Rules, Regulations of Global Economy Are Increasingly Being Set in Brussels

HEBRON, Ind. -- For four years, Michael Aylesworth didn't plant insect-resistant corn on his 2,100-acre farm. The reason: regulations written by bureaucrats 4,000 miles away, in Brussels.

Since many Europeans doubt the safety of such genetically modified crops, the European Union requires any product that contains even 1% of a genetically altered ingredient to say so on its label. It doesn't matter that many Americans don't care one way or another about eating so-called genetically modified organisms, or GMOs. Multinational food processors don't want to buy any corn that might create marketing problems in Europe.

By shunning the high-tech seeds, Mr. Aylesworth figures he lost about 7% of last year's crop to a voracious pest called the corn borer. This spring, he took a risk and decided to plant 400 acres with corn that's genetically modified to poison the bug. He hopes to sell the grain as animal feed, which Europe doesn't require to be labeled for GMO content -- yet.

"I refuse to suffer anymore," Mr. Aylesworth says. "Because of Brussels, I've been using technology that was five to 10 years old."

Calling the Shots

Americans may not realize it, but rules governing the food they eat, the software they use and the cars they drive increasingly are set in Brussels, the unofficial capital of the EU and the home of its executive body, the European Commission.

Because of differing histories and attitudes toward government, the EU, a 15-nation trading bloc with a population of 376 million and the world's second-largest economy, regulates more frequently and more rigorously than the U.S., especially when it comes to consumer protection. So, even though the American market is bigger, the EU, as the jurisdiction with the tougher rules, tends to call the shots for the world's farmers and manufacturers.

Because of the EU, Microsoft Corp. has modified contracts with software makers and Internet-service providers to give consumers a wider choice of technologies, and McDonald's Corp. has stopped serving soft-plastic toys with its Happy Meals.

'On the Other Foot'

"Twenty years ago, if you designed something to U.S. standards you could pretty much sell it all over the world. Now the shoe's on the other foot," says Maja Wessels, a Brussels-based lobbyist for United Technologies Corp. of Hartford, Conn. Her company is redesigning its Carrier air conditioners to comply with pending European recycling rules, which are tougher than U.S. standards. The EU initiative would require electrical-equipment makers to eschew certain hard-to-recycle plastics and chemicals, such as brominated flame retardants.

Brussels' growing influence is often overshadowed by global concerns about American hegemony. Europe often follows Washington's lead in foreign policy, and American culture still dominates the media as much as ever. But some companies learn the hard way that in many ways, Brussels rules. It wasn't until EU regulators torpedoed General Electric Co.'s bid to acquire Honeywell Inc. last year -- a deal the U.S. had already approved -- that GE began to lavish the kind of attention on Brussels that it had devoted to Washington.

Before long, GE announced plans to set up a European headquarters in Brussels, where it had maintained only a modest representative outpost. The company chose one of its most senior European executives, Ferdinando "Nani" Beccalli, to head the new GE Europe, partly in the hope he could get along well with fellow Italian Mario Monti, the EU's antitrust chief.

For many of GE's businesses, ranging from light bulbs to plastics, "almost 99%" of new regulations will come from the EU over time, says Jeffrey Immelt, GE's chief executive. When Mr. Immelt was head of GE's medical-systems unit in the late 1990s, the EU laid down radiation-dose standards for X-ray equipment that were tougher than those in the U.S. As a result, GE found itself working with European experts to create a dose-management system it now uses world-wide.

Other U.S. multinationals also are beefing up their Brussels operations. In 1992, when the EU launched its drive to develop a single set of regulations for all of its member countries, just a few hundred lobbyists worked in Brussels, and nearly all of them represented European companies. Now, there are around 10,000 lobbyists in Brussels representing about 1,400 companies and nonprofit organizations from around the world, says Mafalda dos Santos, managing editor of the European Public Affairs Directory, a Brussels-based publication. Washington has more than 16,000 lobbyists.

A decade ago, McDonald's and sportswear maker Nike Inc., both of the U.S., and Toyota Motor Corp. of Japan didn't have a single representative in Brussels. Today, McDonald's has five, Nike four and Toyota three. U.S. law and consulting firms, which often lobby for American clients, also have sharply increased their presence there, with some recruiting EU officials, to gain insight into EU politics and access to its policy makers.

EU rules often cause particular friction in high-tech fields, such as software, electronic commerce and biotechnology.

Regulators on both sides of the Atlantic, for example, are trying to figure out how to protect consumers' online privacy. But while the U.S. has mostly promoted industry self-regulation, the EU, in October 1998, laid down the law: Europe's residents have the right to know what data has been collected about them online, and to get that information changed, if it's inaccurate, or force the collector to delete it. Last July, the EU threatened to cut off trans-Atlantic e-mail traffic if U.S. companies failed to guarantee those rights.

U.S. companies initially fought the regulations, calling them unnecessary and burdensome. But over the past two years, 176 companies, ranging from film manufacturer Eastman Kodak Co. to chewing-gum maker Wm. Wrigley Jr. Co., have signed "voluntary" agreements to abide by the EU rules. Most really had little choice. As global businesses, they didn't want to go to the expense of creating special Web sites or data-processing procedures just for Europeans. "There's only one program of privacy protection at Microsoft," and it's Europe's, says Richard Purcell, Microsoft's director of corporate privacy.

Another privacy battle looms over an EU proposal to restrict the use of cookies, the tiny software files that online merchants and others can plant on personal computers to track a consumer's travels on the Web. As part of a wide-ranging bill awaiting approval by the European Parliament, Web operators would have to get European consumers' permission before placing cookies on peoples' PCs.

