Saturday 25 June 2011

"But we signed up to a free trade area!"

More and more I see the argument that the EU should be turned into a free trade area, and I thought I should try to create a short reply.

"But we signed up to a free trade area!"

This is also argued with "common market", with it clear that a free trade area (like NAFTA, for example) is meant. But there's a big difference between a free trade area and a common market (a.k.a "single/internal market").

A free trade area simply reduces tariffs and import quotas between countries - this was the aim of the European Free Trade Area,* which the UK helped found in opposition to the EEC, and then left to join the EEC. FTAs don't cover the free movement of goods, people and services that a common market consists of.

The issue with free trade areas that they only reduce tariffs between members, so members can have different tariffs with third countries. This means that some goods might try to get into the free trade area via FTA country A (which has lower external tariffs) before moving on to country B (which has high external tariffs). This lack of control means that some countries prefer a customs union, which is like a FTA but with common external tariffs.

A common market is much more than a FTA because it not only deals with tariffs and import quotas, but also deals with the free movement of goods, services, establishment (freedom to set up businesses throughout the common market), capital and people. This requires some restrictions on the law-making of member states (they can't legislate for import quotas, discriminate against goods from outside the country with different tax rates, etc.), and requires common law making so goods, etc., can move freely without being blocked by different technical standards. This common law making and standards means that there would need to be a common court and law-making institutions in any case. That's why the EU needs to have institutions, but NAFTA doesn't.

Leaving a common market means that a country and its citizens would loose free movement rights. While it's true that there will still be trade between the EU and ex-members (the EU has FTA agreements with Chile, Mexico, South Africa, etc., so I don't see why an ex-member wouldn't get one as well), without common laws, the ex-member would move away from the common standards of the common market, and more and more non-tariff barriers would block trade. Citizens of the ex-member country would also loose their free movement rights.

Having a common market also means that there needs to be a common trade policy with third countries, and the free movement of persons creates pressure for there to beco-operation and common rules on cross-border crime, but foreign affairs and justice and home affairs are other debates.

Since the EEC was aimed at creating an common market, joining countries never signed up for a free trade area.

*Confusingly, the EFTA is now a single market because its member countries are linked up to the EU's single market via the European Economic Area (or via 120 bilateral agreements in the case of Switzerland).

Friday 24 June 2011

Where exactly are the Europarties?

The Europarties are supposed to be forums for political debate and participation in the EU - that's very much the theory, anyway. So during the Euro crisis (and particularly during today's summit), what have the Europarties been up to?

The Socialists and Democrats.

The S&D have been somewhat active. There was a conference recently in Barcelona that resulted in the "Barcelona Declaration" (designed to make Social Democrats electable to take power in the EU by 2014):

"In the "Barcelona Declaration", Socialists and Democrats say they will:

•WORK for fair and progressive financial recovery focused on job creation and the protection of the welfare state;
•PROMOTE inclusion and integration in the face of populism and xenophobia;
•BRING more representation into the democratic system through new ways of participation; and
•STRENGTHEN the EU based on solidarity and combating growing nationalisms and euroscepticism."

The Declaration itself (which you can read here [PDF] in French) pretty much says the same thing, but it pads it out to fill the page. Sadly it's all too vague to really mean anything - and this during a major economic crisis! Even though it's aimed at 2014, how can the second biggest political force have no ideas or strategy at this stage? That the PES's campaigns on the Financial Transaction Tax and on Eurobonds haven't even got a mention simply demonstrates that the PES's leadership can launch internet campaigns separate from the actual power structure in the party without any impact.

The S&D group has endorsed the European Trade Union's day of action in Luxembourg, and points to anternet campaign Change for Europe (I assume it's cross-party with the Greens). While there are a few noises about transaction taxes and shifting the taxation burden, it's not clear that this is leading anywhere other than a party-political endorsement of the Parliament's aim of some own resources (read: taxes) for the EU.

The S&D is, on the surface, in a difficult position as its member parties are engaged in different levels of austerity while its European leadership calls for less austerity and more investment. However, it's not a massive gap, as its member parties also want this too, at least in general. With the S&D* opposition pretty much across Europe, they should really be doing more to throw their political weight around - after all, they don't have enough voices in Council or the Commission, so surely they should want to create a more vocal public response if possible?

Of course, it's not quite that simple as there are divisions between the member parties and within them. But a greater effort to have a common platform is necessary, particularly if they want to be electable in the face of a European culture of austerity.

The PES has announced that it has collected the signatures of 1,000 elected MPs of their member parties for a transaction tax - why not try to make use of this to establish an effective pan-European position?

*The PES ("Party of European Socialists") is the actual party, but in the EP they're known at the S&D. Poor branding, but what can you do?

European People's Party.

The EPP is "in government" in the EU, with a big majority in the Commission and Council, and as the biggest party in the EP. It's been enjoying a period of huge electoral success and it hasn't needed a common programme, and it shows. The party seems to be obsessed with finishing their articles with a "note to the editor" about the EPP's dominance in whatever institution features.

I'm happy to be corrected, but it doesn't look like the EPP has done much in the way of stating policy decisions that haven't been an initative of the (EPP-run) Member States. The EPP acts as a pro-government party for whatever the Council or Commission puts in front of it, unless it was proposed by the S&D side or there's an EP interest against it.

