Emptying the Spirit of the Union – Cameron’s Wishlist

Photo: Getty
Photo: Getty

British Prime Minister David Cameron finally sent his requests to the European Union in light of the upcoming referendum about the membership of the United Kingdom in the Union. In a letter addressed on November 10, 2015, to the President of the European Council, Donald Tusk, PM Cameron laid out the areas wherein the UK will be seeking for reforms in order to satisfy the British demands. In some ways, this letter is the first step in starting officially the discussion between the UK and the EU prior the referendum in 2017.

Reforming the Union – Cameron’s Demands

In a letter titled, “A new settlement for the United Kingdom in a Reformed European Union,” PM Cameron identified four main areas where the UK is seeking for reforms.

The first area is Economic Governance. In this section, PM Cameron addresses the problem of a two-speed Europe caused by the Euro. On the one hand, there are the Eurozone members, and on the other the non-Eurozone members. Britain is concerned about “the integrity of the Single Market, and the legitimate interests of non-Euro members.” In other words, Cameron wants to avoid a power grab by the Eurozone members over the others. Cameron wants to see a discussion among the 28 Member States on issues related to the Eurozone that affect the Union as a whole.

The second area is Competitiveness. The UK wants to scale back the number of regulations limiting trade and ultimately the competitiveness of European products. In addition, Cameron wants to initiate “massive trade deals with America, China, Japan and ASEAN.” Ultimately, Cameron wants to lower the number of existing regulations and their ‘burden’ in order to boost productivity and competitiveness.

The third area is Sovereignty. On this particular theme, highly cherished by extreme right and right parties accross the Union, Cameron wants to bring several proposals. The first one, Britain does not want to be part of ‘an ever-closer union.’ So no political union for Britain. Second, Cameron wants to empower national parliaments, which could stop ‘unwanted legislative proposals’ taken at the European level.

The fourth area, and the longest of all, is Immigration. On the point, Cameron wants to limit movement of people as it creates too much pressures on British public services. If Cameron mentions the mass movement of people from outside to inside, he underlines that “we need to be able to exert greater control on arrivals from inside the EU too.” In addition, Cameron is asking for a restriction on distributing social benefits to individuals leaving on British soil.

In order to feel comfortable, Cameron is asking for reaching “an agreement that would, of course, need to be legally-binding and irreversible.” Even if the 27 EU Member States were to agree of these point, they would have to go through national discussion in order to accept a treaty change. This could increase the pressure on each Member States.

Cherry-picking, and Removing the Essence of the Union

In his daily chronicle on France Inter, David Guetta, underlined that the initial response from Europe to Cameron should be ‘best of luck in your new adventure outside the Union.” The UK since his entrance in the Union has not always been a Member State pushing for the deepening and widening of the EU. But as Guetta expressed “irritation is not a policy.” The Financial Times reports that “One European minister involved in the talks described the ‘British question’ as not addressing what the UK or Europe needs, but what Cameron requires ‘to successfully campaign’.” The 28 heads of states and governments will be meeting in December in order to address the British case and see where to start. However, it is quite difficult to sideline some irritation.

The initial response from Brussels was that finally the UK has clarified its positions and demands. European diplomats feel that with this exhaustive wishlist “they will not be ambushed at the last moment with fresh UK demands.” Many experts are arguing that the only major point of contention may be the fourth point on ‘immigration.’ Eastern European members, like Poland, would undeniably reject such point. But it should be a redflag in Paris and Berlin as movement of people is one of the most fundamental freedoms offered and guaranteed by the EU to European citizens. Once citizens are confined to their national territories, the spirit of the Union disappears.

Cameron’s overall plan – which could be conscious or not – is to remove the human and ideational components of the European project in order to transform it into an advanced trade agreement. PM Cameron’s vision of the future of the EU and UK is quite dramatic. The fact that Cameron wants to maintain three freedoms (capital, goods and services) but wants to limit the fourth one (labor) is quite dramatic. The Common Market was set up around the respect of the four freedoms. Cameron political vision is directly aligned with the ultra conservative British view of the world and understanding of the UK.

