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Don't Forget Little Ol' Western Europe

By Anne ApplebaumPosted Friday, June 23, 2000, at 11:30 PM ET

Earlier this week, the Financial Times profiled a prominent telecoms/media entrepreneur. "Within three years," gushed the world's solemnest newspaper, "he transformed the bulky and insular conglomerate into a successful international business." He "likes nothing better than a head-on challenge," the FT elaborated further, not neglecting to mention his "cut and thrust tactics," his "high-flying" education, his talent at networking, and his relative youth.

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Surely, then, this person is someone we've heard of? Not likely: Jean-Marie Messier, subject of this unusually glowing profile, is French. He runs a company called Vivendi, which we'd also never heard of—until it announced, to much raising of eyebrows and harrumphing about the French and their anti-Hollywood bias, that it had taken over Seagram, together with Universal Pictures, a few days ago. Coincidentally, this happened in the same week that another body we normally know and care very little about also put itself in the path of an American new-economy giant: the European Commission's Competition Directorate-General, that is, which decided to block the merger of Sprint and WorldCom on the grounds that the merged company would control too much of the world's Internet traffic. "It's over," a senior official of the Competition Directorate-General told the Washington Post using surprisingly satisfied language: "This deal is finished. Possibly, the parties will withdraw."

In fact, in a world in which the big trade "story" is China, and the big economic "story" is Russia, and the big regulatory "story" is Microsoft, how easy it is to forget boring old Western Europe. Looked at as a half-continent, our trade with Western Europe is at a higher volume than with any other single country in the world, including Canada: In fact, it is nearly five times as high as our trade with China. But even some individual country statistics are surprising. Among other things, the answer to the trick question about volumes of trade and levels of GDP is always Holland. Did you know that our trade with Holland is nearly three times that of our trade with Russia, even though there are only 16 million Dutch and nearly 150 million Russians? Did you know that we export twice as much to Holland as we do to China, even though there are only 16 million Dutch and 1.2 billion Chinese?

Likewise, decisions made by anonymously quoted Eurocrats working for obscure divisions of the European Commission are likely to affect us more and more. Not only has the EU blocked WorldCom's takeover of Sprint, it has also launched an inquiry into AOL's purchase of Time Warner. While everyone involved in these investigations insists heartily that there is no ill will intended, there isn't any anti-Americanism around here, and the Justice Department was just about to do the same thing anyway, it is becoming clear that European regulators have enormous powers to affect those American companies that have global ambitions and fully intend to use them. Yet the foibles of EU regulatory bodies are hardly everyday editorial page fodder in America, just as aggressive challenges from European businessmen rarely spark the sort of thinly disguised xenophobia that large Japanese purchases of movie studios or Manhattan real estate once did (back in the days when the Japanese had money).

In part, Americans share some elements of this myopia with the British, who go on feeling vaguely superior to the Germans (and other continentals) even though a continuous stream of German purchases of major British car manufacturers and banks: It seems to be an Anglophone trait, this general belief that otherwise familiar-looking people who don't speak our language aren't to be taken seriously. Anglophone provincialism has also worsened in the computer age. It is now generally taken for granted, in places like Washington and New York and London, that everything important that happens, happens in English. Who knows from French media companies? Who knows from German banks? An extremely close relative of mine once refused to take an aspirin while abroad, on the grounds that the package had German writing on it: Only when it was pointed out to her that aspirin was a German invention, and that Bayer is a German company, did she give in.

But there is also a deeper, more atavistic element at work: The real challenges, we seem to feel, must come from people who are genuinely Alien. The Chinese are Alien. The Dutch are not. How could they be? Van Gogh's sunflowers are virtually an American icon, clogs are a fashionable item in downtown Manhattan: It is hard to see the Netherlands as anything like the equivalent of the Yellow Peril. It is true, as I wrote in this space recently that a small but significant handful of Americans are beginning to see a threat in the EU's vague defense strategy, but very few have perceived either the economic challenge, which is admittedly dwarfish but has potential, or the far more serious regulatory challenge, which is already here. Maybe it isn't too late to work up some animus. Think about it: Do we really want our movies made by the French?

