“Better Regulation”: For Whom?
EC Prepares to Dismantle Business Regulation and Expand Corporate Control

One of industry's ultimate dreams is about to come true in the European Union. After years of corporate campaigning, the European Commission (EC) is working full speed to replace EU regulations impacting business with self- regulation by business groups. In the few areas where regulations are still to be considered, these will be subject to tough business impact assessments. The Commission, which hopes to finalise its reform proposals before the end of the year, is receiving the enthusiastic support of the European employers' confederation UNICE, the EU Committee of the American Chamber of Commerce (AmCham), and single- issue groups like the Fair Regulation Campaign.

Enterprise Commissioner Erkki Liikanen

‘Jobs Summit’ Mandates Further Deregulation

he shift from legislation to self-regulation and non- binding recommendations is being prepared by European Commission President Prodi and three other Commissioners: those for Enterprise (Erkki Liikanen pictured right), Single Market (Frits Bolkestein) and Consumers Affairs (David Byrne). Their mandate for this radical neoliberal reform comes from the EU's 'Jobs Summit' last spring in Lisbon, which advocated "greater regulatory freedom" for business in order to achieve the goal of transforming the EU into the "most competitive and dynamic knowledge-based economy in the world" by 2010. The idea was to make the EU more competitive by removing regulatory burdens on European companies. To do this, the Lisbon Council asked the Commission to present a strategy to simplify regulations, considering alternatives to traditional legislation and examining the burdens on the competitiveness of European industry caused by new and existing legislation.

The Commission has embraced its mandate with great enthusiasm. Shortly after the Lisbon summit, Enterprise Commissioner Liikanen introduced the Commission's "golden rule" - 'self-regulation always when possible, regulation only when necessary', in a speech to an audience of hundreds of business leaders at the European Business Summit. [1] A recent progress report by the Commission states that these radical reforms are needed 'if the EU is to become the cheapest and easiest place to do business in the world'. [2]

Erkki Liikanen doesn't miss an opportunity to advertise the EU approach, saying that, "traditional regulation is increasingly called into question by the demands of globalisation". [3] The Commission strategy considers that four options exist in relation to regulation: no regulation at all, [4] industry self-regulation, negotiated agreements and co-regulation. Liikanen clearly favours the last option, in which the Commission sets broad objectives which are enforced by self-regulating business groups.Self- regulation for corporations, as opposed to government regulation has long been a goal of European business lobby groups. Two of the most vocal groups in the current debate for 'better regulation' are the European employers' confederation UNICE and AmCham, the EU Committee of the American Chamber of Commerce, which represents major US corporations operating in Europe. Both groups have expressed their strong support for the proposed reforms. As AmCham puts it, "We share the view that prescriptive, command- and-control legislation is not an appropriate response to the globalisation of the world economy, the enlargement of our Union, or the digital economy." [5] Proctor & Gamble's Erik Jonnaert, speaking on behalf of UNICE, comments that, "Where yesterday we lived in the black and white world of legislation versus free market, today we are entering a much grayer world of soft law". [6] Business has recently concentrated on promoting self-regulation as the best option. [7] UNICE and AmCham are hesitant about co- regulation, which they warn could "result in new requirements for business". [8] According to AmCham, co- regulation could lead to new barriers to trade and violate WTO rules. In his defence of co- regulation, Liikanen explains that "in areas of fundamental public interest, citizens still expect their rights will be protected and their interests defended.' [9] One reason that business is less happy with co-regulation could be its qualms over the voluntary codes of conducts for internet-based firms being prepared by Commissioner Byrne (Consumer Affairs). While the European association of consumers BEUC welcomed this initiative, both UNICE and AmCham bitterly complained about the burdens it would lay on business and demanded that the EC leaves the issue of e- commerce entirely to them.

In various speeches, Liikanen repeatedly refers to what he sees as a successful example of a voluntary agreement with industry. In 1998 the European Commission reached a voluntary agreement with ACEA, the European Automobile Manufactures Association, that would seek to reduce average CO2 emissions from new cars. The agreement, which is entirely non-binding for the car producers, was adopted by the Commission as a core part of its strategy to fight climate change. The step was criticized by environmental groups as a 'setback for efforts to combat global warming', because the targets agreed on were not far-reaching enough and because such a crucial environmental problem should not be left to voluntary action by the car industry. [10] The Commission will not legislate in this field until 2008, even if it becomes clear long before then that the car industry will not meet its targets. Expanding the use of industry self-regulation in environmental policies will not only be highly controversial, it will also raise questions about the credibility of the EU's much-proclaimed commitment to 'sustainable development'. The social implications are clear, and trade unions are worried about the radical deregulation agenda which lurks behind euphemisms like 'right regulatory environment' or 'better regulation'. They see the proposed reforms "as a way of reducing employers' responsibilities". [11] The Commission proposal for business self-regulation includeradical upgrading of the role of business impact assessment (BIA) procedures. The principle of assessing the impacts on business of any legislative initiative coming from the Commission has been in place since 1986. With the new proposal, these assessments would become far tougher. For example, policy makers would have to justify the need for regulation as well as prove that costs and benefits were fully assessed. Not only this, but UNICE also wants the likely impact to be expressed in monetary terms with the assessment initially focusing only on the costs, not the benefits. [12] They also want it "to concentrate not on society as a whole but on business, whose competitiveness needs to be strengthened."

