SO WE LIVE in a globalized world, which impacts on jobs, wages, consumers, and producers. All of which already have received too much attention to require further comment by me.
But what we have not fully considered is the extent to which globalized markets produce pressures for globalization of government policies. And some policymakers and officials want to build dikes to prevent the regulatory policies of other countries from leaking into theirs. In Europe, the big worry is that what the European Union considers excessively burdensome financial regulation will seep into Europe's financial markets. So Ed Balls, the new Economic secretary to the British Treasury, and the chancellor of the exchequer's principal ally, is assuring the City that in the event of a takeover of the London Stock Exchange by NASDAQ, now deemed likely, the government will save the City from the dreaded heavy hand of American regulation, most especially the hated Sarbanes-Oxley Act.
Stock exchanges in America are facing such competitive pressure from London's less-heavily regulated exchanges that they are scrambling to lighten the regulatory load. Secretary of the Treasury Hank Paulson and New York Mayor Mike Bloomberg, both intimately familiar with the working of financial markets, see the globalization process as a threat to the ability of New York to compete with London in the competition for share listings. So they are each initiating studies of ways to make Wall Street less regulated, and therefore more competitive. Which in practice, means getting Congress to modify Sarbanes-Oxley by exempting smaller firms from the act's requirements. That chore might be made easier by the impending retirement from Congress of both authors of that now-controversial legislation.
In addition, both the Treasury secretary and the mayor are putting pressure on the Securities and Exchange Commission to take a more relaxed view of the procedures companies must adopt to comply with SOX, as it is known (or "Darn Sox", as the Economist dubs it).
This is only one, albeit the most prominent, of the consequences of the globalization of policy. Tax is another. More and more companies operating in high-tax venues are casting envious eyes on lower-tax Ireland and a variety of island tax havens. Britain's chancellor Gordon Brown has always resisted calls of high-tax E.U. countries for "tax harmonization," fearing that meant imposing on the United Kingdom the stultifying tax regime of the European Union. Now the shoe is on the other foot, and the market is attempting to impose on him the low-tax regime of countries that British companies are beginning to consider as havens from the Inland Revenue's apparently insatiable desire for funds, and the intrusiveness of its 70,000 tax collectors. We are witnessing on an international scale the sort of tax competition that has always existed among our states in their scramble to attract business. (Although that competition has most often been on a one-shot basis when a business was mulling over a decision to locate a new plant.)
Meanwhile, the U.S. business community is calling for all manner of harmonizations. The, shall we say, looser policies of many countries towards the protection of intellectual property allows foreign competitors to steal American technology, audiovisual content, and designs. So firms in industries from pharmaceuticals to film-making want to harmonize rules on the use of IP--which is a bridge too far for China, where it is possible to buy the DVD of a film for $1 on the day of its U.S. theatrical release. Intellectual property disputes are also a source of some trade tension between U.S. pharmaceutical companies and Australia, a country somewhat less deferential to the patent claims of America's drugs companies.
For the American businessmen with whom I spoke the big worry is competition policy. Ever since the European Union prevented the merger of two American companies, GE and Honeywell, and decided to be tougher on Microsoft than the American government's reluctant antitrust enforcers, European competition policy has had a very high a profile in the States. Some American CEOs think, or say that they think, that the European Union uses competition law to prevent American companies from competing vigorously with home-grown firms. Never mind that most of the complaints against Microsoft, and now against Intel, have come from American companies challenging the competitive tactics of rivals they believe to be "dominant" under E.U. law.
American firms are also finding that doing business in a globalized world subjects them to the merger policies of many nations. Indeed, one expert in mergers and acquisitions tells me that when a deal is struck, he now sets up a giant board with a column for each of the dozens of nations that have antitrust statutes which have to clear the transaction of any company that operates on a transnational basis. Authorities in Australia, along with those in the United States and the European Union, are always top of the list of his concerns.
Then there is food. Europe and America can't agree which foods are safe and which are not. The disputes shift from time to time, going from beef or other specific foods, to the broader category of genetically modified crops--which are considered safe for American stomachs, but not safe enough to eat in many E.U. countries, despite a World Trade Organization finding that there is no sound scientific basis for eschewing the chewing of GM foods.
Finally, there is the globalization of product markets, with made-in-China sneakers flooding America, made-in-China soccer balls flooding Britain, and made-in-China shoes flooding European markets. This phenomenon is leading to a call from America and Europe for harmonization of labor standards. America's trade unions are pressuring the government's trade negotiators to demand internationalization of U.S. work-place standards, while Europeans want the competition from Britain's harder-working labor force ended by preventing workers in the United Kingdom from putting in more hours at work than lazier French and German workers.
There's more, but you get the idea. The European Union wants to impose its more rigorous competition policy on American firms, who want to impose their more rigorous financial regulations on European firms. The Americans and Europeans want to harmonize China's lax-to-nonexistent IP protection regime with their own. Britain wants protection from American financial regulation and from E.U. labor market regulation, and worries that harmonized tax policies might force taxes up if France and Germany do the harmonizing, or down if Ireland plays that role. And every nation wants to impose its own view of appropriate environmental policies on every other, with Europe last week threatening to impose emissions taxes on U.S. airplanes flying into and out of E.U. air space.
Such are the business complexities created by globalized markets.
Irwin M. Stelzer is director of economic policy studies at the Hudson Institute, a columnist for the Sunday Times (London), a contributing editor to The Weekly Standard, and a contributing writer to The Daily Standard.