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Czechs against protectionism

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It’s a good thing that the Czech government is doing what it can to defend the principle and practice of free trade and it’s also a good thing that it will try to steer the EU in this direction as the presiding country at the upcoming EU summit. But we shouldn’t imagine that someone will say: “Protectionism and economic nationalism are wonderful concepts.” Protectionism and nationalism are two words that smell bad.

The devil lies in the details: What guarantees can be made, what type of government loans are acceptable and exactly what the EU can tolerate. Can governments give loans directly or should they cancel owed taxes and insurance fees? What should aid to the European car industry look like, so that everyone gains as much as everyone else out of it?

And yet no one has any doubt that government or no government, companies are moving and will continue to move their production to their home countries. Every bigger German company (this is especially true of carmakers) with Czech suppliers has (or until recently had) two suppliers for every part. One is at home (and is more oriented toward development) and the second is “somewhere in the east”. When demand falls, the domestic supplier continues producing. This isn’t quite protectionism. But it is one of the main reasons behind the drop in industrial production in the Czech Republic.

Let’s be honest – it’s easy to rail against protectionism now because no big Czech company is doing what President Nicolas Sarkozy is accusing Peugeot and Citroën of doing (keeping a significant part of its production in Ukraine and importing the products to the domestic market).

The only big Czech company is ČEZ. Note that politicians (Minister Martin Bursík) have started calling for ČEZ to give up its acquisitions abroad and start investing on the domestic market.

Yes, it certainly isn’t exactly the same thing. ČEZ is state-owned, and the production and distribution of electricity is something different than car production (it is a necessity). And there continues to be interest in acquisitions in eastern Europe: If ČEZ were to move out of Romania or Bulgaria, the local governments would not collapse because some other investor would step in (RWE perhaps).

Let us admit to ourselves that it’s easy for us to be free-market idealists. Czech capital isn’t spread out too much for now. And if “Czech capital” were to leave the country, then it would be for tax havens (which would mean the capital isn’t so Czech anyway), and if it was ever invested abroad, it was in China or Russia (where lost the shirt off its back).

Translated with permission by the Prague Daily Monitor.

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