Populism and Protectionism in the EU

Aspen Institute CE organized a closed roundtable discussion on populism and protectionism in the EU on June 29, 2017 at Brussels. The session headed by the ACE president Ivan Hodáč aimed to discuss the challenge of protectionism and rise of populism in the context of transatlantic relations with special emphasis on the V4 countries. In the discussion took part the V4 MEPs and the European key stakeholders. Find the conclusions below.


Protectionist and populist tendencies go hand in hand, and gain on weigh both in the EU and US, two former strongest proponents of free trade. Political focus is thus shifted to securing fair rather than free trade. These trends will have a negative impact on the completion of single market, competitive businesses (mainly from the CEE region) and will further fuel populist rhetoric, which is based on the argument of protecting the interest of a seemingly unified and unison interest of a nation state. Even more important nowadays it is for business communities, such as BusinnessEurope, to challenge the idea that protectionism will support national economies and – in specific – consumers.

Characteristics of Populism

Populism can be defined as a political attitude that (i) refers to imaginative homogenous people, whose rights need to be protected and defended, therefore it (ii) leaves no room for minorities and plurality, (iii) and contests the legitimacy of the check-and-balances system. In the end however, populists manage to get support from people, who they work against.

Although each emanation of populism has its own agenda and roots, a shared agenda is the rejection of interdependence (in the form of global trade or single market). Populists deploy emotions rather than ratio, and often exploit nostalgia of the idealized past. There are however historic moments, when emotions are so tense that it is impossible to disregard them and use only rational arguments in political debates. Therefore, politicians need to be wary of being too technocratic at times and to allow for a more emotional political narrative when needed.

Populists’ target group is the part of society that finds it more difficult to grapple with a fast-changing reality, unlike the cognitive elite, which is multilingual and mobile (roughly 20-25 % of global population, and another 20% which has the potential to become part thereof).

The question at stake is how long can the EU survive when populist parties are on the rise with and outside of its territory (Turkey, US). If populist come to power in just one member states than it should not shake the functioning of the union. Yet, populist politics can also take a more sophisticated economic form of protectionism.

Protecionism

The EU single market and global trade face an increasing level of protectionism, which restrict the functioning of supranational and international organizations. Although one of the scenarios in Juncker’s White Paper speaks of strengthening the single market, the EC does the contrary and is not active enough in fulfilling its role of the guardian of the treaties. Moreover, the current mood is not that of completing single market bur rather just containing specific protectionist measures effected by member states.

Internal protectionism:

  • Freedom of movement is being threatened by the several developments such as the proposals to regulate posted workers more rigidly. Moreover, western countries utilize in this context the ungrounded argument of social dumping only to protect local/ national businesses, whereas these protectionist measures are merely the manifestation of fear of losing to more competitive business from the CEE region.
  • Freedom of services is being dismantled e.g. by fragmentation in transportation services (in HU, DE, FR, BE), despite the EC efforts to enable the EU service economy via the 2017 Services Package. The package envisages the introduction of EU services e-card or issuing an EU-wide guidance on proportionality tests to national rules on professional services and reform in regulation of professions.
  • France takes the lead in protectionist approach: regulated profession there make up 25 % of all regulated professions in the EU; it also leads in data localization requirements.
  • Freedom of data might become the fifth freedom, as fragmentation thereof (eg. via the legislation to force localization of data) prevents the creation of DSM.

External protectionism and the move from fair free trade to a more robust policy on the fair, not so free, trade side can be seen in the EU:

  • For the first time protectionism got on the security and defense agenda due to potential introduction of tariffs on steel by the US.
  • Screening foreign investments to protect European strategically important sectors against unwanted foreign takeovers. The reason behind the measure is the idea to prevent takeovers of the EU prized technology companies by Chinese state-backed groups.

Current Affairs

Franco-German duo may be dangerous for the V4 and business environment because Merkel and Macron may further introduce protectionist measures targeted at CEE countries. This in turn can erode the support for the EU in these member states.

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