Business and (Federalist) Policy

Article published on May 11, 2004
community published
Article published on May 11, 2004

This article has not been vetted by an editor at Paris HQ

Foreign policy, regulation, and enlargement. What the business community thinks about a United States of Europe.

Since May 1st, the European Union has been made up of 25 countries sharing the values expressed in Community law, the single currency, the single market, and foreign trade. The accession of ten new countries was an historic event which provoked a question: would members of the economic and financial worlds be interested in a federal Europe which would also have a political dimension beyond the economy?

The bugbear is…

According to a survey carried out on April 23rd by Eurochambres, the European association of Chambers of Commerce, in the ten new EU countries the business community is showing a clear interest in the economic advantages offered by the Union, both in terms of the internal market and international trade. This opinion is also shared by the business world in the rest of the EU. But if a federal Europe is mentioned, that is to say a United States of Europe, the economic community’s position is less clear. Seemingly, the idea cannot be discussed in terms of majority or minority support, but rather a certain detachment towards a complex project which does not in any case exist yet in the current political climate. Instead, the economic community tends to concentrate on simpler proposals with clear economic returns.

The search for investment in Research and Development

Angelos Serris, Chief Financial Officer of Upstream Systems, a Greek telecommunications company, claims that ‘the risk is that a federal Europe will regulate economic activity to an even greater extent or, worse, that it will not be able to impose a common financial, fiscal or entrepreneurial framework for the 25 countries. Consequently, internal competition would be damaged and Europe would not be strong enough to deal with its main commercial rivals (the United States, China and Japan). What a federal Europe could bring to the economic-financial community would be better activation of the labour force through investment in research and development, training and flexibility’. These points lie at the heart of the business community’s concerns. According to an official from a powerful multilateral organisation, ‘there is the possibility too that a single European government could make it easier to adopt the harmonisation measures which today require adoption by national parliaments.

Global competition

Another extremely important element for the corporate world is the EU’s external relations. Today, global competition requires considerable negotiation abilities, both with the US, China and Japan, and with regard to the World Trade Organisation (WTO) and other multilateral organisations. In fact, in these areas the EU has no significant powers, nor has it developed any significant economic or legal know-how. According to Christopher Bockmann from Clifford Chance, an international legal consultancy company based in Amsterdam, ‘the EU’s external relations (trade and enlargement) are probably the areas where the entrepreneurial world sees the greatest advantages and the best role for a federal Europe. Bit it is feared that a federal Europe would impose excessive regulation’.

The EU is fearful regarding foreign economic relations, including the Commissions’ anti-trust powers, and a federal European government would carry even more authority. On this point, the main opposition to a federal project could, paradoxically, be the United States, for whom it is more advantageous to have weak European institutions. A strong interlocutor like a federal European government could breathe life into an economic entity able to impose itself on the international scene in three ways. Firstly, with anti-trust, limiting the scope of the USA’s multinationals; secondly, competing as a European block in specific sectors, for example with Airbus in civil aviation; and finally negotiating with one voice, as is already the case for trade. According to Matthew Ryall, in charge of the American mediation company Lasalle in Europe, ‘the concern is that a European super state would adopt worse economic policy measures, something which would make the situation more difficult throughout Europe’.

The idea of a federal Europe was one of the aims of the founding fathers which goes far beyond targets specific to the economic-financial world, a world which seems relatively neutral with regard to the federal idea. But it could help make such a project a reality if it can be convinced that a federal political project is indispensable to improve Europe’s economic performance, just as it previously supported the introduction of the euro.