20 April 2003
Gets Tougher on U.S. Companies
By Samuel Loewenberg
corporations doing business in Europe are finding themselves in
an unusual position. They are having to follow orders.
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.
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.
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.
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.
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.
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.
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.
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."
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.
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.
you go on the offensive in Europe it backfires and you lose on all
fronts," said Erik Jonnaert, the chief lobbyist here for Procter
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
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
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.
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.
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."
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.
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."
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
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."
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.
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.
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."