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Archive for the ‘European Commission’ Category

Motivated in part by a sensible desire for free trade, six nations from Western Europe signed the Treaty of Rome in 1957, thus creating the European Economic Community (EEC). Sort of a European version of the North American Free Trade Agreement (now known as USMCA).

Some supporters of the EEC also were motivated by a desire for some form of political unification and their efforts eventually led to the 1992 Maastricht Treaty, which created the European Union – along with increased powers for a Brussels-based bureaucracy (the European Commission).

There are significant reasons to think that this evolution – from a Europe based on free trade and mutual recognition to a Europe based on supranational governance – was an unfortunate development.

Back in 2015, I warned that this system would “morph over time into a transfer union. And that means more handouts, more subsidies, more harmonization, more bailouts, more centralization, and more bureaucracy.”

A few years earlier, when many of Europe’s welfare states were dealing with a fiscal crisis, I specifically explained why it would be a very bad idea to have “eurobonds,” which would mean – for all intents and purposes – that reasonably well governed nations such as Germany and Sweden would be co-signing loans for poorly governed countries such as Italy and Greece.

Well, this bad idea has resurfaced. Politicians from several European nations are using the coronavirus as an excuse (“never let a crisis go to waste“) to push for a so-called common debt instrument.

Here are the relevant parts of the letter.

…we need to work on a common debt instrument issued by a European institution to raise funds on the market on the same basis and to the benefits of all Member States, thus ensuring stable long term financing… The case for such a common instrument is strong, since we are all facing a symmetric external shock, for which no country bears responsibility, but whose negative consequences are endured by all. And we are collectively accountable for an effective and united European response. This common debt instrument should have sufficient size and long maturity to be fully efficient… The funds collected will be targeted to finance in all Member States the necessary investments in the healthcare system and temporary policies to protect our economies and social model.

Lots of aspirational language, of course, but no flowery words change the fact that “collectively accountable” means European-wide debt and “social model” means welfare state.

I wrote last year that globalization is good whereas global governance is bad. Well, this is the European version.

The Wall Street Journal opined against the concept. Here’s some background information.

Bad crises tend to produce worse policy… We speak of proposals for “corona bonds,” an idea floated as a fiscal solution to Europe’s deepening pandemic. Italian Prime Minister Giuseppe Conte launched the effort, and French President Emmanuel Macron this week joined Mr. Conte and seven other leaders in backing such a bond issue for health-care expenditures and economic recovery. Some 400 economists have joined the chorus. …The bonds would be backed collectively by member governments. The proceeds could be allocated to members such as Italy that otherwise couldn’t borrow from private markets. …Calls for euro bonds last hit a crescendo during the debt crises of 2010-12, when they were pitched to fund bailouts of Greece and others. But the idea has never gone anywhere because it would transform the eurozone into something voters didn’t approve when the currency was created in the 1990s.

And here’s the editorial’s explanation of why eurobonds would be a very bad idea.

Europeans were promised the euro would not become an excuse or vehicle for large fiscal transfers between member states. …Proponents say corona bonds are a special case due to the unfolding economic emergency. But the Italian government that now can’t finance its own recovery was also one of the worst fiscal offenders before Covid-19… Claims that the corona bond would be temporary aren’t credible because European elites have wanted such a facility for years… Voters can assume that if they get these bonds in a crisis, they’ll be stuck with this facility forever. …euro bonds would create profound governance problems. …With corona bonds, German and Dutch taxpayers for the first time are being asked to write a blank check to Italy and perhaps others.

Amen.

Once the camel’s nose is under the tent, it would simply be a matter of time before eurobonds would become a vehicle for bigger government in general and more country-to-country transfers in particular.

Hopefully this terrible idea will be blocked by nations such as Germany, Sweden, and the Netherlands (this satirical video will give you an idea of the tension between the European nations that foot the bills and the ones looking for handouts).

Some advocates for eurobonds say there’s nothing to worry about since the European Commission and related pan-European bureaucracies currently don’t spend much money, at least when measured as a share of overall economic output.

Which is why I sometimes warn my European friends that the United States is an example of why they should be vigilant.

For much of American history, the central government in Washington was very small, as envisioned by the Founders. But beginning with the so-called Progressive Era and then dramatically accelerating under the failed policies of Hoover and Roosevelt, the federal government has expanded dramatically in both size and scope.

The lesson to be learned is that more centralization is a very bad idea, particularly if that centralized form of government gains fiscal power.

