times describe as the biggest European auto bail out, France will give Renault and Peugeot-Citroën €3bn ($3.9bn) each in preferential loans in exchange for keeping jobs in France. Italy has quickly followed suit with a state aid plan to rescues national car producer Fiat.
More worryingly, France has taken the lead in looking to extend the indefensible Common Agricultural Policy (CAP). French president Nicolas Sarkozy recently stated “if the United States defends its farmers as it does, maybe we can do the same in Europe.” This is nonsense, since the EU already has a highly damaging and highly corrupt system of agricultural subsidies which funds Europe’s richest farmers and excludes the world’s poorest farmers from competing fairly in the marketplace. The Heritage Foundation’s Dr. Nile Gardiner has described CAP as the “largest protectionist racket in the world.”
The CAP budget for 2007 was a staggering €55 billion. It consumes more than 40 percent of the entire EU budget, and imposes higher food costs on Europeans to the tune of an additional €55 billion per year.
The biggest recipient of CAP aid? France, which enjoys more than €9 billion per year. Sadly, President Sarkozy long ago ruled out radical reform of CAP. He also insisted on removing the EU’s policy commitment to free and undistorted competition from the renegotiated European Constitution, saying: “The word ‘protection’ is no longer a taboo.”
The case for free trade is a vital one that strong political leaders must make. But when Europe feels the urge to start lecturing Washington about protectionism then it should send a better ambassador than Nicolas Sarkozy.