A report to wave at protectionists: David Bowen suspects that competition policy in Europe will not really improve

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The Independent Online
AMID the fun and games of hotel takeovers and interest rate rises, the publication of another worthy report from the European Commission was unlikely to get much coverage last week - and it did not. But the optimists among us can hope that An Industrial Competitiveness Policy for the European Union, a bodice-ripper released on Wednesday, will make waves long after the Savoy has been turned into a Happy Eater and interest rates are back in double figures. It won't, of course, but it's a nice thought.

According to this report, the Commission has decided that its industrial policy should no longer be based on national champions and sectoral protection but should push for proper training, global alliances and a fierce competition policy. The industry commissioner, Martin Bangemann, also said bureaucracy should be reduced.

These proposals are admirable. On bureaucracy, we can expect the setting up of another directorate to reduce the red tape - Brazil used to have a ministry to do just that, and it was very useful for the people who worked there.

But the shift on industrial strategy really could be important. It shows that Brussels has finally recognised that there are people out there called Asians, that they can make things better and more efficiently than the Europeans can, and that tariff barriers and the promotion of 'national champions' will do nothing at all to change this. There may be environmental reasons for supporting protectionism (Sir James Goldsmith thinks so), but there are no good economic ones.

Does this mean that steel subsidies in Italy and Spain will now be outlawed? Will the French government be stopped from giving any more support to the grotesquely inefficient Air France? Will pigs fly?

Consider the story of Air France - an airline with more than a passing resemblance to British Airways before Lord King got his paws on it. It was grossly overmanned, provided a mediocre service, and its balance sheet turned crimson when the recession arrived. In 1990, it made a loss of Fr720m ( pounds 87m); in 1991, it was Fr690m; in 1992, the loss was Fr3.2bn; and in 1993, Fr8.5bn.

Bernard Attali, the last chairman, tried to cut costs. There was a violent strike, the government said it would not back Mr Attali, and he resigned. His successor, Christian Blanc, has brought in his own 'restructuring' plan, which is as savage as a dead sheep. It involves making 5,000 redundancies - none of them compulsory and only if all 14 unions agree. The plan, which is supposed to reduce costs by 30 per cent, does not compare with the rationalisation forced on British Airways in the run-up to its privatisation.

But Mr Blanc knows where he can concentrate his firepower without fear of losing his job. He has persuaded the Commission to hand over Fr20bn to tide the airline over while it struggles through its recovery plan. The Commission resisted at first, but was overcome by the great machine that is the French government. Bernard Bosson, France's Transport minister, called the deal 'perfectly balanced'.

This was the same Mr Bosson who stopped foreign airlines flying into Orly airport. The reason . . . well, there wasn't one except that Air France wanted to maintain its monopoly there.

Not that the restructuring deal is going through without trouble: Air France's pilots went on strike last week in protest at Mr Blanc's proposal to cut flight bonuses. We should feel as sorry for them as we do for the striking baseball millionaires in the States.

In the same month that it approved the Air France deal (July), the Commission also gave the go- ahead to a multi-million pound aid package to the German steel firm Kloeckner and approved the restructuring of Olympic Airways, the Greek national carrier beside which Air France is a paragon of efficiency.

It is not very original to say that the French are good at looking after their own interests. It is not very original to say that the British are bad at looking after theirs. And it is certainly not original to start wittering about level playing fields.

The publication of a sensible document by one directorate does not, of course, mean that the Brussels gravy train has spun on the turntable and is heading off in the opposite direction. There are plenty of other directorates, and plenty of other national interest groups, that can - and will - bulldoze the born-again free marketeers in the industry directorate.

But it might be worthwhile for British businesses that find themselves under threat from a bulldozer to get hold of a copy, so they at least have some paper to wave with justifiable indignation at the bulldozer driver. Paper, after all, is what Brussels likes best - whatever Mr Bangemann may say about cutting bureaucracy.

Write now to Directorate III, Rue de la Loi, 200. B-1049 Brussels. It might do some good; at worst it will provide amusement as aid deal after aid deal is approved by the Commission.

(Photograph omitted)

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