Sunday, October 03, 2004

Even the best of them have problems

Anybody who wants to know what is wrong with our mainstream newspapers could not do better than read Ambrose Evans-Pritchard’s long piece in yeaterday’s Daily Telegraph, entitled Brussels feels east wind of change. Evans-Pritchard is undoubtedly the best correspondent we have in Brussels, just as he was the best in Washington in the old Clinton days. Yet he, either of his own volition or because his editor told him so, has accepted the temporarily ruling narrative of the day about the EU Commission.

The gist of the article is that the Franco-German plan to harmonize corporation tax has failed “as the young Commission team of José Manuel Barroso swept into Brussels brimming with free-marketeers from Eastern Europe”.

How nice. And what a convenient theme when that all-important referendum campaign starts. We all know the yes side will not fight over the details of the constitution but on general ideas. When the no campaigners will point with fundamental problems with the way the EU is run, they, in turn, will point to the sceptical Daily Telegraph and its equally sceptical Brussels correspondent. Look at that, they will say. Clearly, the Commission is free-trade, enlargement has worked its magic charm, it is all going our way (again!) and why don’t you just vote for the Constitution. These problems can be sorted out. Trust us.

Of course, in two years’ time the new Commission will have demonstrated or not its free-trade credentials and the argument may not work but, in the meantime, the narrative of the new broom, the new Commission, the East European free-marketeers will continue. I am sorry to see Ambrose Evans-Pritchard advancing it. He understands the place and knows better.

First of all, let me point out that this is not news. Every website and every American think-tank has tried to rejoice over the new Commission and the supposedly free-trade East European influence. Why the Telegraph had to take this long is a mystery.

Secondly, the argument about the Franco-German plan for the corporation tax wilts a little with Evans Pritchard pointing out that
“[t] coup de grâce was delivered by a German socialist, Günther Verheugen, reappointed to a second term [how young is that Commission, for goodness’ sake?], this time in charge of industry and enterprise. Defying Berlin, he rubbished proposals for tax harmonization put forward by the French finance minister, Nicolas Sarkozy.”
So much for a Franco-German plot. The German bit seems to have gone AWOL. It has been recognized some time ago that corporation tax will not be co-ordinated, at least not this time round and the fight has gone out of that one. There are other taxation battles to be fought and other, roundabout, ways of making sure that there is no “tax dumping”. And, in the end, we do have that final argument about subsidizing the new inmates … woops, sorry …. members. That is something the East Europeans also consider non-negotiable. That free-trade, they are not.

Whereas Germany may well decide that if we are talking of economic development, perhaps we should talk a little about not redistributing funds and subsidizing someone else’s economy.

Danuta Hübner of Poland, told the MEPs, as the article points out, that she would fight to keep her country’s right to keep a 19 per cent corporation tax rate. She also told them, as the article prudently does not point out, that she did not think 1 per cent of GDP was a sufficient contribution to the EU budget, as it does not buy many grand EU projects.

That, incidentally, has been the supposedly free-trade Barroso’s cry. He wants more money from the member states in order to redistribute it on all sorts of new pharaonic EU projects. Not precisely what one expects to hear from an avowed free-marketeer. Incidentally, his idea of economic growth is the Lisbon process, which is supposed to define, calibrate and score entrepreneurial activity and economic growth. Few people are surprised at the lack of success, given a glaring internal contradiction. You cannot regulate entrepreneurial activity or economic growth into existence.

Of course, Evans-Pritchard is an honest enough journalist to acknowledge that every new Commission arrives promising an economic revolution and each one has failed so far. This one will succeed, he avers almost confidently, until reminded of little things like the Charter of Fundamental Rights and the Common Agricultural Policy. (Though one cannot help wondering which particular gremlin put in that bit about Mandelson being a known free-trader. Really? Known by whom?)

All those glowing character reviews of the new Commissioners mean nothing at the moment. The proof remains in the eating and few of them have said anything to inspire one with any real hope that they understand how economic ideas work and what freedom is about. Even Ms Kroes, the great hope of business everywhere, has done little so far but sat on a large number of corporate boards. Experience tells one that large corporations tend to be in cahoots with the regulators to drive all competition out. Then, of course, they find themselves alone with the big bad wolf but it is all too late.

Alas, I have another piece of news for all the new Commission’s drum beaters. Individual Commissioners matter very little. There may be an exception as far as the international trade negotiations go, but Mr Mandelson will be closely watched by various members of the Council of Ministers. As far as legislation goes, most of it is in the pipeline already, though sometimes the pipes are very long. Let me quote from a blog I wrote on August 19:
“The European Commission has announced its intention to review community legislation on labelling. This is a long term exercise, with date of completion projected for 2010.”
This review will result in numerous hefty pieces of legislation that will severely and adversely affect many small and medium sized food businesses across the EU. There is nothing any individual Commissioner can do to stop the progress of the legislation.

The majority of the financial service legislation is already being put together as part of a long-term plan to overhaul and consolidate the financial services across the Community. Individual Commissioners are but a blip on that process.

And so on. And so on. As for those rules about how many hours we can work, how long ladders can be, how many taps there are in a care home (supposing there are still care homes left), they are already in place. Do these drum beaters really think they are about to be abolished because the EU is becoming more and more stagnant economically? Do they not know what the EU’s answer is to economic stagnation? That’s right. Let us set up another process, name it after another city, create committees, produce framework plans, structural plans, score boards, then stand well back and watch it all fizzle out; and start again by trying to reactivate the process.

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