That’s especially true for Europe since the burden of government spending at the national level already is excessive. Eurobonds would exacerbate the damage by creating a new European-wide method of spending money.

P.S. While eurobonds are a very bad idea, it would be even worse (akin to the U.S. approving the 16th Amendment) if the European Union somehow got the authority to directly impose taxes.

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Today is Brexit Day. As of 6:00 P.M. EST (Midnight in Brussels), the United Kingdom no longer will be a member of the European Union.

This is definitely good news in the long run since the U.K. will now be somewhat insulated from inevitable economic crises caused by the European’s Union’s dirigiste economic model and grim demographic outlook.

Whether it’s also good news in the short run depends mostly on decisions in London, such as whether Prime Minister Boris Johnson and his Tory government expand economic freedom (which should be the case, but there are worrisome signs that the spending burden will increase).

But Washington and Brussels also will play a role since the U.K. wants to sign free-trade agreements. This could be a problem since the E.U. will be tempted to behave in a spiteful manner and Trump and his trade team are protectionists.

But let’s set that aside for the moment and look at the big picture.

The Wall Street Journal nicely summarized the key takeaways in yesterday’s editorial about Brexit.

The EU was founded on the notion that only an ever-deeper economic union—with an ever-closer political union close on its heels—could secure peace and prosperity… Most continental political leaders, if not their voters, still believe this. …British voters think otherwise. Their 2016 vote to leave the EU, ratified in December’s general election, was not a vote for war and poverty. …voters had the temerity to assert themselves despite resistance from a political and bureaucratic class invested in the status quo. …One feature of this new politics is how immune voters have become to economic scaremongering… Britons instead have heard European anxiety that Brexit will trigger a “race to the bottom” on economic policy. What this really means is that EU politicians are aware that a freer economy more open to commerce at home and trade outside the EU would deliver more prosperity to more people than continental social democracy. British voters may not embrace this open vision in the end, but they’ve given themselves the choice. …All of this frightens so-called good Europeans…because it’s a direct challenge to…their “European project.” Central to this worldview is a distrust of…markets… A Britain with greater political independence and deep trading ties to Europe without all the useless red tape and hopeless centralizing could be a model. …Britain’s voters in 2016, and again in 2019, chose peaceful and prosperous coexistence with their neighbors rather than mindless but relentless integration. It’s the most consequential choice any European electorate has made in at least a generation.

Amen.

Brexit is very good news (December’s election in the U.K., which ensured Brexit, was the best policy-related development of 2019).

It means more jurisdictional competition, which is good news for those of us who want some sort of restraint on government greed.

And it means less power for the E.U. bureaucracy, which has a nasty habit of trying to export bad tax policy and bad regulatory policy.

Brexit also is a victory for Nigel Farage. Here are his final remarks to the European Parliament.

Farage has been called the “most consequential political figure in a generation in Europe, perhaps the whole of the West.”

This actually may be true. Brexit almost surely happened because of Farage’s efforts.

And to achieve that goal in the face of unified establishment opposition is truly remarkable.

Speaking of establishment opposition, let’s close today with an updated version of a PG-13 song about how the British people responded to the practitioners of “Project Fear.”

P.S. You can enjoy other Farage speeches by clicking here, here, and here.

P.P.S. And you can enjoy more Brexit-themed humor by clicking here, here, and here.

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There are many boring topics in tax policy, such as the debate between expensing and depreciation for business investment.

International tax rules also put most people to sleep, but they’re nonetheless important.

Indeed, the United States government is currently squabbling with several European governments about the appropriate tax policy for U.S.-based tech companies.

A report from the New York Times last July describes the controversy.

France is seeking a 3 percent tax on the revenues that companies earn from providing digital services to French users. It would apply to digital businesses with annual global revenue of more than 750 million euros, or about $845 million, and sales of €25 million in France. That would cover more than two dozen companies, many of them American, including Facebook, Google and Amazon. …Mr. Lighthizer said the United States was “very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies.” …France’s digital tax adds to the list of actions that European authorities have taken against the tech industry… And more regulation looms. Amazon and Facebook are facing antitrust inquiries from the European Commission. …Britain provided further details about its own proposal to tax tech companies. Starting in 2020, it plans to impose a 2 percent tax on revenue from companies that provide a social media platform, search engine or online marketplace to British users.

For the latest developments, here are excerpts from an article in yesterday’s New York Times.