The most active business group promoting BIAs is the so-called Fair Regulation Campaign (FRC). This lobby group, created in 1999 and dominated by British business, claims to represent over 15 million European companies. After their early success in making the Blair government introduce strict BIAs in UK policy- making and reduce 'red tape' for business, the FRC's next target was the European Commission, "We are having success in Britain, but Brussels is a much bigger fish", says FRC director Charles Miller. [13] The FRC presented the Commission with a series of proposals that have been warmly welcomed. Liikanen and his colleague Bolkenstein have started a 18-month pilot project to test ways of improving the EC's BIAs, in which all Directorates-General (DGs) of the Commission are provided with FRC checklists to guide them. The group is trying to persuade Liikanen to extend the system to existing legislation, so it can be reviewed and possibly dropped, as well as to the European Parliament, which would be banned from proposing amendments without previous business impact assessments. The pilot project will run until February 2002, but the Commission has announced preliminary results for next September. So far, Miller seems very optimistic about the results, saying 'We are going to set out concrete rules we as industry want.' [14]

According to Commissioner Liikanen, co-regulation between governments and business is a pre-condition in order for the EU to "fulfill its role of a world economic power capable of meeting the challenges of globalisation". [15] The Commission's deregulatory frenzy stems from its embrace of neoliberal globalisation and its resulting blind pursuit of international competitiveness. The reality, of course, is that effective regulation of corporate conduct is more necessary today than ever before. Despite this, the EU is actively expanding corporate control, instead of curbing the economic and political power of business, which is now reaching unprecedented levels.

NOTES

1: Erkki Liikanen speech at the EBS, 9 June 2000.  | Back to Text |

2: 'Interim Report from the Commission to the Stockholm European Council', 'Improving and Simplifying the Regulatory Environment', COM, Brussels, 7 March 2001.  | Back to Text |

3: Speech 00/471, 'Remarks on Better Regulation', delivered by Erkki Liikanen at the Fair Regulation Campaign conference, Brussels, 28 November 2000.  | Back to Text |

4: Ibid. "The markets creates the problems of public concern, but also develops its own solutions."  | Back to Text |

5: 'AmCham Position Paper on Alternative Regulatory Models. Part One. The current debate on alternative regulatory models'. Prepared by the EU Committee taskforce on Alternative Regulatory Models. 23 November 2000.  | Back to Text |

6: UNICE Press Release, 'UNICE Calls for Alternative to Regulation', Brussels, 29 November 2000.  | Back to Text |

7: "We firmly believe that self-regulation remains the most appropriate model in many policy areas", insists AmCham. See note 5.  | Back to Text |

8: 'Industry Voices Concern over Co-regulation', Peter Chapman, European Voice, volume 6, number 39, 26 October 2000.  | Back to Text |

9: Speech by Erkki Liikanen, 'Better Regulation: From Principles to Practices', at Alternative Regulatory Models Conference, organized by AmCham. Brussels, 6 February 2001.  | Back to Text |

10: See 'Europe, Inc.', page 77.  | Back to Text |

11: 'Business fights to escape the maze of red tape'. By KevBrown, Industry editor, and Deborah Hargreaves in Brussels, 22 January 2001.  | Back to Text |

12: UNICE "has been working for years to convince the European legislator of the need for effective assessment of the cost of legislation". "Assessing the Cost of Legislation. A Proposal to the European Parliament by the European Industry", UNICE, 20 October 1999.  | Back to Text |

13: 'EU rules questioned. British business is determines to an early say in Brussels legislation', Roland Gribben, Electronic Telegraph, issue 1963, 9 October 2000.  | Back to Text |

15: Speech by Erkki Liikanen, 'Better Regulation: From Principles to Practices', at Alternative Regulatory Models Conference. Brussels, 6 February 2001.  | Back to Text |