Parallels
BERLIN/MUNICH (Own report) - Analysts are warning that an intensification of international conflicts could result from German trade policies. Under German pressure the EU decided last Friday to open bilateral talks on a free trade agreement with India. Berlin is preparing agreements also with other nations. The systematic dismantling of customs controls and other regulatory measures would enhance German export profits. Critics believe that the German government's efforts to reach bilateral agreements is undermining the World Trade Organization (WTO) and eroding the international system of trade relations. The free trade talks are reviving inner-European tensions. Within the framework of these negotiations, Berlin is prepared to make concessions and terminate the subventions to the EU agricultural industry, which has been criticized by developing countries for such a long time. Dissention with other EU states, particularly with Spain and France are bound to occur.
Free Trade Plans
Having been unsuccessful in its attempts to establish a comprehensive system of free trade relations advantageous to German interests within the framework of the World Trade Organization (WTO), Berlin is now seeking bilateral agreements on the dismantlement of customs controls and other regulatory measures. At the end of September, Chancellor Angela Merkel found the idea of establishing a free trade zone between the EU and the USA "fascinating."[1] According to a ministry official, an eventual transatlantic free trade alliance, as well as its prospective enlargement through bilateral agreements between Berlin and Latin American nations would bring such economic advantages to the western world over their emerging Asian trade rivals that it would be tantamount to a "declaration of war on China and India."[2] This transatlantic plan is contested even in Berlin. But the plan for creating a free trade zone with Russia is winning a broad base of supporters, including Foreign Minister Frank-Walter Steinmeier, who seeks to "irreversibly" bind Russia to Europe [3] and the former Bavarian Prime Minister Edmund Stoiber.[4] The Federation of German Industries (BDI) is demanding that the "bilateral trade relations - particularly in the Asian realm - be reinforced" announced the BDI Chief Executive, Ludolf von Wartenberg recently.[5] The decision to initiate free trade talks with India was taken last Friday. China is viewed as another candidate.
A Glimpse at History
But analysts are warning that this could lead to an erosion of the international system of trade relations authenticated by the WTO. According to the German Council on Foreign Relations (DGAP) the "further undermining of the credibility and influence of the WTO" through bilateral trade agreements and free trade zones will provoke "more trade conflicts, protectionism and regionalism."[6] A few years ago the German Institute for International and Security Affairs (SWP) had been even more explicit. Whoever does not "fully understand" the significance of a multilateral system of trade, should take a look at the world's political situation on the eve of World War II. A "glimpse at history" discloses "parallels to the current situation." "Liberalization and deregulation were propagated in the 1920s, as in the 1990s. A multilateral organization, the League of Nations, ensured free world trade" recalled the SWP. "This didn't last. In the 1930s national economies began encapsulating themselves and regional blocs were established."[7]
Loss of Prosperity
Whereas the means and methods for imposing German free trade interests are still being debated, there is a large degree of consensus about the goals of German trade policy. According to these goals "above all, the large threshold nations" such as Brazil, China and India should stop using their customs restrictions to make importation of German industrial goods difficult and they must "make better offers" insists the DGAP.[8] In addition the trade with public utilities such as energy and water supply, telecommunications and health care must be included in the liberalization. After all the profits to be gained in these "markets" are "enormous" and "by far greater than those gained through the access to markets for commodities."[9] If "in some of the poorer developing countries" the western investors' takeovers of the infrastructures necessary for the provision of the endemic population cause a "loss of prosperity," these countries will receive "technical and financial support" promised the DGAP.[10]
Misguided
The larger threshold nations, above all Brazil, are supposed to be lured into opening their markets for German industrial goods, services and investments through the dismantling of the EU's agricultural subventions. These subventions have led to numerous conflicts because they force down the world market prices of agricultural products and make their export onto the EU market more difficult. Two years ago the Mercosur nations (at the time, Brazil, Argentina, Uruguay, Paraguay) broke off negotiations with the EU on easing customs restrictions because Brussels refused a more advantageous access to the EU's agricultural market. France's objections, to protect its agricultural industry from the Latin American competition, had led to Brussels' refusal. Germany intends to do away with this French protectionist policy once and for all. In its "recommendations" for the agenda of the German EU Council Presidency in 2007, the BDI demanded a drastic correction of "the misguided protectionist EU agrarian policy."[11] Even the DGAP insists that the EU make a "better agricultural trade offer."[12]
Advantageous
This is reviving inner-European tensions that have flared on several occasions into hefty disputes between EU member states without ever being settled. Simultaneously the preparation of bilateral free trade agreements is pushing the EU into new international conflicts resembling the period between the two world wars. At the same time, the expected external pressure is impeding a settlement of this internal EU conflict and is aiding Berlin to prevail over French agricultural interests, that it has been fighting against for so long.
[1] Merkel für Freihandelszone mit den USA; www.spiegel-online.de
[2] Fatale Spirale bei transatlantischer Freihandelszone; WirtschaftsWoche 02.10.2006
[3] Steinmeier schlägt Freihandelszone mit Russland vor; www.aktuell.ru 26.09.2006
[4] Stoiber für Freihandelszone zwischen EU und Russland; Frankfurter Allgemeine Zeitung 11.10.2006
[5] BDI zur geplanten EU-Handelspolitik; Pressemitteilung des Bundesverbandes der Deutschen Industrie 09.10.2006
[6] Stormy Mildner, Claudia Decker: Der Einsatz ist hoch. Wohlstandsgewinne durch die Doha-Entwicklungsrunde der WTO, DGAP-Analyse Nr. 1, Juni 2006
[7] see also "Augiasställe" und historische Reminiszenzen
[8], [9], [10] Stormy Mildner, Claudia Decker: Der Einsatz ist hoch. Wohlstandsgewinne durch die Doha-Entwicklungsrunde der WTO, DGAP-Analyse Nr. 1, Juni 2006
[11] see also Make Europe work!
[12] Stormy Mildner, Claudia Decker: Der Einsatz ist hoch. Wohlstandsgewinne durch die Doha-Entwicklungsrunde der WTO, DGAP-Analyse Nr. 1, Juni 2006