To some extent Cameron demonstrates that the British conservative political class has not evolved since the entry of the UK in the Union. Cameron’s vision of the European Union is simply a space of trade and transaction without any European identity. His vision and understanding of the European Union are too simplistic and dangerous to be left unanswered. European capitals will have to find the political courage to address London respectfully and highlight the added value of the UK in the Union. But European capitals should not play this dangerous game of emptying the essence of the Union.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).
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VW-Google – Forget about Ethics and Think Transatlantic Retaliations

Credit: AP
Credit: AP

The recent allegations against Volkswagen (VW) for installing a devise allowing the company to have its 1.6 and 2.0 liters diesel models cheat test are scandalous. The VW case is nothing new in an highly competitive sector with extreme global competition. However, the turn of the debate in the United States about VW and its violations of the Environmental Protection Agency (EPA) testing these last five years do not tell the whole story about transatlantic trade competition. Interestingly enough, diesel cars only represent less than 1% of passenger vehicles in US, when it is more than 50% in Europe, and the EPA is the enemy number one of the Republicans and a large segment of American population distrust the agency. So based on the fact that all three elements, corporate ethics, environmental concerns, and small market share, rank low in the US, why would the US be so offended about VW cheating of EPA tests?

Without falling into conspiracy theory, could the US attacks against VW to be more a case of transatlantic warfare and retaliation against one of the biggest and symbolic European corporation? Could it be a retaliation for the European Commission’s cases against Microsoft and more recently Google?

VW Cheating and Systemic Failure

The VW scandal is based on the fact that VW has repetitively cheated on diesel car emission tests conducted by the EPA in the US and other agencies around the world. The company was selling its diesel models based on the claims that they were cleaner, more reliable, quicker, and greener than its competitions (one of the best discussions on the VWscreen shot 2015-09-18 at 4.55.17 pm case was done on the Diane Rehm’s Show, listen to it here).

The cheating did not only occur in the US. VW executives are saying that “vehicles in Europe with 1.6 and 2.0 litre diesel engines were also affected by the manipulations”. This could affect over 11 millions cars around the world on models of Jetta, Passat, Audi A3, Golf.

The VW group is one of the largest world carmaker counting brands like Volkswagen, Porsche, Audi and Lamborghini. In July the group overtook Toyota for the number one global carmaker. The cheating allegations have already costed the head of its chief executive, Martin Winterkorn, and the VW shares dropped by almost 35% on Monday and Tuesday.

Historically, the United States has not been a large buyer of diesel cars as opposed to its European counterparts. In the US, diesel is more expensive than traditional gasoline because of higher federal tax. However, in Europe it is the opposite for the simple reason that European countries have imposed less taxes on diesel than traditional gasoline. Less than 1% of passenger vehicles in the US are diesel engines, as opposed to over 50% in Europe.

European against the US – Google It…

Credit: Linda Henriksen/European Pressphoto Agency
Credit: Linda Henriksen/European Pressphoto Agency

In a matter of weeks in the month of April, the European Commission went after two global giants, Google and Gazprom, both with antitrust charges. Both cases are being headed by Margrethe Vestager, the E.U. commissioner in charge of competition. She has taken over the question of competition from a different angle than her predecessor Joaquin Almunia by tackling the perceived violators with antitrust charges. Both corporations are very important for the European market. Google controls over 92% of the Search Market Share in Europe, while Russia, through in part Gazprom, provides one third of the gas imported in Europe.

In the case of Google, Vestager is accusing the company of using its dominance in the European market with its search engine in order to advance its interests.

Source: Business Insider. 2015.
Source: Business Insider. 2015.

The accusation claims that Google, through its search engine, can artificially skew results favor its own shopping service at the expense of competitors. This is a direct violation of the core principle of the Single Market and fair competition. “Dominant companies” said Vestager “have a responsibility not to abuse their powerful market position by restricting competition either in the market where they are dominant or in neighboring markets.”

