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The vociferous pack
by Satya Prakash
Issue 12
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The only surprise in the bid of Mittal Steel over Arcelor has been the bid itself. Every step after the bid is proceeding on expected lines. France is leading the vociferous pack of political opposition to this bid. Given the history, no one would have expected anything lesser from France. It has proved itself to be the most protectionist country in world in recent times. Only last year, it had all its political leadership united to oppose the 'rumoured' bid of Pepsico over Danone, the French food firm. The bid never saw light of the day.

France is the most subsidy driven economy in the developed world. It is also involved in a debate with Britain in the EU over its protectionist policies. It has used the money paid by EU under Common Agricultural Policy (CAP) to effectively protect its agricultural sector. It was not long back when Christine Lagarde, the French trade minister, bluntly said that Tony Blair is talking about reform as it is fashionable and he is looking for scapegoat in this context.

On closer look, I find many other compulsions for Mr Villepin to oppose this bid. The GDP growth rate of France has been 1.6 % in 2005 and unemployment rate is 9.5%. France is going through the phase of stagnant economy and rising unemployment. The riots by unemployed youths couple of months back must have been fresh on his mind.

The social security network and health insurance schemes are going through a rough phase. Top of all this, France is having Presidential election in 2007, so all the aspirants which may include President Chirac and Prime Minister Villepin are trying to improve the labour situation. With 30,000 French citizens working in Arcelor, they don't want to take the risk and may be this will give them some brownie points with electorates.

But things are different this time for France. Neither it has any stake in Arcelor, compared to 5.6% stake of Luxembourg government, nor is Arcelor listed in France. This is the reason that French Prime Minister Mr Dominique De Villepin is invoking concepts such as 'Economic Patriotism'. I wonder why this is not invoked when France accuses US of favouring its Boeing.

I would rather Mr Villepin invests its time in doing important things as reforming the labour policies and improving the GDP growth rate. It has been proved in many cases that impractical protectionist schemes have always backfired. Let the bidding process take its own course. There is EU competition commission for all other issues.

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