A growing movement by foreign governments to tax American tech giants that supply internet search, online shopping and social media to their citizens has quickly emerged as the largest global economic battle of 2020. …At the core of the debate are fundamental questions about where economic activity in the digital age is generated, where it should be taxed and who should collect that revenue. …The discussions, which are expected to last months, could end with an agreement on a global minimum tax that all multinational companies must pay on their profits, regardless of where the profits are booked. The negotiations could also set a worldwide standard for how much tax companies must remit to certain countries based on their digital activity. …Mr. Mnuchin expressed frustration on Thursday in Davos that a digital sales tax had become such a focus of discussion at the World Economic Forum. …American tech firms are eager for a deal that would prevent multiple countries from imposing a wide variety of taxes on their activities.

Daniel Bunn of the Tax Foundation has an informative summary of the current debate.

In March of 2018, the European Commission advanced a proposal to tax the revenues of large digital companies at a rate of 3 percent. …The tax would apply to revenues from digital advertising, online marketplaces, and sales of user data and was expected to generate €5 billion ($5.5 billion) in revenues for EU member countries. The tax is inherently distortive and violates standard principles of tax policy. Effectively, the digital services tax is an excise tax on digital services. Additionally, the thresholds make it function effectively like a tariff since most of the businesses subject to the tax are based outside of the EU. …the European Commission was unable to find the necessary unanimous support for the proposal to be adopted. The proposal was laid aside… the French decided to design their own policy. The tax was adopted in the summer of 2019 but is retroactive to January 1, 2019. Similar to the EU proposal, the tax has a rate of 3 percent and applies to online marketplaces and online advertising services. …The United Kingdom proposed a digital services tax at 2 percent as part of its budget in the fall of 2018. The tax has already been legislated and will go into force in April of 2020. …The tax will fall on revenues of search engines, social media platforms, and online marketplaces. …The OECD has been working for most of the last decade to negotiate changes that will limit tax planning opportunities that businesses use to minimize their tax burdens. …The reforms have two general objectives (Pillars 1 and 2): 1) to require businesses to pay more taxes where they have sales, and 2) to further limit the incentives for businesses to locate profits in low-tax jurisdictions. …This week in Davos, the U.S. and France…agreed to continue work on both Pillar 1 and Pillar 2… The burden of proof is on the OECD to show that the price the U.S. and other countries may have to pay in lost revenue or higher taxes on their companies (paid to other countries) will be worth the challenge of adopting and implementing the new rules.

At the risk of over-simplifying, European politicians want the tech companies to pay tax on their revenues rather than their profits (such a digital excise tax would be sort of akin to the gross receipts taxes imposed by some American states).

And they want to use a global formula (if a country has X percent of the world’s Internet users, they would impose the tax on X percent of a company’s worldwide revenue).

Though all you really need to understand is that European politicians view American tech companies as a potential source of loot (the thresholds are designed so European companies would largely be exempt).

For background, let’s review a 2017 article from Agence France-Presse.

…are US tech giants the new robber barons of the 21st century, banking billions in profit while short-changing the public by paying only a pittance in tax? …French President Emmanuel Macron…has slammed the likes of Google, Facebook and Apple as the “freeloaders of the modern world”. …According to EU law, to operate across Europe, multinationals have almost total liberty to choose a home country of their choosing. Not surprisingly, they choose small, low tax nations such as Ireland, the Netherlands or Luxembourg. …Facebook tracks likes, comments and page views and sells the data to companies who then target consumers. But unlike the economy of old, Facebook sells its data to French companies not from France but from a great, nation-less elsewhere… It is in states like Ireland, whose official tax rate of 12.5 percent is the lowest in Europe, that the giants have parked their EU headquarters and book profits from revenues made across the bloc. …France has proposed an unusual idea that has so far divided Europe: tax the US tech giants on sales generated in each European country, rather than on the profits that are cycled through low-tax countries. …the commission wants to dust off an old project…the Common Consolidated Corporate Tax Base or CCCTB — an ambitious bid to consolidate a company’s tax base across the EU. …tax would be distributed in all the countries where the company operates, and not according to the level of booked profit in each of these states, but according to the level of activity.

This below chart from the article must cause nightmares for Europe’s politicians.

As you can see, both Google and Facebook sell the bulk of their services from their Irish subsidiaries.

When I look at this data, it tells me that other European nations should lower their corporate tax rates so they can compete with Ireland.

