In his letter to European citizens earlier this week, Emmanuel Macron painted a picture of a stronger, re-energized European Union, but played down the importance of the bloc’s single market.
“Europe is not just a market, it’s a project,” the French President wrote. “A market is quite useful, but it must not make us forget the need for protective boundaries and unifying values.”
It’s not hard to imagine why he’d want to take such an approach.
The European Commission describes the single market as “one of Europe’s major achievements.” Borderless trade is one of the cornerstones upon which the EU was built. And yet, even as Macron was making the case for a “European Renaissance,” his country was engaged in a two-front battle over the market’s integrity.
Disagreements over the single market are flaring up all over the Continent. They pit France — and to a lesser extent Germany — against not just newer EU members like Romania, Poland and Hungary, but also against free-market champions like the Netherlands, Ireland and Sweden.
Smaller Northern European countries think that France and Germany are steering the European project in the interests of their industrial heavyweights, and have double standards when it comes to implementing the single market. Central and Eastern European countries complain the rich West is pressing them to open up sensitive farm and retail sectors, while simultaneously cracking down on workers traveling to richer countries.
French protectionism lies at the heart of much of this mistrust and suspicion.
“The worry from a lot of the smaller member states is — assuming some sort of Brexit takes place — we are going to see a real shift towards a classical French protectionism,” said Eoin Drea, a senior research officer at the Wilfried Martens Centre for European Studies.
“One of the things traditionally mitigating that has been a German industrial policy that has been more global in its outlook,” he added. “But over the last two years … that has slowly begun to change.”
Fighting with the north
In two weeks, EU leaders are set to discuss the future of the internal market at a summit in Brussels. It’s not likely to be conclusive. National governments are sorely divided about which course to take, and have produced competing blueprints for Europe’s economic future.
In February, 17 mainly Northern and Central European countries wrote a letter calling on European Council President Donald Tusk to ensure the EU’s single market “remains a source of growth and opportunities for citizens and businesses.” France, Germany, Spain and Italy conspicuously failed to sign.
Instead, Paris and Berlin drew up their own rival manifesto for a more protectionist EU. Their priority is to create a new generation of European industrial champions to compete with China, even if that means reduced competition and tougher deals for consumers in Europe.
Because Brussels has emerged as a threat to the Franco-German duo by blocking a landmark rail merger between Alstom and Siemens, Berlin and Paris want to rewrite EU competition rules that are meant to safeguard a dynamic internal market.
This vision of European champions holds little allure for smaller countries that simply don’t have giant companies. Ştefan-Radu Oprea, Romania’s business minister, argues that Europe should be focusing on “small champions,” and noted those will need robust competition rules to flourish.
One diplomat involved confirmed that France and Germany have taken a deliberate decision not to back the plan of the 17. “On the common market, our focus is strictly on industrial policy as put down in the Franco-German manifesto,” he said.
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Trouble in the east
In the EU’s east, the splits in opinion particularly affect sensitive sectors such as agriculture, food retail, transport and construction.
On Saturday, Polish Prime Minister Mateusz Morawiecki was the latest leader to sound off on Europe’s uneven playing field and announced measures that would hit big Western retail investors — which include France’s Carrefour and Germany’s Lidl — because “other countries cleverly defend their own markets.”
Central Europeans accuse richer countries such as France, Austria and Germany of hypocrisy for seeking to restrict the free movement of workers and hauliers. They also argue that France and Italy are granted unfair, lavish protections for their foodstuffs, while Romania, Slovakia, Poland and Hungary have all come under attack for trying to protect land and small retailers.
“What is common to many new member states is the feeling that the internal market has only benefitted those who have technology and capital,” said Daniel Gros, director of the Center for European Policy Studies, a think tank based in Brussels.
As economies in the east such as Poland have closed the gap with countries in the west, Gros explained, “they fear somehow that … investment flows have been locked in to advantage Western European terms.”
“At the same time, they [countries in the east] have become more nationalistic,” he added.
‘National agendas’
France has been the leading force behind efforts to restrict access to the road haulage market for truckers deployed from poorer EU countries, part of Macron’s campaign pledge to buttress the national labor market.
He did this by pushing for rules that would make it harder for non-French workers to operate in the country by limiting the number of days and pickups a trucker could make or by insisting a vehicle needs to return home every few weeks.
Paris even passed a law mandating truckers be paid the French minimum wage as soon as they cross the border — a measure designed to restrict labor market access, and which triggered a European Commission court case over violations of freedom of movement.
“The mobility package is an example of how the initial idea to create an environment for fair competition in road transport and ensure drivers better working conditions switched to the national agendas, personal political interests, and consequently attempts to introduce restrictions to provide services in the European single market,” Lithuania’s Transport Minister Rokas Masiulis told POLITICO.
Food fragmentation
Nowhere are the fissures over the single market more visible than in the areas of food, land ownership and supermarkets. Western Europe receives higher EU subsidy payments than the east.
Countries such as France and Italy have also been prime beneficiaries of contentious legal wriggle room to introduce national “Made in” labels that are accused of fragmenting the single market by encouraging consumers to buy local.
Central European countries have tried to introduce rules to force supermarkets to buy goods locally. They have also sought to restrict big buy-outs of farmland and tried to rein in big retailers with taxes. Under pressure from big business, the European Commission has responded with countermeasures — accusing the east of fragmenting the single market.
Frustration is now boiling over in Warsaw. The Polish government has made several attempts to favor local retailers over foreign investors. It proposed a special tax on large retailers, which the Commission found in 2017 breached EU state said rules.
Poland’s Prime Minister Morawiecki has now upped his offensive by announcing a government plan to limit the ability of larger retailers to sell own-brand products. That would be a severe blow to the major foreign supermarkets, which see such goods as a cash cow.
“It will change the negotiating power of Polish farmers,” Morawiecki said. “We want to have the outcome that Polish products will be on the shelves, and not only the hands of big retailers.”
He complained that “other countries cleverly defend their own markets while we have a very liberal view.”
Taken for granted
Dirk Jacobs, deputy director general of Fooddrink Europe, a large lobby representing processing companies like Nestlé, Pepsi and Coca-Cola, pointed out that countries such as Slovakia followed Hungary and Poland in proposing a tax on foreign-owned companies, a move he suggested is just the tip of the iceberg.
In all, eight EU member countries including Greece, Finland, Lithuania, Italy and France have launched national mandatory labeling schemes for food products, mainly milk and meat used in processed foods. Such labels would oblige producers to show if, for example, the wheat used to make pasta sold in Italy is actually Italian and not from Canada. Opponents of such schemes say that they distort the market by urging consumers to buy local.
“We are seeing a lot of fragmented approaches in the single market and that is a worry,” Jacobs said. “A lot of it comes down to protectionism. It’s visible in the central and eastern parts — in Bulgaria and Romania, where the supermarkets have been threatened with selling more than 50 percent from local producers — but also in Italy, where the government failed to notify Brussels about its origin labeling rules,” he added.
“We are now at a moment that we need to move from words to action.”
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