Update: Reuniting Europe has a blogpost on the EPP summit before the European Council summit.

European Liberal Democrats. (Which are part of the ALDE Group).

I'm pretty sure this says it all:

"Annemie Neyts-Uyttebroeck MEP, President of the European Liberal Democrats re-iterated her views on the need for the European People's Party (EPP) to take a more pro-active approach towards developments in Greece, "the EPP needs to shoulder responsibility and help bring about relief to the Greek situation given that some of the main political actors in this scenario belong to its European political family"."

While the S&D may be more active, as the opposition, the onus is on them to be more active and creative than the incumbant party(ies) - and, in an ideal world, actually effective as an opposition. Reforming Europarty structures to make them more coherent could go a lot further than changing the EP electoral system. What's the point of having "more European" elections if the parties refuse to campaign publically on pan-European issues?

[I just quickly dashed off this post - feel free to bombard me with info on what the parties want to do or what the issues are with their internal structures].

Geert Wilders: Not Guilty

Geert Wilders, the leader of the PVV party in the Netherlands (Partij voor de Vrijheid or Party for Freedom) has been found not guilty of hate speech and discrimination. The court action wasn't one the public prosecuter wanted to take - it was only after civil society groups challenged the public prosecuter's refusal to take Wilders to court was the complaint lodged. The result was a strange case where the prosecuters didn't really want Wilders to be found guilty, and the danger of the PVV benefiting from the case.

On winning the case, Wilders said:

"“I’m incredibly happy with this acquittal on all counts," Mr Wilders said outside the court. "It’s not only an acquittal for me, but a victory for freedom of expression in the Netherlands. Fortunately, you’re allowed to discuss Islam in public debate and you’re not muzzled in public debate. An enormous burden has fallen from my shoulders.”"

Although the court tagged on some disapproving language to its judgment:

"The court found that Mr Wilders’ rhetoric was “on the edge of what is legally permissible” but not illegal. The judge described statements about a “tsunami” of immigrants as “crude and denigrating”, but legally legitimate given the wider context and his acknowledgement that those who integrate are acceptable and do not call for violence."

It was likely to be a win-win situation for Wilders in any case: had he been found guilty, he could protray himself as a martyr for freedom of speech; now that he's been acquitted he can present his rhetoric as being perfectly within the bounds of reasonable political debate (even though the court didn't rule it to be "reasonable", just not illegal).

There are some cases where using the law to limit free speech is a good thing. In a democratic society we take certain level of tolerance and mutual understanding for granted, but hate speech and incitement to violence can have a very toxic effect on a democratic culture, even if they are not acted on. Apart from these extreme cases, it's generally better to fight extremist rhetoric openly. Otherwise court cases will just have the effect of giving such movements a greater dose of the oxygen of publicity.

Wednesday 22 June 2011

The Gloom of having no Good Options

The Greek government has survived the vote of confidence, and now its next test is passing more austerity measures. Austerity has little - if any - support among the Greek electorate simply because it hasn't delivered the goods yet. It seems obvious that Greece will default at some point, but would it be better to do it sooner rather than later?

There doesn't seem to be any good solution here.

Greece cannot pay its debts, but the default and decouple option, as advocated by Daniel Hannan, among others, would be disasterous for Greece and for the EU. Defaulting would unleash a tidalwave of debt back into the European banking system and European taxpayers in the Eurozone would take a big hit at the same time that their governments (particularly in Germany, France and the UK) would be forced to decide whether or not to bail out their bad-Greek-debt-holding banks. For Greece, it would be locked out of the international financal markets (as it is now), and without an alternate line of credit. Since it takes in less in taxes than it needs to finance its expenditure, the resulting austerity could be much, much worse. Leaving the Euro at such a time could lead to extremely high inflation.

Just leaving the Eurozone (and not defaulting) is unlikely to help either, as the devalued New Drachma would make it harder for Greece to pay off its debts, most of which are in Euros.

Continuing austerity doesn't seem to be working either. Greece needs time to restructure and reform its economy, but the time-frame is extremely short for the task that faces the country, and the refrain of "tough love" from Northern Europe is not endearing for the Greek public, to say the least.

Further integration is the call of others, and interestingly also of the IMF, urging the Eurozone to integrate economically and politically. However, these calls still seem vague to me on detail, and I'm not sure how much they are aimed at solving the current crisis rather than on preventing it from happening again (or both). The blue-and-red bonds (where there are some Eurobonds and some national bonds) or the Eurobonds idea is attractive, and could ease some of Greece's problems, but it could also raise some others. Regardless, there is little political will for more integration, and as no attempt by any Eurozone government to really make the case for further integration, it doesn't look like that will change soon.

At the moment the best option seems to be to accept the bad austerity and bail-out deal and forge ahead with reforms in Greece with at least the thin cushion of EU/IMF loans rather than no loans at all and hope that either (a) the EU gets its act together; or (b) the painful austerity will help Greece just enough so that it can partially default in a more managed way in a year or two when the prospects are better for it and the EU. Neither option is an inspiring or very sellable one.

The protests in Greece will continue, but I wonder what the historical legacy would be if they won and Greece defaulted unilaterally - both for internally and in Europe?