Trade distortion and protectionism
Is the Euro the biggest threat to the global trading system?
Published 17 July 2019 | 2 minute read
The European Union (EU) is positioning itself as a champion of the multilateral trading system, yet the single European currency has resulted in notably lopsided trade and economic growth.
As a result, the very “Euro project” that was designed to facilitate trade and reduce frictions between countries is now posing a major threat to the sustainability of the multilateral system. This is increasing the likelihood of a wholesale rejection of market orientated economic policies.
Germany and the Netherlands have been running perennial current account surpluses of a size that would embarrass even the most mercantilist of Asian countries. At the same time, the currency union’s sub-optimal nature has been a major contributor to income stagnation, high unemployment and deflationary pressures in southern Europe. These have promoted political populism and disillusionment with the market economy and free trade.
© The Hinrich Foundation. See our website Terms and conditions for our copyright and reprint policy. All statements of fact and the views, conclusions and recommendations expressed in this publication are the sole responsibility of the author(s).