European Regulators Make a Power Grab

"Europe's economy is falling behind. In 2008 the U.S. and Europe had nearly equal gross domestic products; by 2023 America's GDP was roughly 75% larger than Europe's. Years of slow growth haven't inspired Europeans to roll back regulations, and instead the European Union is trying to narrow the GDP gap by imposing its growth-killing rules on U.S. businesses.

In May the EU adopted the Corporate Sustainability Due Diligence Directive, which converts a range of international conventions into binding law enforceable on American companies. Don't be fooled by the benign branding -- these "corporate sustainability" measures include extreme policies that will hamstring U.S. firms.

The new regulation forces U.S. companies to adhere to the EU's "net zero" carbon emissions target and to comply with onerous labor-related standards -- even when they exceed the requirements of U.S. law. In addition to imposing severe financial penalties for violations, the rule establishes a private right of action that gives activists an incentive to bombard companies with frivolous lawsuits.

Though the regulation directly targets U.S. companies with European market revenue exceeding 450 million euros (about $500 million), it indirectly harms small and medium-size businesses too. It requires big companies to police their subsidiaries and supply chains for compliance with environmental, social and governance standards, even if these smaller firms otherwise wouldn't be covered by the rule. This approach is even more aggressive than the Securities and Exchange Commission's abandoned Scope 3 carbon-emissions proposal. It could pile on compliance costs for industries that rely on complex global supply chains.

Besides its economic effects, the regulation's extraterritorial reach is an affront to U.S. sovereignty. Major policies should be openly debated and decided by our elected representatives -- not dictated by unaccountable foreign lawmakers. European leaders may choose to self-immolate their economies on the altar of climate and social justice, but Americans shouldn't be dragged along without a say.

The Biden-Harris administration has done little to challenge the EU's overreach. Given the administration's expansive view of its regulatory powers, its willingness to cede authority to Europe should raise concerns. Its inaction could be interpreted as tacit approval of the EU's pushing through policies that U.S. progressives have failed to enact at home. The Federal Trade Commission has already come under fire for sidestepping Congress to impose its antitrust agenda via European regulators. Americans must not tolerate this circumvention of the democratic process.

This is no way for America, the world's largest economy and Europe's top trading partner, to lead or represent the interests of its citizens. The Biden-Harris administration must engage with the EU to delay implementation of its new regulation and eliminate its extraterritorial reach over U.S. businesses. If it doesn't, voters will have another reason in November to elect new leaders who will stand up for America's interests and economic freedom.

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Mr. Hagerty, a Republican, is a U.S. senator from Tennessee. Mr. Hill, a Republican, represents Arkansas's Second Congressional District." [1]

All three powers (EU, US and China) are trying to compete by using more of the levers available to the state these days.

1. European Regulators Make a Power Grab. Hagerty, Bill; Hill, French.  Wall Street Journal, Eastern edition; New York, N.Y.. 16 Oct 2024: A.15.