04/03/2009 1:44:41 pm
In EU Observer: Do the Right Thing - Not Just Anything! Today, Gunnar Hökmark and I have a Comment in EU Observer arguing against protectionism and outlines five broad reform areas that European governments should focus on instead:

"First, support the global trading system and make a new attempt to reach an agreement within the Doha framework. Few things would benefit global confidence more than an agreement that creates a trustworthy framework for freer global trade. Since seven out of ten employed Europeans work in the services sector, it is especially important also to open up trade in services. The EU could unilaterally initiate agriculture policy reforms, to kick-start the process.

Second, realize that the old companies, products and jobs sometimes have to go. The car makers employ 2 million people in the EU, but 90 million are employed by SMEs. If we protect the old, we will prevent a lot of the new from emerging. Britain was the world?s leading car maker in 1955, but the decline could not be saved by massive subsidies and today car making is limited in Britain. Britain is a much wealthier country today.

Third, defend and extend the European single market. It has brought increased prosperity to European citizens, and led to the restructuring of the European business sector, which has made it more competitive. The single market is threatened when it should be expanded to more countries and new sectors - like health care.

Fourth, implement a general bank guarantee and introduce better regulation of financial markets. A bank guarantee is necessary to reinstate trust in the market and get lending going again. Financial markets need to be regulated, but simple and light. To a large extent, after all, the financial crisis was ignited by excessive regulation and government interventions in the US housing market.

Fifth, make way for the new. The global restructuring of production and employment is intensified in the crisis, and as the old inevitably goes, we have to open up for the new. The entrepreneurs that may create the new gazelle companies must no longer suffer from an overload of public bureaucracy and punitive taxes. Part of this must be increased spending on research and development - vastly better than car or agriculture subsidies."

Read the entire article here - >