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Anne Applebaum is a Washington Post and Slate columnist. Her most recent book is Gulag: A History.

COMMENTS

Reader Response from The Fray:

Behind Ms Appelbaum's presumption that American companies should be able to do as they please abroad are some disturbingly imperialistic undercurrents. By opposing the idea that other countries have a right to regulate Americans if and when they do business on their soil, she seems to believe that Americans should be able to act with impunity everywhere in the world, impervious to any laws but our own. There are two possible rationales for such a view: first, that American businesses are somehow privileged, unique, god-like entities, above international law. I sincerely hope that Ms Appelbaum is not suggesting this. Second, that each country's businesses should be governed by their home country's rules and regulations, at home as well as abroad. But would we, as Americans, really want this? A convenient test of one's objectivity is to turn the tables. So let's exchange "American companies doing business in Europe" with "European companies doing business in America". Any European business which trades its products with the U.S. is also subject to the same U.S. regulations (on product safety, for example) which American producers of the same product are. All of this sounds quite reasonable now, doesn't it? We Americans feel perfectly justified in deciding what is safe and what is not, and in requiring that any product sold in our domestic market adhere to the same set of standards, regardless of its national origins.

Ms Appelbaum argues that we should be especially concerned that European regulators will place restrictions on American companies, due to the large volume of U.S. trade with the EC. Clearly, U.S. suppliers of a product have to adhere to the same product safety standards as do domestic producers. This is just as much a part of doing business in Spain as it is in the U.S.

Also, Ms Appelbaum (deliberately?) confuses these product-safety (and thus inherently trade-related) issues with those of anti-trust. European anti-trust regulators only have jurisdiction over those divisions of American companies which operate in Europe. To take an example: Were GM to merge with Chrysler, then American anti-trust regulations hold. The fact that Chrysler also sells many cars abroad (that it trades with Europe) would be irrelevant. When, however, Chrysler and Daimler-Benz merge, this merger must be approved by both European and U.S. regulators, since the two firms operate in different countries. Thus, to the extent that either WorldCom or Sprint run European operations, EC anti-trust regulators do have jurisdiction. If WorldCom and Sprint were to merge only their U.S. divisions, European regulators would have no power to stop them. On the other hand, if WorldCom and Sprint were to merge only their European divisions, the Justice department would not have any power to interfere. In summary: believe it or not, Europeans have just as much right to sovereignty as we Americans have to ours.

--MCE

(To reply, click here.)

What restrains regulatory power is a mixture of co-operation and fear rooted in the recognition of the costs to both sides of economic warfare. But absent treaties, there are no legally enforceable limits on the power of either the U.S. or the EU. I know of no treaties which regulate antitrust jurisdiction. The EU has been watching the Microsoft litigation with more than passing interest, and may yet bring legal proceedings against Microsoft in European courts for monopolizing European markets, and could in principle seek the same kind of structural remedies Judge Jackson ordered.

One of the looming challenges of this century is reconciling traditional notions of national sovereignty with international business. It has become commonplace to argue that the growth of multinationals will erode national sovereignty; the most extreme arguments suggest that the nation state will simply wither away before the economic power of multinationals. The recent actions of the EU suggest otherwise.

--Michael Masinter

(To reply, click here.)

[Also in The Fray: Jan ter Horst pointed out that Holland is one of the component parts of the Netherlands, and thus the two terms are not interchangeable. Brian Loynd took issue with the word 'dwarfish', as "the EU is still a larger economy than the U.S." And Gregory Holman--well somebody had to say it--would much prefer to watch French films than U.S. films. The examples he gave were Belle de Jour vs Deep Impact. Interesting comparison.
--Fray Editor]

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