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Friday, May 31, 2013

Answer to Hague's Nullification Proposal: The European Parliament Is Democratic

At the end of May 2013, William Hague of the British government delivered a speech advocating that state legislatures should be able to block E.U. laws proposed by the European Commission. At the time, a state legislature could use a “yellow card” to object to a proposal that could presumably be better legislated and enforced at the state level. Hague wanted a “red card” option that a state legislature could use to block legislation. There are several problems with Hague’s proposal.
 
               Should the state legislatures dominate the EU's legislature?  The British state government says yes. Would the Union wither and die?           Source: mapperywordpress.com
Presumably, such a card from just one of the 27 state legislatures could block a proposal. It would be difficult to imagine virtually any law surviving at the E.U. level. Why then have the E.U. at all then? Were such a card to block the proposed E.U. law only in the particular state objecting, the E.U. would be faced with the problem that President Jackson faced in the U.S. in 1930 when the South Carolina legislature passed the Nullification Act, which enabled the state’s legislature to block any U.S. law detrimental to the state’s interests. If every state can pick and choose among federal laws, what force would any federal law have?
Finally, Hague was assuming that the European Parliament is not democratic at all, whereas the state legislatures are fully so. However, the members of the European Parliament are directly elected by EU citizens. The representatives represent those constituents rather than states (or state governments). Perhaps this is why Hague proposed to have the state legislatures essentially replace the European Parliament. To be sure, the legislative districts at the state level are smaller and thus more democratic in this respect. This does not render federal legislative bodies like the European Parliament and the U.S. House of Representatives non-democratic. At most, the differential in terms of democracy between the two levels is an argument for greater subsidiarity.

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Thursday, May 30, 2013

Federalism on Different Levels: Switzerland Capitulates to the E.U.

In 1960, Switzerland was one of the two founders of the European Free Trade Association. All of the countries participating in that free-trade agreement except Switzerland went on to ratify the EEA (European Economic Area) free-trade treaty, an agreement akin to NAFTA in America. In a referendum in December 1992, the Swiss turned down the proposed treaty. Rather than gain access to the E.U.’s domestic market through EEA, the Swiss opted to do so through bilateral treaties with the E.U. by which the independent state agreed to E.U. laws relevant to the single market. Switzerland also signed on to the  Schengen arrangement, which became an E.U. law in 1999, and provisions concerning security and asylum. Even so, changes to the relevant E.U. federal law are binding on Switzerland via the bilateral treaties only if a bilateral commission approves. Admittedly, “Bilateral” is somewhat misleading here, as a basic equivalence is erroneously assumed between the E.U. and Switzerland.

 Switzerland, shown in orange, would not even be a large state in the E.U.    Source:  battlecat.net

The complete essay is at "Is the E.U. a Federal System?"

Tuesday, May 28, 2013

Merkel Siding with China against the E.U.: Federalism Imploding?


In May 2013, German Chancellor Angela Merkel interjected herself into the brewing trade conflict between the E.U. and China. At issue was the European Commission’s proposal to impose import tariffs on some Chinese solar and telecommunications products in response to suspected dumping by China. Merkel’s involvement involves a conflict of interest for her and exploits a vulnerability in the E.U.’s federal system.
The conflict of interest involves Germany’s economic interest in maintaining trade with China and Merkel’s role at the E.U. level through the European Council. The Wall Street Journal reported at the time, “China is an increasingly important market for Germany’s export-oriented industry and Germany is China’s largest trading partner in Europe.” Among the E.U. states, Germany had the most to lose in a trading war. Furthermore, it was in the interest of Li Keqiang, China’s premier, to use Merkel to avert the proposed tariffs. Both Germany’s particular economic interests and Merkel being used by the Chinese government put Merkel at odds with her own duty at the E.U. level to contribute to governance in the E.U.’s interest rather than merely that of her own state.
Typically a conflict of interest involves the specter of gain for the person or institution pitted against its duty oriented to a larger good. In the case at hand, Merkel would be violating her duty at the E.U. level were she to sway E.U. policy toward Germany’s particular economic interest and away from that of the E.U. itself. She would be violating the duty even more expressly were she to intervene to do China’s bidding. In fact, such an action could be counted as treasonous. To the extent that Germany (and thus Merkel) have disproportionate influence at the E.U. level, the conflict of interest could be particularly costly for the European Union because German interests could eclipse that of the E.U. itself. Merkel’s exaggerated influence in the European Council’s deliberations is in itself a vulnerability in the E.U.’s federal system.
Dominance of Germany at the E.U. level risks E.U. law and policy being made in Germany’s interest, rather than in that of the E.U. itself. In addition to rendering the whole suboptimal, Germany’s dominance is not fair to the other states and their respective government officials. Moreover, the disproportionate power of the state governments altogether at the E.U. level due to the power of the European Council risks the E.U. itself being compromised (or even potentially ruined) by its states. If Merkel has enough influence at the E.U. level to get the Commission, the E.U.’s executive branch, to back off its proposed tariffs, then you can bet the state governments have too much influence in the federal government relative to the lower house (i.e., the European Parliament) and the executive branch.
       Flags of the E.U. and China, both of which are empires, albeit one being federal and the other centrally governed.  Both forms of government have drawbacks that can be exploited by the other.   Source: ipolitics.ca
As a government official of an E.U. state, Angela Merkel was not in a position at the time to be a mediator or third party between the E.U. and China. That would be a category mistake. Moreover, Germany is a political society in the E.U. rather than being equivalent to the European Union. Put another way, Germany, the E.U. and China do not constitute a threesome. It can be concluded, therefore, that the Chinese government was attempting to exploit a major vulnerability in the European Union by compromising Angela Merkel. She should have referred the Chinese premier to the president of the European Commission and express her own position to the president of the European Council. Both presidents are institutionally placed in the E.U. government to act in the interest of the E.U., unless the state governments (or an official of one) have sufficient power at the E.U. level to have the presidents do their bidding. Rather than exacerbating the E.U.’s vulnerability, Merkel should have acted to fortify E.U. governance even at the expense of her own state and herself.
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Monday, May 27, 2013