When European politicians look at this data, it tells them that they should come up with new ways of extracting money from the companies.

P.S. The American tech companies are so worried about digital excise taxes that they’re open to the idea of a global agreement to revamp how their profits are taxed. I suspect that strategy will backfire in the long run (see, for instance, how the OECD has used the BEPS project as an excuse to impose higher tax burdens on multinational companies).

P.P.S. As a general rule, governments should be free to impose very bad tax policy on economic activity inside their borders (just as places such as Monaco and the Cayman Islands should be free to impose very good tax policy on what happens inside their borders). That being said, it’s also true that nations like France are designing their digital taxes American companies are the sole targets. An indirect form of protectionism.

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The Department of Agriculture should be abolished. Yesterday, if possible.

It’s basically a welfare scam for politically connected farmers and it undermines the efficiency of America’s agriculture sector.

Some of the specific handouts – such as those for milk, corn, sugar, and even cranberries – are unbelievably wasteful.

But the European Union’s system of subsidies may be even worse. As reported by the New York Times, it is a toxic brew of waste, fraud, sleaze, and corruption.

…children toil for new overlords, a group of oligarchs and political patrons…a feudal system…financed and emboldened by the European Union. Every year, the 28-country bloc pays out $65 billion in farm subsidies… But across…much of Central and Eastern Europe, the bulk goes to a connected and powerful few. The prime minister of the Czech Republic collected tens of millions of dollars in subsidies just last year. Subsidies have underwritten Mafia-style land grabs in Slovakia and Bulgaria. …a subsidy system that is deliberately opaque, grossly undermines the European Union’s environmental goals and is warped by corruption and self-dealing. …The program is the biggest item in the European Union’s central budget, accounting for 40 percent of expenditures. It’s one of the largest subsidy programs in the world. …The European Union spends three times as much as the United States on farm subsidies each year, but as the system has expanded, accountability has not kept up. …Even as the European Union champions the subsidy program as an essential safety net for hardworking farmers, studies have repeatedly shown that 80 percent of the money goes to the biggest 20 percent of recipients. …It is a type of modern feudalism, where small farmers live in the shadows of huge, politically powerful interests — and European Union subsidies help finance it.

Is anyone surprised that big government leads to big corruption?

By the way, the article focused on the sleaze in Eastern Europe.

The problem, however, is not regional. Here’s a nice visual showing how there’s also plenty of graft lining pockets in Western Europe.

P.S. I imagine British politicians will concoct their own system of foolish subsidies, but the CAP handouts are another reason why voters were smart to vote for Brexit.

P.P.S. The CAP subsidies are one of many reasons why the European Union has been a net negative for national economies.

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I was interviewed yesterday about the economy. That meant talking about new jobs numbers, as well as speculating on what’s happening with the Federal Reserve.

For today’s column, though, I want to share the part of the interview that focused on the United Kingdom’s vote to leave the European Union.

If “Brexit” actually happens, there will be diminished trade between the United Kingdom and the European Union. That will be bad for both sides.

That being said, I pointed out that the United Kingdom is better positioned to prosper after Brexit. That’s definitely the case in the long run, but I think it could be true even in the short run.

By the way, at the end of this clip, I should have stated that the European Union doesn’t want to strike a mutually beneficial deal.

The crowd in Brussels was more than happy with the Brexit-in-Name-Only pact they imposed on the hapless Theresa May.

But the bureaucrats are so upset with Brexit that they won’t agree to a free trade agreement that would be good for both parties.

Since we’re on the topic of Brexit, here’s a radio interview I did with KABC, one of the big stations in Los Angeles. I had much more time to explore nuances, including the fact that the opposition parties don’t want an election since they fear it will produce a strong majority in favor of a Clean Brexit.

There are three things about the interview worth highlighting.

  • First, as I explain starting about 3:15, Brexit is like refinancing a mortgage. It might cost a bit in the short run, but it makes sense because of the long-run savings. Indeed, that was my main argument when I wrote “The Economic Case for Brexit” back in 2016, before the referendum.
  • Second, as I explain starting about 6:15, the same people who oppose Brexit were also the ones who wanted the U.K. to be part of the euro (the European Union’s common currency). Given what’s happened since, including bailouts, joining the euro would have been a big mistake.
  • Third, starting about 11:50, I put forth an analogy – involving a hypothetical referendum to repeal the income tax in the United States – to illustrate why the issue is arousing so much passion. This is basically the last chance Britons have to reclaim self-government.