The antitrust case against Google, starting in 2008, illustrates the challenges of guaranteeing fair competition in the new age of the internet era. The case against Google was brought before the Commission by British price comparison site, Foundem. As reported by the Financial Times, “almost 20 complainants against Google want the search engine to abide by strict rules that ensure its formula treats its own services — providing results for travel, shopping and maps — no differently from rivals.”

An added dimension to the Google case is the gap between Europeans and Americans’ concerns and respect about privacy and data protection. The broad American surveillance program, revealed by Edward Snowden, created a serious transatlantic crisis. Interestingly enough, the European case against Google is the only one to stick, even though Google faced charges on three continents. In case of wrongdoing, the Commission has the power to levy fines of up to 10 per cent of Google’s global turnover.

Transatlantic Retaliation or Fair Game?

For the US to go after VW is to go after the powerful ‘Made in Germany’ and German engineering savoir-faire. It is about tackling the competition where it hurts. The US have been tough on foreign competitions with cases against KIA and Hyundai, for lying on fuel efficiency, as well as its own manufacturers with Ford, whom had put defeat devises on its minivans in the late 1990s, and against GM for mechanical defaults costing the lives of more than two dozens individuals.

Ultimately, this piece does not try to lower or even reject the accusations against VW, or even defend VW from any ethical wrongdoing. At the opposite, VW has been caught for cheating by putting a product on the market, which could qualify as an environmental crime. If legally, it will be difficult to trace back the environmental consequences of these cars, it has legal grounds for lying to the costumers on car efficiency and cheating on official tests. But aside blaming one company from wrongdoing, it is interesting to try to put a rational economic look into trade retaliation between two global giants, the EU and the US. Both economic powerhouses are competing on promoting their brands on the global car market, with Ford and GM for the US, and Daimler AG, VW group, BMW AG, PSA Peugeot Citroën, and Renault for the Europeans.

downloadThe Google/VW cases should be analyzed altogether, as there are cases of transatlantic competitions and retaliation. From Europe, the Europeans are demonstrating the lack of willingness and incentives by the US government to go after Google, one of the premium American companies, even though it has used its supremacy in order to promote its interests on the American market. Europeans are claiming that they have to do the job in order to guarantee fairness of competition on the internet market. From the US, the Americans are advancing themselves as the ones that have identified the cheating thanks to the EPA and the Californian authorities, and are denouncing the lack of supervision at the European level. The Americans are talking of environmental wrongdoing and systemic failure within the most powerful auto group in the world.

Interestingly enough, when Commissioner Vestager brought the case against Google in April 2015, she then travelled to Washington D.C. meeting her American counterparts. At the time of the meeting, other American companies were backing the European claims of Google’s violations. These American companies allowed “to head off accusations the action was inspired by German-led anti-Americanism.” In Germany, the VW scandal is shaking up the population and the FT reported in a recent piece that “People will ask why the Americans, who don’t really care about the environment, are attacking a German institution.”

Germany has been the European engine for the last decade and the strongest economic pillar of Europe since the collapse of the world market. Germany economic model is directly based on an export driven economy. The automobile sector represents 2.7% of German GDP. Most car sales are made by the VW group, 70% of them are sold outside of Germany, and the group employs nearly 600,000 people around the world, and more than a third of the 775,000 people who work in the auto industry in Germany (these numbers come from CNN money’s website). Attacking the VW group will have some impact on the German economy and ultimately European economy. “If nobody else has done it, the damage would be limited. If it looks like it’s more companies, not just Volkswagen, it would be a major problem for the German car industry, and the German economy overall,” said Theo Vermaelen, a finance professor at INSEAD.

Are VW/Google cases in order to protect the consumers, data privacy, morality, ethics, and competition? It is difficult to believe it. They seem to simply be transatlantic retaliation in an more than ever-competitive global market.

(Copyright 2014 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).