Has Globalization Become a Stale Cookie?

Something interesting is happening at this very moment in Europe. Something which is likely to teach a valuable and unforgettable lesson about the scope and the destiny of globalization.

The EU common market, the powerful engine behind European Union economic aggregation and growth rests on four fundamental freedoms: the free movement of goods, the free provision of services, the freedom of establishment and the free flow of capitals. 

Roughly speaking, free movement of goods means that there are no customs, tariffs or non-tariff barriers between EU Member States. Free provision of services means that anyone who is qualified to provide a service in a Member State can do the same in any other Member State. Freedom of establishment means that sudents, workers and corporations can elect their residence in any Member State without restrictions. Free flow of capitals means that investors may invest their capital in any Member State without nationality-based restrictions.

These fundamental (I would say constitutional) liberties of the European Union are now at jeopardy, due to the new taste of national governments for protectionism. The EU Commission sensed the threat posed to European aggregation and is fighting back to keep the common market open and competitive.

Everything started last summer, when two banks, the Dutch ABN Amro and the Spanish BBVA attempted to take over two Italian banks, respectively Banca Antonveneta and BNL. The Italian banking sector has been traditionally reluctant to host foreign operators and this has also harmed effective competition over the years (Italian bank accounts are the most expensive in Europe!!!!). Once again, like other times in the past, the Bank of Italy stepped in and denied authorization to the takeover bids by the foreign banks.   

The Spanish and the Dutch screamed at the scandal and called the Italians bad names, until the judges in Milan found out that the governor of the Bank of Italy (and some politicians) was colluding with Italian banks to favour them in the bidding and keep Antonveneta and BNL under Italian control. To make a long story short, the governor eventually resigned, a new governor was appointed and the foreign bidders got the green light to jump on the Italian hot chicks. ABN Amro got control of Antonveneta and the French BNP Paribas bought BNL.

Italian media were still flogging the government over its medieval attitude in the circumstance, when the Italian energy giant Enel attempted to purchase the French energy company Suez. In a rapid sequence, however, the French government made it clear that it was not enthusiastic at the idea, got Gaz de France ready to buy Suez, amended the existing French law to allow the Suez-GdF merger and adopted a new statute against foreign takeovers in 'strategic sectors' (i.e. energy, telecoms, defence, etc.).

The French example was followed by Spain and by Poland. The latter, despite being a new Member State, did not want miss its chance to behave badly and opposed to the merger between the Italian bank Unicredit and the German HBV, which had previously been cleared by the EU Commission.

This was too much for the Commission, which opened investigations on these cases, charging the governments of restricting the freedom of establishment of foreign companies on national markets and restricting the free flow of capitals by making national companies less contendible. Proceedings for the infringement of the EC Treaty (providing for such freedoms) have been opened against some 20 Member States, but the most serious charges concern France, Spain and Italy, which are all trying to protect national companies in the energy sector.

The story raises a number of considerations. Globalization has been magnified as a driver for economic development. Jobs and workers' economic and social stability have been sacrified on the assumption that globalization is efficiency-driven and makes of flexibility a condition to survival of businesses. Then we find out that globalization works when children manufacture soccer balls at one dollar per day, but miserably fails when it is called upon to liberalize the banking, energy and defense markets, traditionally fertile grounds for anticompetitive practices resulting in consumers' exploitation.      

   

Comments

[Davld Marshall Evans]

All nations tend to be against foreign takeovers - witness the furore in the US when it was proposed that their ports should be taken over by Dubai. And 'security' is the political excuse used for chauvinism. So in the UK considerable doubts are expressed by proposals that the Russian Gazprom should take over the (natural) gas supply network, as well as fears about Russian willingness to continue deliveries of gas to western Europe. Of course Russia is not an EU member, but similar attitudes are being displayed over Peugeot's closure of its British factory, while retaining its French ones. One of the reasons is said to be that it is much harder and more expensive to close factories and dismiss workers under French domestic employment law (although this is disputed). Nevertheless the British Government - which has emphasised British labour law's flexibility as inducing foreign investment and thus fortifying the economy - doesn't now say that the Peugeot closure is a deliberate consequence of the flexibility policy and to be welcomed as demostrating to the world the advantages of investment in the UK! Of course at the same time there are jeers at Chirac's caving in to street demostrations against his attempt to encourage jobs in France by making their dismissal law more flexible in respect of young workers...I suppose it is only human nature to want to have your cake and eat it.

Again there are domestic complaints in the UK about British Aerospace proposing to sell its interest in Airbus, with the argument that it will take the UK permanently out of the passenger airliner production market, and that if the UK factories are under the control of a company of other EU nationality they will be more vulnerable to closure....it is I think impossible to avoid some nationalistic feelings of loyalty affecting decisions.

[slevmore]

No one seems to favor complete globalization. Someone who is able to provide the services of being prime minister or army captain in one EU country is likely to be unable for a long time to gain the right to provide such service on equal terms in another EU country. In a sense the question is where to draw the line between free trade or globalization with loss of sovereignty and even cultural and political identity. The current equilibrium, if it is that, is not bad. It is that the four freedoms or flows within the EU, or among the states in the U.S. for that matter, are remarkably different from those flows between jurisdictions not contained within either of these federations. A lawyer trained in Italy finds it much easier to practice in France than in the U.S. or in Japan. It may even be easier to accomplish a bank takeover within the EU than from without, but perhaps bank takeovers and port management and a few other things remain more like prime-minister positions than like goods and services that are more easily globalized.

[Tapsearcher]

Free Trade in our times is not about moving products but primarily it is about moving production from place to place based on the cheapest labor markets.
We have closed down middle class auto workers jobs and sent them outside the USA.
Now we are bringing back foreign auto makers who come here just to assemble to beat the long haul shipping costs. We have states like Indiana paying out taxpayer and casino taxes for Honda to come there and assemble their cars. The move creates about 4,000 jobs with about one half the value of the old jobs while at the same time nearly 20,000 auto parts workers lost their jobs in Indiana with parts coming in from around the world based on desitute workers abroad.
Other states are doing the same thing with KIA getting 400 millions dollars to build an assemble plant in Alabama. The same thing happened in North Carolina paying BMW to come to their state.
This is just a few examples of so called Free Trade. How can this be called real trade.
See Coming to America http://tapsearch.com/tapartnews/id37.html
Explore the lost worlds in the Globalist Free Trade Flat World of Thomas Friedman
( You do not have to take a plane anywhere to find out what is happening in the world. All you have to do is take a few cabs inside most of our major cities and meet very interesting people from all over the world telling it like it is.)
http://tapsearch.com/flatworld/id1.html