By Marc De Vos, the founder and CEO of Belgian think tank Itinera
Following long discussions, the European Union has reached a compromise that makes European big business responsible for respecting European human rights and environmental standards in its supply chain outside Europe. NGOs still think these so-called due diligence obligation for international suppliers does not go far enough, while business federations think the opposite. The fundamental question is this, however: should corporations act NGOs?
In a normal world, international treaties set the framework for commercial relations between companies from different countries. If the European Union wants to ensure that, say, Chinese companies do not supply European companies with products made in China in violation of human rights, it must stipulate human rights compliance in a trade treaty with China, agreeing on monitoring and enforcement mechanisms. If Europe wants to ensure environmental protection in the value chain of a product, it should agree on environmental standards in the countries and for the actors involved in its production, use or end of life.
Such agreements are, of course, diplomatically or politically difficult. If they prove unachievable, Europe can ban, restrict or tax trade with tariffs, including to compensate for harm. Or it can bet on the added value of trade to contribute to a convergence process of better protection among poorer trading partners through welfare gains. Something completely different is to mobilise companies to impose internationally European standards that the Union itself has not negotiated or dares to negotiate in the third countries concerned. At the political level, Europe thereby engages in rule imperialism: it unilaterally imposes its rules outside European borders.
Other countries are increasingly questioning EU’s use of trade policy to act as a “global regulator”, acc to EU’s director general @WeyandSabine during an address to the Institute of International and European Affairs on Tuesday. https://t.co/GwqZGWqKGw
— Frans Köster (@franskoster070) April 24, 2024
The European Union considers rule imperialism to be its strength. Europe sees itself as the standard-setter for the world. In privacy, in AI, in sustainability, in human rights and far beyond: the Union makes the most stringent rules and, because of the size of the European market, expects them to become de facto world standards for companies and countries outside Europe. America innovates, China replicates and Europe regulates. In fact, we are proud of that. If that fails, we apparently expect European companies to export those standards themselves. The Union recycles business for a political agenda and makes those companies subcontractors to politics, with predictable frustration in China and beyond.
The politicisation of business is not new: it is a real trend. In financial transactions, banks are replacing the government in controlling and fighting fraud, money laundering and the like. Climate policy has literally sucked all economic players into an agenda of planned sustainability that has supplanted the open model of emission standards and taxes. Businesses themselves also engage in politicisation when they promote diversity, inclusion and other social objectives as belonging to the essence of entrepreneurship or business organisation.
The politicisation of business practices blurs the distinction between the public and private spheres in our time. We all feel our private existence constricted by political norms on, say, non-discrimination, speech or religious observance, not to mention the rights and duties with which the welfare state moulds our entire lives. The value of the separation between public and private space, between politics and economics, between government and market, for society, for democracy and for the economy, is getting squeezed. The price of this is economic welfare loss and social polarisation.
Originally published in Dutch in Belgian magazine Trends
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