There's More Than One Kind of Protectionism

I have made no secret of my feeling that growing economic pressure on an ageing Europe is not likely to produce the mood for imaginative radical structural reform that many anticipate. I think that commentators in general, and Stephen Roach in particular, are way too optimistic here. I also think that as the outcome is an unknown, since we haven't been here before, and that at best a wait-and-see approach is called for. Today some additional news from Brussels which suggests that protection may be as likely as reform. (In fact Japan has already shown us this, but the, of course, Japan is 'different').

Public services such as electricity, post and telecommunications could be given greater protection against competition and state aid rules under plans being considered by European regulators. The European Commission is studying proposals that could prevent antitrust and single market regulators from acting against companies involved in "services of general interest". Brussels authorities are also considering whether to launch new regulations to clarify the role of public services such as railways, energy, telecoms and health. The plans are at an early stage but could attract criticism that European governments are seeking to protect state-owned enterprises such as Electricité de France and Deutsche Post. Both companies have been attacked by the Commission for using government protection and subsidies to harm rivals in the private sector. An early draft of a consultative document, due to be finalised by the summer, says the Commission could present an EU-wide law on public services.

The text, seen by the Financial Times, says the law could specify "the conditions under which the provision of services of general interest is exempted from . . . the internal market and competition rules". The EU's founding treaty states that services of general interest are exempt from competition and internal market rules but fails to specify what these services are. In practice, the onus is on governments and companies to convince regulators their activities are not anti-competitive. Critics of the Commission's proposals fear that a new law would widen the scope for exemptions and make it easier for companies to escape punishment from Brussels. Such a law has been championed by the French government, which made it a condition for the partial opening of its electricity market - currently dominated by EdF - at last year's Barcelona summit.The French government and other supporters of the law argue that without protection from regulators, companies would not have the incentives to provide vital services such as post and healthcare to remote or poorer regions.
Source: Financial Times
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