Wake up and shed protectionism, Brown tells EU countries |
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Sun, 11 Sep 2005 06:05
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MANCHESTER: Britain's chancellor of the exchequer Gordon Brown told the finance ministers of European Union countries to respond to competition, especially from Asian countries, with economic reforms instead of creating trade blocks.
Addressing 25 finance ministers, central bankers and corporate honchos from EU countries, he pointed out the fragile nature of the EU in the face of globalisation and other economic threats like increasing oil prices and advocated flexibility in the economic polices of the member-countries. (Britain holds the rotating presidency of EU currently.)
There is urgent need for reforms in Europe's labor market, he said, as the economic challenges will "grow in intensity" with competition from China, India and other parts of Asia increasing. "We are at a pivotal time for the European economy. The most recent changes that have been taking place in the global economy, including what has happened in New Orleans, do raise quite fundamental questions about the economic model Europe needs for future success."
Later, addressing press persons, he said Europe cannot afford to provide a hiding place for protectionism. "The message could not be clearer that Europe must raise its game to compete in the new global economy and deal with long-term challenges ... European growth has shown itself to be fragile."
Brown also wrote in an article in the Financial Times that the agreement between the EU and China over textile quotas was a last stand by some European countries to delay economic reforms and a failure to meet the challenges from Asia.
He said the United States' willingness to adapt to world trends had left it in a stronger position than Europe, despite the destruction caused by Hurricane Katrina.
The increasing oil prices exposed the frailty of the European economies. Hurricane Katrina could do more damage to European economy than the U.S. economy, he said adding "in Britain we are managing to withstand many of the difficulties the world economy is facing".
Brown said the Asian countries are not participating in a race to the bottom but in a race to the top and Europe had to "raise its game" in terms of research spending and education.
Some of the corporate heads participating in the conclave were supportive of Brown's arguments. Patrick Cescau, Unilever chief executive, told the ministers "knowledge and innovation need to be at the centre of our growth agenda". Arun Sarin, head of Vodafone, argued for structural reforms while Bart Becht of Reckitt Benckiser advocated better regulation.
Manufacturers in Europe are facing a piquant situation, shedding jobs and trying hard to increase production even as there is rising raw material costs and competition from Asian countries. This has prompted creation of quota systems to protect local industry, which in turn has resulted in some 80 million sweaters, pants and bras lying in EU ports in the past month because the exports overstepped a quota sheltering clothing manufacturers imposed on China by Trade Commissioner Peter Mandelson.
Britain's support for free trade and flexible markets has been cause for friction between the country and EU members. In this light, Brown's advocacy apparently did not move his colleagues today. Luxembourg prime minister Jean-Claude Juncker, who headed the 12-member Euro group of single currency finance ministers, was not impressed by the attacks on Europe's "new protectionism". He said: "If he's right I might agree - if he is not right, I won't."
Some German finance ministry officials too said they had not had time to prepare a response to Brown's arguments.
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