By the way, returning to the second point, the anti-Brexit crowd were the ones who tried to scare voters (“Project Fear”) by claiming a vote for Brexit would tip the U.K. into recession.

They were wrong on the euro, they were wrong on the economic response to the Brexit vote, and they’re wrong about actual Brexit.

In America, we say three strikes and you’re out.

P.S. If you want Brexit-themed humor, click here and here.

P.P.S. There’s academic evidence that E.U. membership undermines prosperity.

P.P.P.S. The International Monetary Fund has consistently put out sloppy and biased research in hopes of deterring Brexit.

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I’ve argued for many years that a Clean Brexit is the right step for the United Kingdom for the simple reason that the European Union is a slowly sinking ship.

Part of the problem is demographics. Europe’s welfare states are already very expensive and the relative costs will increase dramatically in coming years because of rising longevity and falling birthrates. So I expect more Greek-style fiscal crises.

The other part of the problem is attitudinal. I’m not talking about European-wide attitudes (though that also is something to worry about, given the erosion of societal capital), but rather the views of the European elites.

The notion of “ever closer union” is not just empty rhetoric in European treaties. It’s the ideological preference of senior European leaders, including in many nations and definitely in Brussels (home of the European Commission and the European Parliament).

In practical terms, this means a relentless effort for more centralization.

All policies that will accelerate Europe’s decline.

What’s happening with the taxation of air travel is a good example. Here are some excerpts from a story in U.S. News & World Report.

The Netherlands and France are trying to convince fellow European nations at a conference in The Hague to end tax exemptions on jet fuel and plane tickets… In the first major initiative on air travel tax in years, the conference on Thursday and Friday – which will be attended by about 29 countries – will discuss ticket taxes, kerosene levies and value-added tax (VAT) on air travel. …The conference will be attended by European Union economics commissioner Pierre Moscovici and finance and environment ministers. …The conference organizers hope that higher taxes will lead to changes in consumer behavior, with fewer people flying

The politicians, bureaucrats, and environmental activists are unhappy that European consumers are enjoying lightly taxed travel inside Europe.

Oh, the horror!

A combination of low aviation taxes, a proliferation of budget airlines and the rise of Airbnb have led to a boom in intra-European city-trips. …Research has shown that if the price of air travel goes up by one percent, demand will likely fall by about one percent, according to IMF tax policy division head Ruud De Mooij. He said that in a typical tank of gas for a car, over half the cost is tax…”Airline travel is nearly entirely exempt from all tax… Ending its undertaxation would level the playing field versus other modes of transport,” he said. …Environmental NGOs such as Transport and Environment (T&E) have long criticized the EU for being a “kerosene tax haven”.”Europe is a sorry story. Even the U.S., Australia and Brazil, where climate change deniers are in charge, all tax aviation more than Europe does,” T&E’s Bill Hemmings said. …The EU report shows that just six out of 28 EU member states levy ticket taxes on international flights, with Britain’s rates by far the highest at about 14 euros for short-haul economy flights and up to 499 euros for long-haul business class. …Friends of the Earth says there are no easy answers and that the only way to reduce airline CO2 emissions is by constraining aviation trough taxation, frequent flyer levies and limiting the number of flights at airports.

The only semi-compelling argument in the story is that air travel is taxed at preferential rates compared to other modes of transportation.

Assuming that’s true, it would be morally and economically appropriate to remove that distortion.

But not as part of a money-grab by European politicians who want more money and more centralization.

As you can see from this chart, the tax burden in eurozone nations is almost 50 percent higher than it is in the United States (46.2 percent of GDP compared to 32.7 percent of GDP according to OECD data for 2018).

And it’s lower-income and middle-class taxpayers who are paying the difference.

So here’s a fair trade. European nations (not Brussels) can impose additional taxes on air travel if they are willing to lower other taxes by a greater amount. Maybe €3 of tax cuts for every €1 of additional taxes on air travel?

Needless to say, nobody in Brussels – or in national capitals – is contemplating such a swap. The discussion is entirely focused on extracting more tax revenue.

P.S. There’s some compelling academic evidence that the European Union has undermined the continent’s economic performance. Which is sad since the EU started as a noble idea of a free trade area and instead has become a vehicle for statism.

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Thanks to the glorious miracle of capitalism, I’m writing this column 36,000 feet above the Atlantic Ocean.

