Close The Door; Voices arguing for a return to protectionism are getting louder across the region.(European Union)

Byline: Stefan Theil (With Tracy McNicoll in Paris)

At long last, Tony Blair actually played the role of European Union president. Hoping to prevent last week's gathering of EU leaders from turning into another verbal fistfight, he downgraded the meeting from an official summit to an "informal" confab. Two days of talks were cut back to one. All the while he kept his eye on the real prize: a historic deal to conclude the current Doha trade round, swapping cuts in European farm tariffs and subsidies for similar concessions by the United States.

Alas, Jacques Chirac would have none of it. French farmers bear the sacrifice for Blair's gamble with his American friends? Sans doute, France reserves the right to veto that one, the French president promised. Just like that, he threatened to scuttle a new global trade order that might save Europe's taxpayers billions of dollars and create millions of jobs around the world.

The clash at Hampton Court is a symptom of the crisis gripping Europe. The economic integration of the Continent's 450 million consumers into a prosperous single market--the EU's raison d'etre since its creation after World War II--has come to a virtual standstill. At the same time, growing numbers of Europeans have awakened to the threat of globalization, with little agreement on how to cope. On one side are the core economies of the continent: Germany, Italy and France, all stagnating yet determined to preserve their vision of a "social Europe" that protects citizens from too much change. On the other side: Britain and the Scandinavians, who want to meet the challenges of globalization by staying competitive, flexible and attuned to the fast-changing demands of the market.

Casting about for solutions, the former seem to be raising an old specter: protectionism. Never mind that, economically, the case against trade barriers is cut and dried. There is not a single case in history where nations that cut themselves off from global trade grew--or stayed--rich, says Paul Hofheinz, president of the Lisbon Council, a pro-market lobby in Brussels: "The issue is completely unambiguous." Yet in an increasingly insecure world, where politicians have to appeal to voters worried about their jobs, protectionism's political expediency is clear.

The signs are everywhere. Even as Chirac sunk last week's summit, his prime minister, Dominique de Villepin, was working on legislation to protect 10 "strategic" industries from foreign buyers--not just Americans or Asians, but even European neighbors. This new "economic patriotism," he says, is designed to defend "France and that which is French" by declaring entire sectors of French industry off-limits to foreigners, including pharmaceuticals, biotech and--strangely--casinos. Already, Chirac has denounced the European Commission for allowing Hewlett-Packard to slash its French work force; last summer, de Villepin attacked Pepsi's reported interest in Danone, the French diary conglomerate, as an assault on one of the nation's "industrial jewels." In Italy, meanwhile, the government has been accused of ignoring a five-year-old EU court order not to block other Europeans from acquiring Italian companies, as it did again last summer when Italian banking regulator Antonio Fazio tried to stop Holland's ABN Amro from taking over Italy's Banca Antonveneta. And in Germany, leading politicians inveigh against foreign "locusts" buying up local companies.

It's not only the EU's three biggest founding members putting the continent's integration on hold as they question the benefits of free-market competition. Even "liberal" states are hearing protectionist voices. Sweden, that paragon of a superdynamic "knowledge economy," is having second thoughts about its open borders. There, labor unions in December 2004 successfully campaigned to stop the construction firm Laval Partneri from using cheap Latvian workers to build a Stockholm-area school. Laval, since forced into bankruptcy by a union-led boycott, has sued the unions before the European ...