Europe Inc. is staying mostly on sidelines

Posted in Europe | 13-Dec-05 | Author: Tom Wright and James Kanter| Source: International Herald Tribune

EU flags blow in the wind in front of EU headquarters in Brussels.
GENEVA As global trade talks have foundered in recent months, one group with much to gain from free trade has been conspicuous by its absence from the debate: Europe's chief executives.

In the United States, companies have been lobbying hard for a trade deal that would grant them better access to markets for insurance, banking and telecommunications services in Latin America and Asia. By backing U.S. proposals to reduce huge American farm subsidies and protective tariffs, which agricultural exporters like Brazil and India are demanding in return, businesses are beginning to act as a counterweight to the powerful farm lobby, which wants to block further reductions in subsidies.

But in Europe, where the opposition of farmers to a trade deal represents a broader rejection of globalization, companies have generally refrained from supporting free trade too openly. Many French companies see little point in lobbying the authorities in Paris, who are "nervous about appearing in favor of the free market and alienating the electorate," said Nina Mitz, head of the Paris branch of Financial Dynamics, a business communications consultancy.

Other analysts say European multinationals have not wanted to attract attention in a climate of anti-globalization. But for some, the risks of not acting are too great. Jean-Louis Fages, chief executive of A2iA, a French software company that generates more than half of its 5 million, or $5.9 million, in annual revenue overseas, said high taxes in Southeast Asia were thwarting his plans for further expansion.

"For France and Europe to survive economically, we need a new global trade deal to knock down barriers where markets are growing," Fages said.

"The world has changed, and we can no longer compete as an agricultural economy."

That sentiment has helped some European business leaders find their voice amid fears that trade talks might collapse. Laurence Parisot, president of the French employers' group Medef, said she recognized that the services sector, which employs 65 percent of French workers and includes huge global companies like the insurer AXA and the utilities company Suez, would benefit greatly from a trade deal.

In November, European CEOs, including the heads of Vivendi Universal and Siemens, were among 60 global business leaders who signed an open letter urging the Group of 8, which comprises the Group of 7 leading industrialized democracies plus Russia, to break the impasse in trade talks. But corporate Europe has joined in too late and faces heavy opposition at home when it does speak up, some analysts say.

The European Union has steadfastly refused to meet demands from the United States and developing countries to cut agricultural import tariffs. Without movement in this area, countries like Brazil are unwilling to discuss opening their markets to services and industrial goods.

Plus, said Jacques Maire, a senior vice president at AXA, the failure by trade negotiators to broaden market access for services means that the company feels there was little role it can play in the talks. Farmers have grabbed the headlines, Maire said, because they are more motivated to hold on to their subsidies.

The risk is that the WTO process will continue to lose momentum. Because corporate Europe has come late into the game, its companies may now support other efforts for trade liberalization by lobbying for more bilateral agreements with countries like China and India. These accords are easier to negotiate but exclude poor countries like Chad, with whom no wealthy country is seeking a deal, analysts said.

"The more the WTO process drags on," said Guido Glania, director of international trade policy at the Federation of German Industries, "the more companies will say, 'Let us do it the bilateral way."'

European companies are already pushing for the EU to negotiate individual trade deals with countries like China and regions like Southeast Asia, Glania said. Such deals could give companies better access to important developing markets.

AXA, for one, has had difficulty with regulators in China, making it hard to do business there. A bilateral trade deal, Maire said, could help. But, he said, "of course it would be much more efficient to have a general trade agreement."