Europe’s Market Power & the Challenge to Big Tech

By Sven C. Oehme and John M. Zindar

68 years ago six countries signed the Treaty of Paris, launching the European Coal and Steel Community, the first step in the “big idea” project of a single-market Europe. From day one there have been doubts if the continent could indeed evolve into a seamless market based on democracy and rule of law.

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Recently the European project has been slammed in quick succession by crises that linger: the Euro crisis that began in 2010; mass immigration beginning in 2015; the Brexit vote of 2016; and transatlantic trade and security disputes since 2017. These four crises mark a decade of doubt about Europe’s future global power and influence. Throw in a widening ideological divide between western and eastern members and European institution building has taken big hits.

But despite the many threats, one should not underestimate Europe’s potential to wield power over global markets. After all, the European Union is not only the world’s second largest economy with the second largest reserve currency, but also the number two merchandise exporter, just behind China and far ahead of the USA.

Moreover, the EU is by far the world’s leading foreign direct investor, with global FDI stock of nearly $17 trillion. Controlling such enormous assets around the world buys a lot of market influence. The global FDI stock of America and China, at $5.6 and $1.3 trillion respectively, pale by comparison.

While the above may not be widely known, what has received attention recently are Europe’s hugely influential anti-trust, taxation and privacy policies, often directed at big U.S. technology firms.

Danish Social Liberal Margarethe Vestager, EU Competition Commissioner since 2014, has been especially tough on big technology, raising alarms of protectionism and job-destroying overreach. She has already fined tech giants Facebook, Google and Qualcomm billions (as well as food service giants McDonald’s and Starbucks) while ordering Apple in 2016 to re-pay Ireland an eye-popping €13 billion ($14.7 billion) for unfair tax breaks.

She is loathed in U.S. boardrooms and by President Trump, but is a rising star in Europe where there is a strong consensus that the digital age requires new regulatory thinking and safeguards for citizen privacy, while multinationals need more oversight. A few months ago polls ranked her the most popular of the 28 EU Commissioners and a favorite to become the next European Commission President.

Decisions by European competition and tax authorities have long been as important as those in America, as a “thumbs down” on corporate strategy from either side usually torpedoes a project because both markets are critical to success. Now Chinese authorities also have an important say in global anti-trust.

When Ms. Vestager’s term ends in November she could be elected EC President, remain as Competition Commissioner, or move on to something else. If she remains in her position for another five-year term, she will continue to break new anti-trust ground.

But she or her successor should devote greater effort to coordinate and compromise with their counterparts in Washington and Beijing. The more the big three authorities can agree despite diverging business cultures and interests, the less disruptive those regulators will be to global economic growth. That could be a very positive trend in European market influence.

Mr. Oehme is President & CEO of The European-American Business Organization, Inc. (www.eabo.biz). Mr. Zindar is a Partner at the same.

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