Europe Gets Tougher on U.S. Companies
By Samuel Loewenberg

BRUSSELS

AMERICAN corporations doing business in Europe are finding themselves in an unusual position. They are having to follow orders.

The European Union, which includes 15 member countries from Portugal to Finland and Ireland to Greece, is adopting environmental and consumer protection legislation that will go further in regulating corporate behavior than almost anything the United States government has enacted in decades. For American companies that are accustomed to getting their way in Washington, it has come as a shock.

"They are big powerful companies in the U.S., but just because they are big powerful companies in the U.S. doesn't mean they are going to be treated better in Brussels," said Michelle O'Neill, who lobbies on behalf of Hewlett-Packard here.

If anything, being an American company in Europe is a liability these days. Some American business practices are regarded with deep suspicion here, in light of the corporate accounting scandals and what many Europeans see as the Bush administration's high-handed and unilateralist policies on the environment and Iraq.

"I don't think that Europeans are in the mood — or will be in the mood for some time to come — to swallow what the Americans tell them about the way things are going to go," said Giles Merritt, who runs Friends of Europe, a research group that receives money from the European Union.

Earlier this year, the European Union adopted two rules that companies in the United States estimate will cost them hundreds of millions of dollars a year. The first will prohibit electronics makers from using lead, mercury and other heavy metals in their products. The second will require the makers of consumer electronics and household appliances to pick up the bill for recycling their products. Since last year, automakers have had to take responsibility for recycling the cars they sell.

Broader and costlier rules are in the works. Among them are a requirement that chemical makers run safety and environmental impact tests on more than 30,000 chemicals; the industry has said that the rule could cost it more than $7 billion. The commission is also considering prohibiting consumer products companies from directing television commercials at children. And it is looking at passing a law to encourage manufacturers to cut the energy used and greenhouse gases generated in making their products. It also wants to reduce the number and volume of hazardous chemicals in products made in Europe.

The breadth of the legislation is confounding critics who had accused the European Union of picking on prominent American companies like Microsoft or General Electric simply to protect inefficient competitors in Europe. Instead, it appears that Brussels is doing something more sweeping: it is taking on the way America does business.

"If you compare E.U. policy now, it looks a lot like America in the 1970's," said David J. Vogel, a professor at the University of California at Berkeley who studies environmental and business regulation in the United States and Europe. "In this new generation of environmental issues the E.U. is moving quite aggressively, while U.S. policy is stalemated."

In Washington, corporate lobbying has weakened or killed legislation aimed at regulating tobacco, pharmaceuticals and pollutants that contribute to global warming. In all three cases, the affected industries spent tens of millions of dollars on lobbying and advertising, all to persuade lawmakers that regulation restricted the free market and would hurt American business.

Such tactics would not play well in Europe, where there is a long history of state intervention in the economy and where senior government officials are usually more highly regarded than are corporate executives.

"If you go on the offensive in Europe it backfires and you lose on all fronts," said Erik Jonnaert, the chief lobbyist here for Procter & Gamble.

American companies can ill afford such losses in a big market that is about to become bigger: after 10 nations join the European Union next year, the rule makers here will represent more than a half-billion consumers.

In the European Union, measures often seek to avert harm before it occurs. By contrast, regulation in the United States often responds to a crisis; the recent Sarbanes-Oxley legislation, for example, tightened corporate accounting rules after the Enron and WorldCom scandals.

Margot Wallstrom, the European Union's environment commissioner, summed up the European approach when she praised plans to require companies to run safety tests on the chemicals they sell and in most cases have sold for decades.

"No longer do public authorities need to prove they are dangerous," she said at a recent conference on the chemicals legislation. "The onus is now on industry" to demonstrate that the products they sell are safe, she added.

Often, American executives are bewildered when European ideals of social democracy trump America's more laissez-faire values. In Europe, "there is a whole kind of underlying socialist suspicion of corporations," said a lobbyist for an American investment bank. "Consumers are treated like children in Europe."

European regulators, however, seem to perceive the companies themselves as children who will misbehave if left unattended. In Washington, corporate lobbyists deride legislation as an example of "big government." But such arguments do not play in Brussels.

John T. Disharoon, a lobbyist for Caterpillar who moved to Brussels three years ago from Washington, says policy makers in the United States are generally more accountable to the public than European regulators. "So it basically changes the entire lobbying dynamic," he said. "Traditional pressure points like jobs, economic data, what it will do to industry are not as effective."

THE biggest difference in Brussels and Washington, lobbyists here say, is that American politicians rely far more on corporate donations to finance their election campaigns. Further, the revolving-door phenomenon, a virtual institution in Washington where former officials go to work for the industries they once regulated, is far less common in Brussels.

The Bush administration regularly weighs in against European regulations that it sees as hurting business. Rockwell A. Schnabel, the United States ambassador to the European Union, called for "smart regulation" that "meets society's objectives without strangling innovation and growth."

Many Europeans are still angry at the Bush administration for its rejection of the Kyoto protocol, an agreement created to curb global warming. Jorge Moreira da Silva, a member of the European Parliament from Portugal, said he hoped to turn the tables on President Bush. Mr. Moreira da Silva is shepherding legislation on emissions trading, a market-based incentives plan that the European Union is considering even though the United States has not yet signed on to the agreement.

By persuading American companies that there is money to be made through emissions trading, Mr. Moreira da Silva said, he hoped to pressure the American government to adopt stricter pollution regulations — and maybe even reverse its opposition to the Kyoto protocol.

"It's like I was a lobbyist myself," he said. "I feel that the best way to convince the Bush administration to join Kyoto is to convince American companies."