EU government turns to a beacon of protectionism

Although often more wishful thinking than unambiguous reality, American economic freedom was once a (classic) liberal model that many other governments around the world hoped to emulate or at least felt compelled to emulate. ‘offer excuses not to follow. Now, it seems, the situation is clearer: America is becoming a commanding model that European politicians and bureaucrats are consciously trying to plagiarize. This is at least obvious in matters of international trade.

It must be admitted that this is not the first time that the American government has been at the forefront of protectionism in the “free world”. From the Civil War to Franklin D. Roosevelt (and his Secretary of State Cordell Hull, a “mountain free trader”, later described by Senator Paul Douglas of Illinois), America had some of the lowest tariffs. highest in the developed world. More generally, American trade policy oscillates between regulated free trade and protectionist regulations. See the extraordinary book by Douglas Irwin trade showdown and my review in Regulation-for example:

In 1976, according to some calculations, the American market was more protected by non-tariff barriers than the European Economic Community and Japan, even though exports were less subsidized in America.

In the same review I wrote:

But what is surprising, at least to an amateur student of American history, is the almost continuous protectionist tendency of the American government from its founding to the present day and, when free trade has been championed, the modesty and the prudery of its defenders. In the early 1830s, Senator Henry Clay, inventor of the “American [protectionist] system”, declared that “to be free”, trade “must be fair, equal and reciprocal”. The so-called “fair trade” is not a recent invention. Most often in the 19th century, the profits of international trade were understood to attach exclusively to exports, as in old mercantilist thinking. There wasn’t much understanding that tariffs are a tax on domestic consumers.

So what happens now? Pushed by the French government, the European Union government is developing a set of protectionist legal instruments presented as a response and imitation of the restrictive trade measures taken by the administrations of Donald Trump and Joe Biden. The continuity between the last two presidents, who would claim to be so different, speaks volumes about the disastrous state of American politics.

A story in the FinancialTimes provides examples (Andy Bounds, “France gets its way, thanks to Brexit”, June 6, 2022). We learn that the new protectionist activism in France and the EU

is partly a response to the US administration of Donald Trump, which imposed tariffs on steel and aluminum for national security reasons.

Even the Defense Production Act (DPA), a remnant of the Korean War which was invoked by Trump at the start of the Covid pandemic and which Biden also used, is the subject of envy:

Brussels was finally prompted to toughen its stance last year, when US President Joe Biden invoked the Defense Production Act to restrict exports of vaccine ingredients amid the Covid-19 pandemic. Thierry Breton, European Commissioner for the Internal Market, has threatened to suspend the supply of vaccines from the United States unless it lifts its de facto ban.

He said he needed a tool similar to the DPA, most recently used to increase production of infant formula and airlift supplies from Europe.

Imitation ODA would allow the EU to restrict exports when it sees fit, which of course means it will prevent others from importing and stop the effective sharing of supplies in an emergency:

The French commissioner’s team is currently working on an emergency instrument for the single market, which would allow export restrictions on five or six categories of goods, such as raw materials, in the event of an emergency.

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