Sunday, February 06, 2005

Booker

In this week’s column, Booker starts with the EU abandoning "the farcical pledge" its leaders gave in Lisbon in 2000 that by 2010 it would have "the most competitive, dynamic knowledge-based economy in the world".

In light of the European Commission's recent admission that regulation is now imposing costs on the EU’s businesses of €1,000 billion a year, it was a wise move, he writes.

This, however, is merely the hors d'oeuvre. The main course is commission president José Barroso promise to remedy this disaster. Says Booker, he might begin by looking at the effects of just two items of EU regulation.

The first he introduces by reference to a report commissioned by the European Fine Art Federation which will confirm that, as from next year, a devastating blow will be struck at Britain’s £4.2 billion a year fine art market, larger than those of all other EU art markets put together, by the so-called droit de suite directive.

Put forward by France and Germany, this directive will in effect impose a tax up to 4 percent on all sales above 3000 euros of works by living artists or those who died less than 70 years previously, the proceeds going to the artists or their heirs.

So much for Britain's "influence" in the EU, this was one directive the UK government vigorously opposed. Even at the time it was going through, it was known that it would drive a huge amount of business out of Britain, which enjoys 25 percent of the world’s art market. Its destination would be mainly to New York and Zurich where droit de suite does not apply.

Then, in 1999, an independent report commissioned by the British government estimated the potential loss of business at £750 million a year, putting at risk up to 8000 jobs.

Now, the new report, from Victor Ginsburgh, a Belgian professor of economics, suggests that the chief beneficiaries of this law will not be living artists, many of whom opposed it, but the estates of a handful of major 20th century painters, such as Picasso and Matisse, which could receive more than 80 percent of the proceeds.

Britain, writes Booker, was outvoted on the directive by countries which already apply droit de suite, in the name of creating "a level playing field". But as Anthony Browne, chairman of the British Art Market Federation, points out "it is no good having a level playing field within the EU, when it will simply pay our clients to sell their paintings in countries outside the EU where droit de suite does not operate".

The chief concession the UK won in its five-year battle to stop the directive was that it will not have to impose the duty on the work of dead artists until 2012 (for living artists, it starts next January).

If Mr Barroso's fine words last week mean anything at all, he could start by looking again at a regulation, the only effect of which will be to export thousands of jobs and hundreds of millions of pounds-worth of business outside the EU.

Booker then moves on to a second, even more damaging EU proposal is the notorious Reach directive (Registration, Evaluation and Authorisation of Chemicals), under which hundreds of thousands of chemical formulations will each have to be tested and authorised at astronomic expense. Across vast swathes of industry, this will drive up costs by billions of pounds.

To illustrate the problem, Booker spoke to fellow Blogger Tim Worstall, an Englishman living in Portugal. He, with partners in Russia and America, runs a business testing and developing the miraculous properties in alloys of scandium, a very light, rare metal, only three tons a year of which are mined, in Kazhakstan. A recent order for Airbus, 2000 kg of a scandium-oxide, aluminium mix worth £80,000, might under Reach cost an additional £100,000 to test and authorise.

For future models of Airbus, the company is experimenting with a scandium-assisted welding process which could reduce the weight of an aircraft by 10 percent. Yet just for welding rods alone, the regulatory costs of the different formulations could be £5 million.

Along with countless other manufacturers who use sophisticated chemical combinations, in industries ranging from plastics to leather, Mr Worstall concludes that the only consequence of Reach in its present form will be to strike a fatal blow at innovation and competitiveness, driving business worth billions of pounds outside the EU.

Concludes Booker, if Mr Barroso and his colleagues really have any conception of how to encourage a "dynamic, knowledge-based economy", here are two places they might start. Otherwise the last businessman to leave the EU should turn out the light (which, under the EU’s plan to derive 40 percent of our energy by 2040 from ‘renewables’, such as wind turbines, will probably happen anyway).

Booker’s second story concerns a foul-up by the Department for Education and Skills over foreign students using English language schools and, for the "three" he has a story on the last mobile bank in Britain. Finally, the "four" takes from a posting we put on the Blog on Thursday about Mark Leonard, the foreign policy director of the Centre for European Reform, who, says Booker, deserves a prize for honesty.

This was for his reference to "Europe's power", where he admitted that: "the British House of Commons, British law courts and British civil servants are still here, but they have become agents of the European Union implementing European law."

Says Booker, I am grateful to see a keen fan of the EU making the point so much more candidly than I would dare do myself. Eurosceptics are hoping our rather less frank Europe minister Denis McShane will have the courage to sign up Mr Leonard as a front-man in the forthcoming debate on the EU’s constitution.

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