Protectionism, i.e. save yourself if you can

Boguslaw Kowalski

Last year the European Union saw a 7.82% decrease in car sales as compared to 2007. The biggest decrease was noticed in Latvia.

The automotive field is sinking. The economic crisis has led to an unprecedented fall in all productions in Europe and the USA but the automotive production has suffered most. The year 2008 was the worst for almost half a century. The automotive industry has experienced the biggest fall since the oil crisis of the years 1973-74.

The situation is bad in Europe and in Poland

The analysis of the European Commission, which the media got to know, shows that the biggest problem is the loan restrictions. In Europe 60-80 % of private cars are bought by people who take loans. The same applies to lorries. Their sales in the whole EU decreased from 38,000 cars in January 2008 to 600 in November 2008. The automotive firms faced a real threat of bankruptcy and unemployment. And that concerns 2.2 million people employed directly in production and as many as 12 million employed in various co-operating companies in the whole EU. Last year in the EU the car sales had a 7.82% decrease on average as compared to the year 2007. The biggest fall was noticed in Latvia – a 40.94% decrease, in Estonia – 21.25%, in Ireland – 18.73% and in Sweden – 17.21%. Worse results than the European average were reported in such big countries as Italy (13.36%) and Great Britain (11.32%). The countries with the biggest production and sales of automobiles in Europe also reported decreases: Germany (1.85%) and France (0.69%). Unfortunately, there is a declining tendency and it is predicted that in 2009 there will be a further fall in car sales, even 20-30 % a year, which means ca. 40% reduction of employment. In this background the situation in Poland is not very bad because last year we sold 9.15% cars more than in 2007. But we know that the crisis upon the Vistula has only begun and probably we will see an over 30% decrease in 2009. The situation is much worse when we look at the structure of the sales of what is produced in Poland. Over 97% of automotive products (cars and spare parts) are exported mainly to big EU countries, i.e. where the crisis is developing. That’s why in spite of the relatively good sales on the national market our factories must restrict their productions.

State help, i.e. protectionism on the horizon

Fearing mass job reductions and mass unemployment the governments of some big countries helped their automotive industry. The USA directed 17.4 billion dollars to their companies, France – 6 billion euros, Sweden – 2.65 billion euros, Italy – 2 billion euros, Germany – 1.6 billion euros and Spain – 1 billion euros. Additionally, three countries give bonus for their citizens who scrap their used cars and buy new ones. This bonus amounts to 2,000 euros in Germany, 1,500 euros in Italy and 1,000 euros in France. As we can see our EU neighbours generously gave money to their car factories. But in exchange they began laying down various requirements. The French President Nicolas Sarkozy went as far as to demand from the concerns not to close their factories and not to move them to other countries, e.g. to the Czech Republic and not to decrease their employment. The Italian government wants to introduce similar restrictions. Similar options have been considered in other countries. The main opposition party in Sweden proposed not to build the energy connection with the Baltic States, which the European Commission promotes. According to the leader of the Social-Democrats Mona Sahlin the Swedish government should rather worry to ensure supplies for their own industry and worry about the prices of electricity than to transmit it to Europe. Whereas the German government, as the biggest net payer to the EU budget, blocked the proposal of the European Commission to assign 5 billion euros for investments in the European energy system. Most of the money was to be given to Poland for the gas port construction and the construction of the gas pipeline to Norway, which in turn was to be the basis of the Common EU Energy Policy. But in difficult times Germany simply prefers to have this money back in its treasury.

What about the common European market?

These clearly protectionist tendencies aiming at caring for one’s own market have been criticised. Economists and some politicians turn our attention to the fact that this is a very shortsighted politics. When there is an open big market in the whole EU you should protect employment and localisation of factories within the whole EU and not only within its particular member states. Since only on a big market you can stimulate sales, which is an indispensable spring of economic growth. It seems that these guidelines refer first of all to the automotive industry. Currently, particular car makes are actually produced in several countries. One country produces engines, the other produces bodies and others assemble them. Therefore, an attempt to struggle against the crisis in only one country will be good for nothing. There is a common market of production and common market of sales. And only activities undertaken on the whole market can bring positive results. Therefore, the Czech Republic that presides over the European Union and at the same time is directly threatened by the protectionist politics of the Western countries decided to call a meeting of all member states to work out a common way to fight with the crisis and defend the common European market.

Poland remembers about the shipyard liquidation

In this background our government is in an unenviable situation. Just recently, being under the pressure of Brussels, it sacrificed the Polish shipyards on the altar of the common European market and now it faces something quite opposite from the side of its main EU partners. If the so-called old members states allowed protectionist actions and broke the present rules, Prime Minister Donald Tusk, together with his ministers, would turn out to be a very naive person that sacrificed the interests of his own industry for illusion. Therefore, together with the Czech Republic and other small countries he must do his best to make all member states, including the strongest ones, follow the rules of the open common European market. That’s why he is trying to marginalize his deputy Waldemar Pawlak, Minister of Economy, because the latter would eagerly see some elements of protectionism and financial support exclusively for his own companies in Poland as well. The Minister of Finance supports Prime Minister Tusk. He limits his activities to seeking savings in the public finances and does not want to hear about any help for industry from the state budget. One can see increasingly clearly the dissonance in the coalition, between Poland’s Citizens’ Platform and the Polish Peasants’ Party. The firm liberal line of Prime Minister Tusk’s policy towards the increasing negative phenomena, including the particularly socially painful unemployment, will be very hard to maintain. If it changed under the pressure of social protests it could bring in its tail far-reaching political consequences including the fall of the government. Anyway, the government must struggle with the crisis on two planes: the internal one in dialogue with its own nation to prevent an outbreak of dissatisfaction, and the European one in dialogue with other governments to stop the protectionist tendencies of the biggest European players. Since in the present conditions the policy of protectionism helps only the strongest countries survive the crisis better.

"Niedziela" 9/2009

Editor: Tygodnik Katolicki "Niedziela", ul. 3 Maja 12, 42-200 Czestochowa, Polska
Editor-in-chief: Fr Jaroslaw Grabowski • E-mail: