The European Union, concerned that it does not have health or environmental data on the majority of the compounds now in use, is crafting legislation that by 2005 will require the industry to conduct extensive safety tests on 30,000 common chemicals. At least 1,500 are expected to be banned or severely restricted in their use as a result. The industry estimates that the testing alone will cost it more than $7.5 billion. "At present we are unwittingly testing chemicals on both living humans and animals," European Environment Commissioner Margot Wallström told chemical-company executives in Brussels, Belgium, the EU capital, this spring. "It is high time to place the responsibility where it belongs: with industry."
The American companies-and the Bush administration, which on their behalf continues to pressure the European Union to drop this matter-are not used to such talk, much less such action. In Washington, corporations wielding insider connections and buckets of campaign cash are used to woo legislators and regulators. But as the Americans are .nding out, that dynamic does not hold in Brussels.
When American chemical-industry executives wanted to fly to Brussels to quash the safety-testing legislation, their European counterparts told them to holster their Palm Pilots and stay home. "Their perception was, 'Here come the cowboys,'" says Fred McEldowney, who works on international issues at the American Chemistry Council, the Washington lobbying arm of manufacturers that includes Dow, DuPont and ExxonMobil.
This was not just a tactical dispute. It refected a fundamental difference in the way Europe and America view the role of the state in the market economy and the role of corporations in public life.
Over the last few years, the European Union has put into effect a raft of far-reaching environmental and consumerprotection legislation that would be unimaginable in Washington: a moratorium on genetically modi.ed foods; another on beef treated with growth hormone; a requirement that automakers and electronics manufacturers pick up the tab for disposing of their products in environmentally friendly ways; and a ban on the use of such common electronics manufacturing materials as mercury, lead and brominated .ame retardants. It also recently upheld a prohibition on pharmaceutical company advertising and is debating whether to prohibit television commercials directed toward children. U.S. companies will have to make some major adjustments if they want to do business in Europe's 340-million-person market-or in its half-billion-person market next year, when the European Union is slated to add 10 new member countries.
Chemical reaction
The story of the European chemicals legislation is illustrative
of American companies' fumbling so far. From the beginning,
says Alain Perroy, chief lobbyist for the European chemicals
industry, "we were all convinced in Europe that there
was no way to get that legislation to disappear." And Perroy
turned out to be right. But the Americans saw things differently.
They thought the Europeans were practicing a kind of
"preemptive surrender," in McEldowney's words.
The American Chamber of Commerce, which acts as the
voice of U.S. industry in Brussels, initially opposed the whole
notion of mandated chemical testing. The chamber relied on
the kind of rhetoric about preserving competitiveness and
"building upon industry's sense of responsibility" that has
often carried the day in Washington. When the European
Union nonetheless issued a white paper calling for industryfinanced
testing of 30,000 compounds, the Chamber of
Commerce was forced to regroup. It issued an irritated response
and turned to lobbying against particular provisions
of the proposed legislation, arguing against an outright banon chemicals found to be hazardous and pushing for a smaller
bureaucracy and a looser time line for testing.
But these attempts at a limited rollback of the chemicals
initiative were also unsuccessful, and by 2002, the chamber
was mainly trying to keep the European Union from extending
it. Meanwhile, the Europeans were talking about expanding
the testing to all products with chemicals in them,
which is to say, everything.
what was, and still seems to be, throwing corporate
America off-kilter is what Wallström has called the "radical
paradigm shift" between American and European thinking
on these issues. According to the "precautionary principle,"
a doctrine enshrined in the 1992 Maastricht Treaty among EU
members, governments should protect their populations
against risk, even before all the data are compiled. The doctrine
is a prescription for government intervention before
harm occurs. By contrast, Washington generally doesn't pass
broad regulatory overhauls unless there's concrete evidence
of harm. U.S. laws that put new burdens on industry-such
as the Superfund or the recent accounting reform-tend to
be attempts to clean up disasters.
Europe's chemicals legislation "is a remarkable effort, because
it is very expensive and it isn't in response to a public
crisis," says Mary Graham, co-director of Harvard University's
Kennedy School of Government Transparency Policy Project.
Proponents claim that the chemical-testing legislation will
save companies money in the long run. Dr. Michael Warhurst,
who works on the issue for the World Wildlife Fund, argues
that the tests will keep especially dangerous chemicals off the
market and thus preempt many large lawsuits. He points out
that product liability lawsuits cost U.S. industry about $180
billion a year, or 1.9 percent of the gross domestic product.
EU regulators don't try to .nesse the costs of the legislation.
They estimate that industry will have to shell out
3.6 billion euros (about half of what the chemical industry
predicts) for testing. In addition, according to EU estimates,
the legislation's indirect costs-as chemical prices rise due
to the testing and higher-priced chemicals replace those
withdrawn from the market-will total between 14 billion
and 26 billion euros by the year 2020.
But, by the Europeans' count, this is a small price to pay
for the bene.ts gained. The European Commission estimates
that the strengthened regulation of chemicals will result in
a drop of 2,200 to 4,300 cancer cases per year, with a savings
over 30 years of 18 billion to 54 billion euros in occupational
health costs alone.
American business, by and large, has been slow to
adapt to this European mind-set. But the Bush administration
has been even slower. It weighed in early on the chemicals
legislation and is now dropping hints about starting a trade
war over it.
Last year, the U.S. ambassador to the European Union,
Rockwell Schnabel, complained in a Wall Street Journal
Europe op-ed that European regulators did not take enough
business input into their decisions and that they were concentrating
too much on environment and health at the expense
of growth and trade. Schnabel is a former member of
Dan Quayle's Council on Competitiveness, which was established
in the .rst Bush administration with the mandate of
quashing new regulations that it determined were unduly
costly to industry. (The current Bush administration has an
agency in place with a similar mandate.)
The U.S. government also responded to the EU white paper
on the chemicals policy with what it calls a "nonpaper," an
unsigned letter distributed to European Commission officials
that complained about the European policy. The nonpaper
called the EU plan a "costly, burdensome, and complex regulatory
system" that could distort global markets, eliminate
jobs and reduce consumer choice. Both the U.S. government
and American corporations also argue against the regulations
on the grounds that they are not "based on science." Never
mind that safety testing is a patently scienti.c endeavor.
Since then, senior U.S. Department of Commerce officials
have lobbied EU member states, and officials from the U.S.
Environmental Protection Agency have traveled to Brussels
to promote U.S.-style regulation of chemicals, which involves
a testing program covering only 2,200 compounds and is, of
course, voluntary.
In May, U.S. Assistant Secretary of Commerce for Market
Access and Compliance William Lash told The New York
Times, "This is a big game; it will dwarf the [genetically modi
fied food] dispute."
The Bush administration, however, has a lot to overcome.Its standing on environmental matters is notoriously low in
Europe. President Bush's decisions to pull out of the Kyoto
global-warming treaty and skip the Johannesburg development
conference were minor stories in the U.S. media but
major controversies in Europe. Indeed, they "had an enormous
impact on the perception of U.S. companies from an environmental-
policy perspective," says Julian Lageard, the
lobbyist for Intel who heads the American Chamber of
Commerce's committee on environmental affairs. "All of your
activities are in the spotlight."
The distrust between the european union and
American business on this issue is, of course, compounded by
their differences on the subject of government itself. Lobbyists
in Washington attack every piece of legislation their employer
doesn't like by calling it "big government," and they are guaranteed guaranteed
to .nd a receptive audience in nearly all Republicans
and many Democrats. It's a different story in Europe. After all,
the European Union is, by definition, big government.
The American penchant for "self-regulation" rather than
government oversight also has little credibility with officials
in Brussels, who tend to take the view that companies, like
children, will misbehave if left to themselves.
"Our reaction when faced with regulation is, 'Hold on a
moment! What's the problem? Is legislation necessary?'" says
Baudouin Kelecom, a spokesman for ExxonMobil in Brussels.
And while his company has a reputation for being the most
recalcitrant of U.S. concerns operating in Europe, at home
most American companies express a similar attitude.
Industry, they insist, is better at monitoring itself than government
is at overseeing it. This has been the dominant strain
in federal regulation since the days of Ronald Reagan.
European companies are usually far more willing to accept
regulation. The social democratic history of Europe in the last
50 years has left a legacy of entwinement between government
and industry such that even fully private European
companies are used to government intervention and strong
labor unions.
"The American context is so neoliberal that it is very hard
for any American, whether they are a consumer organization
or a corporation, to understand what drives Europeans,"
says David Earnshaw, a former parliamentary aide who is
now a lobbyist in the Brussels office of public-relations giant
Burson-Marsteller.
U.S. companies have long tried to sell Europeans on the
American laissez-faire model. Before the Enron, Wall Street
and corporate-accounting scandals broke, U.S. businesses
were putting strong pressure on European and other international
accounting regulators to adopt U.S. accounting principles.
The senior finance officials of both Pfizer and General
Electric, for example, pushed the International Accounting
Standards Board to forgo a rule requiring that stock options
awarded to executives be counted among a company's expenses.
That effort has now been put on hold.
European manners
Lobbying, considered in Washington a respectable method
for business interests to weigh in with the government, is
looked upon with suspicion by most member states of the
European Union. To be sure, there's no lack of political
schmoozing among European politicians and business representatives.
Nor are European politicians strangers to the
backroom deal or the envelope under the table. In 2000,
much of the European Commission was fired in a cloud of
scandal while corruption was revealed at the highest levels
in France and Germany.
But the current conflict between corporate America and the
European Union cannot be fully understood unless one considers
that the bribery and corruption that have long plagued
European politics are dwarfed by what is legal and accepted
in Washington. In the United States, lobbyists can kill legislation
at almost any point in its progress. They can keep it
from ever being heard in committee and they can cut its funding
after it's been passed. Whether the issue is tobacco, health
insurance or nuclear power, corporate lobbying tactics in
Washington are standard: Give tens of thousands of dollars
to candidates, hire former officials who used to regulate the industry, and utilize mass mailings and front groups to produce
an appearance of grass-roots support, known in the business
as "Astroturf."
These tactics are just beginning to surface in Brussels.
The big pharmaceutical companies, GlaxoSmithKline and
Merck, mobilized and funded patients groups representing
the mentally ill, which helped the firms win approval for the
patenting of genes. General Electric, wounded in 2001 when
the European Union quashed its merger with Honeywell, has
now moved its European headquarters to Brussels, and has
chosen an Italian-the same nationality as EU Commissioner
for Competition Policy Mario Monti-to head it. And
Microsoft recently engaged in a high-profile revolving-door
hire, bringing on Detlef Eckert, the former head of policy
planning for the European directorate of information technology.
In that post, Eckert reportedly had access to con.-
dential documents in Brussels' antitrust case against the
software giant. (Microsoft has assured EU officials that he
will not be working on antitrust issues.) One U.S. investment
bank executive recently bragged that his company had wellconnected
former high-level officials on retainer in almost
every European country. "We can get access to anybody we
want to," he said.
The potential for manipulation clearly exists. Like
Washington, Brussels operates in a bubble little understood
or observed by the general public, where overworked and
understaffed politicians and bureaucrats must make complicated
decisions on a host of policy issues. This is fertile
ground for lobbyists-as providers of substantive information
and political intelligence-to grow in influence. And just
as in Washington, corporate lobbyists in Brussels far outnumber
public-interest representatives.
Moreover, the European Union is made up of a variety of
institutions, all still evolving and all vying with one another
for power. The most important decision-making bodies are the
Council of Ministers, made up of heads of state and senior cabinet
officials, which proposes and approves legislation; the
European Commission, the giant multinational bureaucracy,
which proposes legislation and promulgates regulations; and
the 626-member European Parliament, which used to be
rather weak but lately has been strengthening its oversight
and legislative role, particularly on environmental and consumer
issues. Within these bodies, government representatives
and parliamentary deputies have allegiances to a plethora
of political parties, among them socialists, greens, Thatcherite
conservatives and hard-line nationalists.
Yet despite this, Brussels does not seem to be in the grip
of the partisan wars that so paralyze Washington and are so
easily exploited by corporate lobbyists. Instead, compromise
is the name of the game. At a recent hearing of the European
Parliament's .nancial-services committee, some 50 committee
members from 15 countries were crowded into a room
wearing headphones while interpreters in glass booths overhead
gave simultaneous translations in dozens of languages.
Waiters in red vests and bow ties moved silently around the
room pouring tea. In the back, scores of lobbyists jotted down
notes. The only interruptions in the earnest proceedings
came when the German chairwoman begged a Spanish member
to slow down so that her interpreter could keep up.
The elitism for which the EU bureaucracy is so often criticized
seems to provide further insulation from in.uence by big business. Bureaucrats in the European Commission,
whose lawmaking powers are similar to those of the U.S.
Congress do not run for election and thus can't be pressured
in the same way as members of the U.S. Congress. Lobbyists
in Brussels attach even more significance to the fact that
they're quite limited in the campaign donations they can dispense
in Europe. This is dictated by custom and by law. The
cost of European campaigning, in any case, is low. David
Robert Bowe, a three-term member of the European
Parliament from Britain, says that his last campaign cost only
a little more than $40,000.
Ironically, it's the growing democratization of the
European Union, the increasing power of its elected parliament
that may provide the greatest opportunities for corporate
lobbyists to exert American-style influence. As Hill &
Knowlton European Chairwoman Elaine Cruikshanks recently
noted, the parliament "is open and accessible and has
members with relatively few staff to support them."Already,
Cruikshanks says, members are eager for lobbyists to help rll
the informational void.
The power of bird-watchers
But to date, U.S. companies have been regularly stymied by
European political realities. And they have been repeatedly
caught off guard by the power of environmental, health and
consumer movements in Europe.
Unlike in Washington, where Greenpeace and Ralph
Nader are seen as the political fringe, in Europe politicians
cross such public-interest groups at their own peril. The green
movement had its roots in Germany, the industrial giant;
France fights heated trade wars on behalf of family farmers
and fresh pastries; and England, home of Thatcherism and privatization,
is also a nation of militant bird-watchers and
garden-club members.
"Often American corporations don't understand the pace
at which this stuff moves over here. It comes as a terribly rude
shock to them," says Gavin Grant, deputy chairman at the
London office of Burson-Marsteller, where the lobby is lined
with large TV screens .ashing graphics interspersed with
the words "The Power of Perception."
One of the forces behind the chemicals legislation was
Greenpeace, which campaigned for it for years. The organization
is now campaigning in Germany and the United
Kingdom to support the testing law and overcome the opposition
of chemical makers in those countries, says Stephen
Tindale, who heads Greenpeace in Britain.
U.S. officials and corporate executives who maintain that
the European Union is issuing regulations to protect its own
industries are missing the point. By making laws that force
companies to put the social contract above their earnings,
Europe is taking on not just particular American businesses
but the very way that America does business.
As Michelle O'Neill, an Irishwoman who lobbies on environmental
issues for Hewlett-Packard, puts it, "Just because
they are big, powerful companies in the U.S. doesn't mean
they are going to be treated better in Brussels."