What's new in the EU: European declaration warns against national protectionism

In the past few weeks, various opinions, proposals and projects have demonstrated either direct or indirect support for the idea that protectionism could be a solution to the current economic crisis.

Luc Van den Brande, the president of the Committee of the Regions, last Thursday articulated a clear position against the return of economic protectionism in the European Union. He called for an integrated and coordinated approach between member states in light of the current economic situation, with an official declaration during the plenary session of the Committee of the Regions (CoR). The committee's approach is also important for Israeli businesses and ventures, as more and more Israeli enterprises are looking to penetrate into the European market at large, especially for public procurement bids and tenders. Established in 1994, the CoR was set up to address regional issues. The European Treaties oblige the Commission and Council to consult the CoR whenever new proposals are made in areas that have repercussions at regional or local level. The Maastricht Treaty set out five such areas: economic and social cohesion, trans-European infrastructure networks, health, education and culture. The Amsterdam Treaty added another five areas to the list: employment policy, social policy, the environment, vocational training and transport, which now covers much of the scope of the EU's activity. Over recent months, the financial crisis and the subsequent economic crisis have worsened and spread throughout the global economy. The declaration, if it will be backed by substantial measures, is the way Europe could show it is coming up with a coordinated response against protectionism. The consequences of the financial crisis on the economy should not change the EU's established and agreed long-term policy priorities regarding free trade, the promotion of research and innovation, the improvement of competitiveness, the reinforcement of territorial cohesion, the fight against global warming and the creation of a reformed energy economy. In the past few weeks, various opinions, proposals and projects have demonstrated either direct or indirect support for the idea that protectionism could be a solution to the current crisis or limit its consequences on national economies. The Declaration of the CoR made it clear that it firmly believes the measures taken by the EU and the member states for the recovery of the economy and the financial system can be successful if they are better coordinated at the European level, with open and constructive communication between all the stakeholders concerned. As the financial crisis spills over into the real economy, the efforts of the member states, regional and local authorities and EU institutions must focus on efficient support for demand and on protecting citizens, particularly the most vulnerable, against the negative consequences of slowdown and job cuts, while coping with the rules of competition and the stability pact within the existing legal framework. In a global world with complex supply chains, national protectionism might not only damage the structure of commercial interconnections, but also, and above all, hurt consumption (price, quality, choice) and - since imports are also part of the supply chains - production capacities, thereby damaging the economy as a whole. Protectionism and shortterm policies could produce a structurally weaker EU business and financial sector, with negative implications for productive potential in the wider economy, risking the need for repeated government intervention and leading to a heavier burden on public finances and the risk of default on state debts. National "go-it-alone" measures encourage others to follow and, if member states were to pursue uncoordinated rescue plans, the European single currency would suffer and the single market could eventually disintegrate. Therefore, the European governments should promote competitiveness rather than consider protectionist measures. syrquin@013.net Ari Syrquin is the head of the international department at GSCB Law Firm.