China: Empire Demands Capitalism

Communism, for lack of a better word, has somehow morphed into capitalism, at least in China, as if a genetic mutation had taken hold through mitosis. Although this is an exaggeration, it does capture an important trend that can be traced back to Deng Xiaoping (1904-1997), who “abandoned many orthodox communist doctrines and attempted to incorporate elements of the free-enterprise system into the Chinese economy” beginning in the late 1970s, according to the Encyclopedia Britannica. Decades later, upon becoming prime minister, Li Keqiang announced in 2013 that the central government would reduce the state’s role in the economy. As reported by the New York Times, the Chinese government issued a set of policy proposals to reduce “government intervention in the marketplace” and give “competition among private businesses a bigger role in investment decisions and setting prices.” According to the proposals, a tax on natural resources would be expanded, market forces would play a larger role in determining bank interest rates, and, according to the government, policies would be enacted to “promote the effective entry of private capital into finance, energy, railways, telecommunications and other spheres.” Foreign investors would be given more opportunities to invest in finance, including banking, logistics and healthcare. Foreign exchange controls would also be loosened further.
 
The proposals were enough for Stephen Green, an economist with Standard Chartered, to remark, “This is radical stuff, really.” Huang Yiping, chief economist at Barclays, pointed to lower growth projections and massive amounts of debt as giving the Chinese government a rather practical motive in continuing the trend of refurbishing communism. At the time of the proposals, many experts doubted, however, whether the Communist Party would “abandon the state capitalist model, break up huge, state-run oligopolies or privatize major sectors of the economy that the party considers strategic, like banking, energy and telecommunications.” Additionally, corrupt government officials would doubtlessly resist losing what the New York Times calls their “secret stakes in companies,” not to mention all the bribes.
 
Even so, it is astounding that the prime minister, a communist, would say: “If we place excessive reliance on government steering and policy leverage to stimulate growth, that will be difficult to sustain and could even produce new problems and risks. The market is the creator of social wealth and the wellspring of self-sustaining economic development.” Marx and Lenin would hardly recognize the Chinese Communist Party. Because China has over a billion people, the old “command-and-control” economic model based on centralized directives on production quotas and prices would at the very least be difficult to coordinate. The result would doubtlessly include bottlenecks in supply, and thus shortages on the shelves (as evinced in the U.S.S.R.).  The sheer scale of China, an empire of former kingdoms, renders centralized control highly inefficient.
 
                           The Emperor Kangxi of the Qing Dynasty. He ruled for 60 years, greatly expanding the size of the empire.      Source: Chinahighlights.com
 
Interestingly, even as Emperor Kangxi (1654-1722), the second emperor of the Qing Dynasty (1644-1911), expanded the empire by taking over central Asian Muslim kingdoms, he resisted the preceding Ming Dynasty’s laissez-faire policy on internal trade and industry by turning some crucial industries into monopolies. Interestingly, John D. Rockefeller would probably have concurred, based on his own theory that the coordination in a monopoly in a vital industry such as oil could put an end to destructive competition. In any case, Kangxi apparently saw no contradiction between expanding the empire and centralizing some important sectors of the economy. Similarly, Mao saw no internal tension in collectivized consolidation on a large scale.

Source:

David Barboza, “China Plans to Reduce the State’s Role in the Economy,” The New York Times, May 24, 2013.