Tuesday, 2 September 2003

European Global Governance

Globalisation is usually seen as the expansion of the global market and particularly an expansion of the reach of large multi-national corporations. Many politicians and pressure groups argue that it is essential that global governance structures be expanded to ensure that these companies — and the market in general — don’t get out of control harming human rights, democratic stability, culture, the environment, and global health.

From about the time of President Kennedy, there has been a slow, and now accelerating, push for global governance, and away from the sovereignty of nation states. This process has always been driven by Europe (and was initially internal to Europe to avoid another World War). The global governance institutions that the pressure groups, bureaucrats, and politicians promote include international treaties on numerous issues such as climate change, chemicals, and tobacco. There are proposals pushed by powerful and respected international bodies for agreements on labour standards, environmental protection, and tax harmonisation. These entail an entirely different form of globalisation and one that is beginning to have a significant and deleterious effect.

Many people, especially Europeans, do not like to see American brands like Marlboro, McDonald’s, or Coca-Cola being sold on every street corner of the planet. But unlike homogenised government agreements from which there is little escape, one does have the choice not to buy these products. Jurisdictional competition is as important for governments as it is for businesses, perhaps more so because of the hegemonic (occasionally despotic) power they can wield.

And it is the financial harms to governmental hegemony, caused by jurisdictional competition, which count most. Most of the major pressure groups, such as Oxfam and Greenpeace, spend their greatest efforts at G-8, IMF, World Bank, WTO-type meetings, rather than haranguing people on street corners. Whether you are lobbying for baby seals, a smoke-free world, or banking informational exchange, it’s better to be annoying politically influential people (and the media who report about them) than members of the public who have no power and are rationally ignorant of policy decisions.

Harmonisation: Harmony or Harm?

European elites want harmonisation across the rich world; they argue that it will bring economic harmony, but the outcome will be more discordant, with populations being fleeced by high-tax governments. Without harmonisation, countries will continue to adopt diverse tax and regulatory structures, and the world’s media (even if its through glasses tinted with the soft-red of mild socialism) will see the success of the lower-taxed, lower-regulated economies — Iceland, Ireland, Luxembourg, Switzerland, Hong Kong and Singapore — as demonstrating that one doesn’t need to be an economic giant to be successful.

Lower tax countries have recently come under pressure to comply with OECD and EU concerns about tax evasion and money laundering. The claims of OECD and others have some legitimacy (especially in providing information about terrorists and other dangerous characters), but not much. And they must be fought.

If we don’t combat these messages more seriously, the world will be pushed by vested interests (primarily in Europe) towards a harmonised, homogenised global governance structure that will slow world growth to European proportions — something that the aspiring nations cannot afford (they desperately need to get out of poverty) and we shouldn’t want.

Unfortunately, Europe is no longer an aspiring region. The usual distinction made in common talk is between the developing and the developed world. But this is misleading. The U.S. is the richest country in the world, but it is still aspiring like most of those normally called developing. Europe is not — it is developed, but not aspiring. Originating in fear of a third world war, it has become sclerotic, inward looking and above all happy with stasis. There are exceptions, but the elites in Europe are happy with their lot and want to keep it, and even export its brand of fairness.

The push for endless regulations probably cost even more than high taxes, but it’s the tax harmonisation that can lead to an even greater loss of sovereignty. And that is where the position taken by the U.S. (and its allies) is so important. No other nation can restrict the activities of European regulators

The French Trinity of Pascal Lamy, Lionel Jospin — both socialists — and Jacques Chirac, are all on record wanting tax harmonisation, all wanting British and Irish lower taxes to move in the French direction. The German duo of Gerhard Schroeder and Joschka Fischer want the same thing — and especially EU Qualified Majority Voting on tax matters.

Outside the EU, these actors are imperialistic in targeting small jurisdictions on tax, and hypocritical in not applying the same rules in their own countries. So far they have failed to convince the U.S. and the aspiring nations to desire harmonisation, but there are voices, many Democrats, who like their ideas. The U.S. administration must continue to engage in the battle for national sovereignty. It should do so for self-interested reasons, but also to help the poorest countries that cannot fight the EU without its help.

Dr Roger Bate is a fellow of the International Policy Network.

This article appeared on http://www.techcentralstation.com