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Wednesday, June 21, 2017

“Globalists” Can Be Protectionists Too

Emmanuel Macron claiming to be a globalist doesn't necessarily mean he is a genuine supporter of free-trade.

On Sunday, French voters headed to the polls to vote in the second round of the parliamentary elections. The political party of the new president Emmanuel Macron, La République En Marche, has won an absolute majority, distancing all his political rivals by a considerable share of the vote. Meanwhile, a noticeable amount of MP’s from the weakened Socialist Party and Republican Party have already struck deals with Macron’s movement in order to see themselves unopposed in their electoral district. As a result, many “opposition” parliamentarians will also support the government of the newly appointed Prime Minister Edouard Philippe.

This has given Macron a strong mandate for his policies, which have been universally described as “pro-EU and pro-free trade”. But if there is no doubt that Macron supports European integration, is he really a genuine free-trader? Our political theater, where statements are promulgated to the status of decision-making, would almost make the honest free-trader forget that Macron too is protectionist. Macron too is a potential danger to laissez-faire.

It is true that Macron claims that he wants to preserve globalization. He even declared that “protectionism is war, it’s a lie.” But he never challenged any specific protectionist policies such as the Common Agricultural Policy. He also argued that “we do not have to be a completely open continent: protectionism should not be confused with a necessary protection.” In the same way that under democracy “war becomes simply a device to end war” as Henry Louis Mencken would have said, protectionism has become for Macron a device to end trade barriers. The EU, in the eyes of Macron, must use tariffs to end protectionism.For the political elite, protectionism becomes justified anytime it can be used to preserve the status quo.

Macron’s protectionism is not, and that is true, national. Instead, during his campaign, he asked for protectionism on a European scale. His protectionist program is twofold. First, Macron would like to enact a European version of the Buy American Act of 1933 which required the US government to purchase products made in the US. Second, Macron would like to reinforce “anti-dumping” rules. During his campaign, candidate Macron accused Poland of unfair competition by setting lower social standards. No surprise then that Macron is one of the most fervent proponents of trade treaties responsible for the proliferation of non-tariff barriers. For Macron, protectionism is just fine as long as it is wrapped in good intentions. Macron-ist protectionism is established in the name of the workers, the environment, or safety.

Of course, the attack on social dumping is just politician talk to avoid bringing up the necessary reforms of the French welfare state and tax regime. In 2012 already, president Sarkozy 
had argued that “free trade, yes. Disloyal competition, no. A Europe that opens all its public-procurement markets when others do not open them at all — no.” For the political elite, protectionism becomes justified anytime it can be used to preserve the status quo.

The European Commission rapidly criticized Macron’s proposal of a Buy European Act. But this should not make anyone think that the EU is about free trade. Even if we leave aside the case of agriculture which suffers from an explicitly protectionist policy at the EU level, the EU has been sliding more and more toward protectionism. The latest instance is the changes made in the anti-dumping and anti-subsidies rules imposed to limit the imports of Chinese steel. Similarly, the dramatic increase of non-tariff barriers is nothing more than veiled protectionism. In December 2016, for instance, new regulations on the imports of lemons into the EU have been enacted to protect Spanish producers. Similar restrictions have been but into place against Turkish lemons in January 2017.

Although our business here is not prognosis but diagnosis, the dynamics of the EU bureaucracy is likely to reinforce European protectionism in the future. Many pro-EU free traders started by arguing that the EU would save laissez-faire capitalism. Confronted by proofs of the opposite, they switched to the doctrine that the EU limits the anti-liberal endeavors of its member states. This has become an article of faith among pro-EU liberals. Sadly, the phantasmagorical belief that the EU is captured by a relatively more liberal elite which protects the free market order does not make it so. On the contrary, the formation of large trade blocs such as the EU generally makes protectionism less costly. This is so because, in a context where the supply for imports and the demand for exports are not completely elastic, a large trade block can use import duties to lower the international price and improve its terms of trade. The more powerful the EU, the more politicians such as Macron will favor European protectionism. The great liberal economist Wilhelm Röpke once said that “decentrism is the essence of the spirit of Europe.” But decentrism is also the essence of genuine free-trade.

Macron is playing the game of Trump and Le Pen

Is Emmanuel Macron ready to institute tools which would foster EU-protectionism, despite having criticised his former opponent Marine Le Pen for the exact same thing? The assessment that the battle between Macron and candidates like Le Pen or Trump had been that between free trade and protectionism is a large misapprehensionIn fact, Macron had compared Le Pen to Vladimir Putin, because her “program of protectionism, isolationism and nationalism leads to economic war, misery and war in general.” In March, he had criticised US president Donald Trump for his protectionist policies, claiming that this would disadvantage the US itself. In response to Trump’s idea of raising tariffs on German car manufacturers, Macron retorted that Europe would then also have to raise tariffs on U.S. exports if the United States:

“I don’t want to go down that path, but we would respond if the wrong choices were made.”

Unfortunately, politician’s love for protectionism doesn’t just fall out of the sky. According to an IFOP poll in 2012, prior to the presidential election, 53 percent of French people believe that free trade has a negative impact on consumer prices; 69 percent assert that it aggravates the deficit, and a staggering 81 percent believe it has a negative impact on employment. Not only does Emmanuel Macron know this, it is very likely that he would make the same arguments in the defence of his Buy European Act or his positions on anti-dumping.

The assessment that the battle between Macron and candidates like Le Pen or Trump had been that between free trade and protectionism is a large misapprehension. Both candidates ran on protectionism: the only difference is the scale. Genuine free-marketeers should not see Emmanuel Macron as one of their allies, but rather as just another brand of politicians who propose managed trade instead of free markets.

  • Bill Wirtz is a Young Voices Advocate and a FEE Eugene S. Thorpe Fellow. His work has been featured in several outlets, including Newsweek, Rare, RealClear, CityAM, Le Monde and Le Figaro. He also works as a Policy Analyst for the Consumer Choice Center.

    Learn more about him at his website

  • Louis Rouanet is a Sciences Po Paris alumni and a PhD student at George Mason University. He is also a Fellow at the Mercatus Center.