Stanley's blog

Protectionist winds

“Barroso protectionism alert” is today’s Financial Times headline. Also on the front page is a report under the title “US anger at award of defence contract to EADS”.

Commission President José Manuel Barroso warns that protectionist pressures are increasing across Europe, even among forces traditionally committed to free markets.

Fears of growing protectionist sentiment in the United States are more worrying. The US Air force decided that the Northrop Grumman/EADS (Airbus) refuelling tanker was to be preferred to that of Boeing; no less than €23bn is at stake. The outcry against the decision is considerable. It will be interesting to see how the three Presidential candidates handle the issue. Will Clinton and Obama play to the gallery or speak out courageously? McCain is a more natural fee trader but some condemn him for blocking the original deal with Boeing over a corruption issue.

In today’s world of globalisation, both bids involve substantial work in Europe. Globalisation has been sold as, overall, a win-win phenomenon, although there are, of course, individual winners and losers.

Congress can theoretically block the contract on budgetary grounds but might find it difficult to argue in the face of the Air Force’s insistence on the superiority of the Northrop/EADS plane. But attempts may be made to split the contract. In any case, there can be serious delays and also possibly litigation challenging the deal. The issue may become dynamite in an election year.

My own worry is that protectionist winds will blow increasingly strongly eastwards from the US and that these winds will increase the European protectionist pressures to which the Commission President refers.

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