High-tech companies from around the world, including media giants AOL Time Warner Inc. and Reuters Group PLC, along with the American Chamber of Commerce, are lobbying furiously to rewrite the bill. They claim cookies help consumers by remembering their passwords and language preferences. The companies also worry that if the EU provision becomes law, they will have to redesign Web sites world-wide in order to avoid inadvertently collecting personal information on Europeans.

Many companies also oppose other aspects of the bill, including its limits on the proliferation of unsolicited e-mails, or spam. U.S. Rep. Rick Boucher, a Virginia Democrat, met recently with members of the European Parliament to argue that proposed EU spam rules could hurt Amazon.com Inc. and other U.S. online merchants. The rules would bar Amazon, for example, from sales tactics such as e-mailing its book customers about special deals on other types of merchandise, such as its garden furniture, Rep. Boucher says. "We have to coordinate policymaking between the EU and the U.S. on a broad front," he adds.

The power to set the regulatory agenda for the U.S. is a relatively new one for the EU, which has about 31,500 employees in Brussels. Since 1957, when they set up shop there, these so-called Eurocrats have written a total of about 80,000 pages of rules and regulations.

The rules often start as an attempt to reconcile various national standards within the EU, to make cross-border commerce easier. EU critics in Britain, Ireland and elsewhere regularly bash EU bureaucrats for impinging on national sovereignty. The British press recently hailed the "metric martyrs," its name for four British grocers who are appealing an EU ban on the use of imperial measurements, such as pounds and ounces, in favor of the metric system.

However, some EU rules have made European companies more competitive in global markets. In 1991, the EU mandated a single mobile-phone standard called GSM, so that new digital phones sold in the EU would work anywhere within the bloc. The U.S. didn't pick a nationwide standard, and thus fell behind in the global race to sell mobile phones and transmission equipment.

When it comes to consumer or environmental protection, EU regulators often invoke what they call the "precautionary principle," a sort of better-safe-than-sorry code. That approach evolved partly from a series of food scares in Europe over the past 10 to 15 years, involving such threats as "mad-cow disease," the misuse of growth-promoting hormones in livestock feed and, more recently, dioxin contamination. It also reflects the fact that Europeans are more inclined than Americans to expect government to protect them.

Often, suspicion of an adverse effect on consumer health or the environment is enough to trigger an EU regulation, regardless of the cost to business.

The U.S. sometimes takes the better-safe-than-sorry approach, as it did when it banned the use of cellphones in airplanes, fearing they would interfere with other communications equipment. But U.S. regulators generally must balance the potential benefits of a regulation against the costs. That's partly because businesses can fight American regulators' decisions during rule-making proceedings or, afterward, in court. Most EU decisions aren't as easily challenged.

In 1999, when the EU banned the use of a class of chemicals used to soften plastics -- because of fears they could harm children who sucked on soft-plastic toys -- international toy makers fell in line. For toys intended for children under three, El Segundo, Calif.-based Mattel Inc., which makes Barbie dolls and Fisher-Price products, shifted entirely to softening agents derived from edible oils and plant starches. McDonald's banished soft-plastic toys altogether from its Happy Meal bags and boxes.

Now, the EU is considering requiring companies to test 30,000 chemicals already on the market to see whether they are hazardous, as well as thousands of products that use some of the chemicals in question. Veronique Scailteur, a Brussels-based toxicologist with Procter & Gamble Co., says the company might have to stop using ethanol in the after-shaves and dishwasher detergents it sells world-wide because lab tests show alcohol can interfere with animal reproduction.

Another EU initiative targets auto makers. A preliminary agreement between the European Commission and auto makers in Europe, the U.S. and Japan would require car hoods and bumpers to be redesigned so they would cause fewer injuries in accidents with pedestrians. Metal "bull bars" -- the protruding curved pipes that help make the fronts of many sport-utility vehicles look rugged -- would be banned on any new vehicles sold in Europe, because the rigid bars could make the vehicles more deadly if they struck a pedestrian.

Auto makers signed the deal because they figured it would be less onerous than binding legislation. But Robert Lange, executive director of safety for General Motors Corp., says the bumper rule could force GM to retool its Corvette factory in Bowling Green, Ky., because the cost of designing and using special parts for the European market would be hard to justify.

U.S. farmers cater to European tastes, too. While the U.S. Food and Drug Administration has approved the use of most genetically modified crops in human food, the EU has placed strict limits on which genetically modified seeds can be planted and how they can be used in Europe, where environmentalists have protested against what they call "Frankenfoods."

What causes trouble for American farmers is the EU's labeling requirements for food containing even 1% of a genetically modified ingredient. That's because some U.S. food processors won't buy genetically modified corn or soybeans because they sell their products internationally, and it isn't practical to make special non-GMO batches just for Europe. Some food processors won't even buy conventional grain from farmers who also plant GMO varieties.

Worried about trade with Europe, the Illinois Department of Agriculture last year asked farmers not to plant a Monsanto Co. corn that isn't approved in the EU. Kraft Foods Inc., of Northfield, Ill., says it won't use genetically modified ingredients such as vegetable oil in the Toblerone chocolate and Milka candy bars that it exports from Europe to 150 other countries, including the U.S.

Greenpeace and other environmental activists are pushing the EU to expand its labeling rules to include meat, dairy products and animal feed. That would present a new hurdle for U.S. farmers, who would be faced with the choice of eliminating genetically modified seeds or losing buyers who do business in Europe. "We couldn't use biotech corn if Europe introduced a biotech meat labeling requirement," says Indiana's Mr. Aylesworth. "I don't ever want to plant anything that's not cleared for export."

Updated April 23, 2002