OxfordPress.com

Europe assumes lead role in regulating global commerce

LONDON — During World War II, America was, as Franklin Roosevelt said, the arsenal of democracy — the country whose economic and industrial might helped save the world from tyranny and later helped rebuild Europe.

Today, much of global commerce is ruled not by the United States but by Europe.

The European Union's influence reaches far beyond Europe's borders and into American boardrooms, factories and supermarkets.

The EU has taken on Bill Gates, prevented two U.S.-based corporate giants from merging and forced American companies to adopt environmental practices much more stringent than required by American law.

"The Europeans are now making the rules that govern global trade," said T.R. Reid, the author of "The United States of Europe." "And that's why, as I say in the book, Skippy peanut butter comes in a 256-centiliter jar. It's not because Americans care about the liter or the centiliter."

It's because Europe mandates that products be measured metrically, and many companies don't find it worthwhile to make different containers for different markets.

That's the same reason that drinkers will rarely find a fifth of bourbon in American liquor stores these days. A fifth is a fifth of a gallon — not a legal product measurement in Europe — so most bottles are 750 milliliters, which is close to the same thing.

The same marketing considerations apply to American manufacturers of everything from cosmetics to chemicals.

The European Union, with a tariff-free area that includes 450 million citizens in 25 countries, has the global clout to enforce its will.

"Europe, not the U.S., is the largest exporting market," said Jeremy Rifkin, the president of the Washington-based Foundation on Economic Trends and the author of "The European Dream." "They are the largest internal market. Sixty-one of the 140 largest Fortune 500 companies are European. Fifty are American."

In 2001, two American companies, General Electric and Honeywell, wanted to merge. American antitrust regulators had no objection.

But European antitrust regulators did. And, to the enormous surprise of Jack Welch, then General Electric's CEO, the deal was quashed. The companies simply could not afford to pull out of a market that huge.

More recently, EU regulators ruled that Microsoft was abusively using its quasi-monopoly to lock out competitors, and fined the company a record 497 million euros, or $639 million.

Officials from the EU and Microsoft are now in what are described as "intense" discussions as the company strives to avoid further fines.

One of the European Union's core causes is environmentalism. And the EU's environmental rules affect not only American companies that sell products in the European Union, but their suppliers, as well — even if those suppliers do no business in Europe.

For example, as of July 1, 2006, new electrical equipment cannot be sold inside the EU if it contains six specified substances, including lead, mercury and cadmium, because of the difficulty of disposing of that material in an environmentally sound way.

That means that National Instruments Corp., which is based in Austin, Tex., but also has a plant in Hungary, must not use those substances in its computers. The company is using EU regulations, which are stricter than those of the United States, to revamp all its environmental policies, even for products sold domestically, said Rebecca Geier, the company's investor relations manager.

"The world is looking at the EU as the leader from an environmental standpoint," she said.

The EU directive affects not only National Instruments, but also any company that supplies components to it. A U.S. company that does not comply with EU guidelines simply cannot sell parts to National Instruments.

"You have to go way, way, way up the food chain to solve this problem," Geier said.

Many companies have recently recognized the power of the EU. In the late 1990s, there were about 200 American lobbyists in Brussels. Now the number is in the thousands.

Despite the power of the EU to set and enforce regulations, many American companies — National Instruments included — feel they get great benefit from operating inside the union.

Geier mentioned the advantage of the single currency, which means the company is not buffeted by currency fluctuations.

UPS, the delivery service, says its business in Europe was significantly enhanced by the expansion of the EU from 15 to 25 countries last year.

The company decided to expand its trans-Europe hub in Cologne, Germany. It bought a delivery company in Poland. It has saved costs now that crossing national borders is "just as if you were going state to state in the U.S.," said David Abney, president of UPS International.

And the expanded EU offers the delivery company a market larger than the U.S. in an area one-third the size.

"You're not going to find much more of a bullish supporter of the EU than UPS," Abney said.

Steve Leroy, a Brussels-based spokesman for Coca-Cola, said Coke benefits most from the stability of the EU and the "level playing field," which does not allow certain companies advantages over others.

Coca-cola is so pro-EU that it has supported conferences on expanding the union.

"We strongly believe in the EU," Leroy said, "and a year ago we had a special EU edition of the 20-centiliter size of the classic glass bottle with the flags of the 10 new member states."