I’m on my way back from Europe, where I ground through about a dozen presentations as part of a swing through 10 countries.

Most of my speeches were about the future of Europe, which was the theme of the Austrian Economic Center’s 2019 Free Market Road Show.

So it was bad timing that I didn’t have a chance until now to comb through a new study from three scholars about the economic impact of the European Union. As they point out at the start of their research, EU officials clearly want people to believe European-wide governance is a recipe for stronger growth.

The great European postwar statesmen, including the EU founding fathers, clearly…envisaged the establishment of a common political and economic entity as a guarantor of…domestic economic progress. …Article 2 of the foundational Treaty of Rome explicitly talked about “raising the standard of living.” … in practice EU today mainly emphasizes growth, as is evident from its most ambitious recent policy agendas. In 2000, a stated aim of the Lisbon Agenda was to make the European economy the “most competitive and knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion.” And all seven of the Flagship Initiatives adopted as part of the Europe 2020 Strategy were about growth—smart, sustainable, and inclusive.

Here’s a bit of background on their methodology.

…the focus of the present paper will be on prosperity as the key outcome that the EU will be measured up against… Our approach in the present paper is to use different empirical strategies (difference-in-differences type setups and standard growth regressions); slice the length of the panel in various ways (e.g., dropping post crisis observations); look at different samples of countries (e.g., a global sample, the sample of original OECD countries, the sample of formerly planned economies, and the sample of EU member countries); pay attention to spatial dependencies; and, finally, require manipulability of the treatment variable.

And what did they find?

It seems that the European Union has not triggered or enabled better economic performance.

The conclusion that emerges upon looking systematically at the data is that EU membership has no impact on economic growth. …We start by simply looking at the comparative performance of the EU and the United States, which is the comparison that Niall Ferguson makes. The IMF’s World Economic Outlook Database provides real GDP growth rates going back to 1980 for the EU and the US. These are plotted in Figure 1. The EU only managed to outperform the US economy in terms of real GDP growth in ten out of the 35 years between 1980 and 2015. …With these growth rates, the US economy would double its size every 27 years, whereas the corresponding number for the EU is 36 years. This hardly amounts to stellar performance on part of the EU.

What makes this data so remarkable is that convergence theory tells us that poorer nations should grow faster than richer nations.

So EU countries should be catching up to America.

Yet the opposite is happening. Here’s the relevant chart on US vs. EU performance.

The scholars conducted various statistical tests.

Many of those test actually showed that EU membership is associated with weaker performance.

…we basically measure pre- and post-entry growth for the EU countries up against the growth trajectories of all other countries. …EU membership is associated with lower economic growth in all columns. …where we use the maximum length WDI sample (i.e., 1961-2015), EU entry is associated with a statistically significant growth reduction of roughly 1.8 percentage points per year. When we remove the period associated with the sovereign debt crisis in the Eurozone (i.e., 2010-15), the reduction remains significant but is lower (1.27 percentage points per year). Finally, when we remove the global financial crisis of 2008-09, the reduction (which is now statistically insignificant) is 0.5 percentage points per year. Using GDP per worker growth from PWT gives roughly similar results… Consequently, in a difference-in-differences type setting EU entry seems to have reduced economic growth.

Moreover, a bigger EU (i.e., more member nations) is associated with slower average growth.

Last but not least, the authors compared former Soviet Bloc nations to see if linking up with the EU led to improvements in economic performance.

…we ask whether growth picked up in the new Eastern European EU countries after accession vis-à-vis growth in 18 formerly planned non-EU countries. …Of the 11 accession countries, not a single one had higher average annual real GDP per capita growth in the period after the EU accession as compared to the period before.

Ouch.

These are not flattering results.

Here’s a look at the relevant chart.

These findings leave me with a feeling of guilt. For almost twenty years, I’ve been telling audiences in Eastern Europe that they probably should join the EU.

Yes, I realized that meant a lot of pointless red tape from Brussels, but I always assumed that those costs would be acceptable because the EU would give them expanded trade and help improve the rule of law.

I’ll have to do some thinking about this issue before my next trip.

P.S. In case you’re wondering why I’ve been telling Eastern European nations to join the EU while telling the United Kingdom to go for a Clean Brexit, my analysis (at least up til now) has been that market-oriented nations are held back by being in EU while poorer and more statist economies are improved by EU membership.

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