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Tag Archives: protectionism

I recently had an interesting discussion on twitter with @e_jim and @Davanlo about why Europe was a good thing. I have come to believe it isn’t, and I will expand slightly on why I believe that here .

Regulation costs

The key point to why I have come to distrust Europe is because it over-regulates. But it’s not just about the fact Europe regulates too much (although it does). It’s about the excessive cost of European regulation.

As you know, when Europe emits a regulation, it has to be transposed into local legislation. This is not a trivial exercise for the Member States, and requires full legislative efforts on their behalf.

This means you bear the cost of regulating twice: once on European level and once at country level.

Furthermore, because Member States have a degree of freedom in transposing European legislation, the whole idea of a unique legislative framework for Europe is actually negated. The same policy decisions are applicable all over Europe, but legislation does differ.

So we bear the costs of two levels of regulation instead of one.

Lack of legislative competition

The suggested solution to this is to skip the national level implementation. This would indeed solve the cost problem more or less, but a more fundamental problem would remain. The lack of legislative competition.

The idea is simple really. With legislation at lower levels, you can more easily compare the effects of different policies, see which work, and go in the right direction. In the same way competition leads to success of the best products, legislative competition leads to the success of the best policies. This is how communism and harsh protectionism finally went were they deserved to.

This occurs among others through voting and, more importantly, voters voting with their feet. It becomes much more difficult to do this if the same policies apply across a territory as large as Europe’s. And of course, having less reference points, it becomes much more difficult to spot the better policy. All the more so when all policies are half baked compromise policies as they are today.

The problem with compromise politics is that it becomes impossible to identify the part of the compromise which is responsible for the failure of the policy. So it just continues going on, and having no easy comparison point, the policy sustains itself despite lacklustre results.

More thoughts on this can be found in this post and it’s comments.

It should be added that legislative competition at higher levels (say, between the US and Europe and China) doesn’t work. Because of the massive size of the regions, and the massively different history and contexts, difference of policy performance is explained away. “This American policy wouldn’t work in Europe”, etc. And one has to admit, the argument has merit. For competition to be able to work, you do need some form of homogeneity, to make the comparison valid. The complexity of comparing the US to Europe makes the exercise nearly impossible. Belgium and France on the other hand, are manageable comparison units.

Special interests

Another issue is that centralization of power leads to the power of lobbies & special interest groups. I seem to be meeting a lobbyist every other week in Brussels these days. Of course, having a central locus of power to focus upon makes lobbies’ jobs so much easier. As such, it is my belief they gain much more traction than when powers were more local, and money runs the show in ways not conceivable before.

Again, this boils down to legislative competition. Realistically, a given lobby could hardly lobby all the local governments successfully. As such, only certain local governments would see their policies influenced by the lobby. And it would quickly become apparent how the policy is flawed.

This does not happen when lobbies can influence Brussels directly.

Just consider whether agriculture in Europe would be the same without the Common Agricultural Policy in Europe. And ask yourself if it would be a bad thing. The fine print if you lack the imagination is that France would not have the money to sustain such an ill-advised policy on it’s own, but it can thanks to the fact all of Europe pays for it.

The same applies to much less obvious domains though, areas where lobbies didn’t even exist due to organisational costs when the locus of power was more local.

Protectionism

Protectionism is an interesting topic, and one easily misunderstood. An argument in favour of the European Union is that it stops the Member States from adopting protectionist policies. While that is true, the Union as it currently exists is massive overkill to achieve that goal. Trade agreements are enough for that.

Furthermore, the largely unperceived perverse effect of the Union is that it acts as an incentive to develop protectionism of the Union against other regions of the world. Which is one of the factors spurring the extreme over-regulation of the Union. If you think consumer law is only about protecting the consumer an not blocking off foreign competition, think again. Think about the Microsoft trials. The Galileo project.

And contrary to protectionism at a lower level, the adverse effects don’t hurt the Union fast enough for the policy to be quickly identified as negative and repelled.

In a nutshell

The Union generates excessive regulation costs, stops legislative competition from taking place and allows for protectionism. Further reading on why I distrust the EU can be found here and what I suggest as alternative can be found here.

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