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Brussels warns against protectionist measures

Latest update : 2009-02-25

Four days before a special EU summit on the economic crisis, the European Commission has warned against any protectionism in the ailing car industry, saying that it would only hurt exports.

AFP - Europe must make a concerted effort to avoid protectionism in the auto sector, which would only hurt the ailing industry's exports, the European Commission warned Wednesday.

"It is essential that state aid and other measures are well directed, working to build the future strength of the industry rather than introducing short-term distortions that will damage long-term competitiveness," the EU's executive warned in a statement.

Brussels called on European capitals to invest in "strategic technologies" and help workers retrain to keep or change their jobs.

Registrations of new cars in Europe fell 27 percent in January compared with a year earlier, according to the European Automobile Manufacturers Association (ACEA).

Such figures have prompted countries such as France, Italy and Spain to launch rescue packages, prompting cries of protectionism, especially in central and eastern Europe amid fears that foreign auto factories will be closed and jobs repatriated.

The way to help the industry is through "a determined and concerted effort to combat any move towards protectionism in global markets," the commission said.

EU Industry Commissioner Guenter Verheugen -- considered industry friendly -- presented the "communication" to the press in Brussels alongside EU Competition Commissioner Neelie Kroes, who has a more hardline image and has railed against countries seeking to "steal" from their neighbours.

Her office is currently examining auto sector aid plans from Britain, France, Germany, Italy, Spain and Sweden, while stressing that she has "red lines" that cannot be crossed.

Both commissioners condemned acts of "economic nationalism", stressing that the short-term national gains were far outweighed by the long-term costs.

"The car industry is European, no company operates and no item is produced in just one country," said Verheugen.

Verheugen stressed that bailout money would not be admissible to deal with corporate problems and poor management which occurred before the onset of the economic crisis, which has plunged the EU into recession.

The EU executive noted that the European Union itself is threatened by protectionism elsewhere.

"The situation is aggravated by the rising risk of protectionism, threatening reduced access to third country markets for European producers who have thrived on the export market," it said.

"The first cases have come in the form of new import licensing requirements," in Argentina and Brazil, "or rising import duties," in Russia and elsewhere.

The commission listed all the kinds of aid deemed acceptable under EU law, including regional aid, rescue and restructuring funds that will help a company "be viable in the long-term" and special temporary help "to facilitate access to finance in the current financial and economic crisis."

In general, under pressure from EU nations, Europe's competition authorities have been more flexible in assessing national bailout packages to troubled banks and industries.

The European automobile industry association (ACEA) complained that the measures don't go far enough.

"The EU has started filling a toolbox with potential instruments but too little of them have been actually put into use due to time-consuming procedures and a lack of guidance at EU level," said ACEA secretary general Ivan Hodac.

"The most pressing issue to resolve remains the limited access to credit due to the non-functioning of the financial market. Other immediate needs include fleet renewal incentives and the postponement of further costly regulation," he added.

Date created : 2009-02-25