Labour is pledging to introduce protectionism.
In the wake of the takeover of Cadbury by Kraft that first promised to keep a factory open and then decided to close it when the government could no longer block the deal labour is pledging to introduce new legislation. This would protect strategic firms which could apply to alot of firms depending on what the national interest is defined as, would keeping jobs in the UK be in the national interest? Certainly. Enough to block a takeover? Who knows!
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New law needs more stakeholder support
Gordon Brown has stated that should he be elected he would introduce a law that would make it harder for foreign companies to acquire British businesses. This would be done by increasing the threshold for the amount of stakeholder support that is needed for such a takeover to occur. Currently a simple majority is needed in order for a takeover to occur. The proposal now is that two-thirds will be needed for a foreign takeover. This would make it harder for foreign investment. Whether we agree or not as to if this proposal will aid our flailing economy is not of importance here, what is importance is that what Brown is proposing leads to protectionism. What Brown would be doing is placing a more stringent requirement on foreign investors than British investors.
What is not detailed here is the precise area in which this would apply. The new rule on stake holder support would not be for general application. It would only apply to certain industries; specifically that of utility and infrastructure. Given that the new law only applies to these areas in addition to that fact tat it is not an all out ban on foreign takeovers but a heightening of the requirements; this law cannot be said to be a protectionist measure.
They want to protect British jobs
The big problem that arose from the Cadbury’s takeover by American firm Kraft was the worry that the factory would be closed and moved to a source where cheaper labour could be found. This is always a problem with foreign investments. There is a fear that they will take the company and place the jobs in their own country whilst taking on a brand name that will continually be sold in Britain. In order to ensure that British jobs do not move elsewhere it would make sense for the Labour Government to propose protectionist laws. Especially in the time of the recession, British jobs need to be kept in Britain.
Protecting a few British jobs is most certainly not the same as the almost sinister term ‘protectionism’ denotes. Protectionism is the whole importation of economic policies which prevent globalisation; not only with jobs and company takeovers, but also with trade and commerce. They prevent companies from other countries trading in the home country in order to conserve the demand for the home countries suppliers. This is vastly different from what Labour is proposing. Labour in fact is very much in favour of global commerce. Do not forget that they largely support the Economic European Community, and this organisation does not allow for protectionism.
Labour is currently under an immense amount of criticism for the borrowing of so money. When you read about public spending the deficit, what is always stated is the GDP; Gross Domestic Production. This is a measure of a countries overall economic output. It is closely correlated to the standard of living. If large foreign investors took over companies and took their productivity elsewhere then the GDP would be lower. This would make Labour look even worse for accruing so much debt. Therefore, Labour are introducing protectionist measures; protecting the GDP and therefore their credibility.
Just because a company was formed in a different country, it does not mean that their profits and productivity made in one country does not count towards the GDP. If Labour really were implementing protectionist measures, they would actually lose out on GDP formed by other national firms. If these foreign investors took their business back to their own country, more Britain’s would lose jobs, less Britain’s would spend money, and is would result in an even lower GDP. For all Labour’s faults, they would never propose such measures with such disastrous consequences.
Britain? Protectionism? There is no introduction needed!
Any expert would tell you that is non sense to say that Britain is not protectionist. Many companies have had limitations placed upon who can and cannot take them over; these were set by the Government. Today the Government has ‘golden shares’ in Rolls Royce, BAE systems and Royal Mail. These golden shares prevent foreign takeovers. Given that only the Royal Mail serves a real national interest, how could anyone argue that Protectionism and Britain need an introduction?
France were ridiculed for such a move
In the wake of DANONE receiving interest from American company PepsiCo, the French Prime Minister, Jacques Chirac, declared DANONE a strategic industry in order to dissuade the take over. This received wide laughter from across the globe. DANONE produces yoghurt. This was 5 years ago. Labour would not introduce protectionism on the basis of the Cadbury’s takeover bid. The Cadbury’s law that has been batted around the papers has caused ridicule already. Labour would not change their political stance on protectionism on the basis of a chocolate factory being taken over by an American company.
This argument relies upon the loyalty and consistency of politicians to their belief. But politicians are about as loyal to their own beliefs as they are to the electorate. If Labour thought that introducing protectionism would gain them more votes, they would do so. They would do this against their own beliefs and they would do this despite the ridicule. Given the high level of attention and outrage the British people expressed over the Cadbury’s takeover, it would be more than plausible for Labour to introduce protectionist measures.
This is only a manifesto pledge on the basis of a public outcry
Given the huge level of fright and dismay that travelled the country when Cadbury’s was over taken by Kraft’s political leaders have to respond in some way in order to keep the electorate happy. This is what Gordon Brown is doing. He has no intention of making Britain protectionist. He has been known for his support and encouragement of foreign investment. The new proposed law will never become a Bill before Parliament let alone a ‘Cadbury’s law’. We must remember that Manifestos are like wedding vows. Promises they may be, legally binding they are not.
A very limited application.
This anointed Cadbury Law only apply to ‘infrastructure and utility’ companies. This is a very limited application and only adds a few more industries into the protected circle which currently comprises of national interest and security. Given that the application is so limited, how can the law be deemed to be protectionist? Protectionism is the protection of national assets away from foreigners. This new pledge of Labour’s falls far short of that.
This is especially considering that most utility companies are already ownder by foreign investers. BAA, the airline company was bought by Ferrovial of Spain, DP World bought P&O, our port operators and Abbey our very own bank was bought by Santander.Given the high l;evel of foreign investment already in the country the limited expansion into areas which are mostly bought by foreign investors is not a protectionist pledge but a crowd pleasing load of legal twaddle.
Give me a precise list and categorisation of what companies would come under the Heading ‘infrastructure and utility’? You will not be able to. Why? The wording is deliberately vague. This clause may sound like it has a limited application but the truth of the matter is it is a vague phrase within which anything could fall under should the Government decide. Therefore, it is a covert protectionist measure which potentially has unlimited application.
What do you think?