Navam Gupta (PGP/18/033)

Non Market Issues

Non market issues in the European Union may be categorized by the level at which they are addressed.
That can be the EU level, the National level or the Company specific level. Some important EU level
issues are euro crisis, deeper political integration, high unemployment, trade policy, harmonization of
fiscal policies, takeover policy. To take an example of takeover policy, the governments in several
member states held golden shares in companies which in effect gave the governments veto over any
takeover attempt. This impeded the free flow of capital with the EU.

At the National level, the biggest issue is the overall tax burden. Countries like Denmark, France and
Sweden have taxes-to-GDP ratio over 50%. The corresponding number for US and Japan is in the lower
thirties. Firms are concerned that such high taxes hinder their global competitiveness.

EU more readily uses precautionary regulation as compared to the US. One example is the policy
regarding Genetically Modified Food (GMF). EU restricted the use of GMF on the grounds that it might
pose health risks. This created a major trade conflict between EU and US.

Another example EU embarked on a campaign to force the testing of 30,000 industrial chemicals
either manufactured in or imported into EU. The testing would be required even if there were no
indication that there was any risk associated with the chemical. After intense lobbying, it was scaled
back.

US more frequently relies on voluntary approach to regulation. For example, in US when a woman
complained that Google Street View showed her cat, Google voluntarily agreed to blur the faces of
people visible in street view. The EUs top data protection officer, however, warned that Street View
would have to comply with data protection directive.

At the company level, a recent example is that of fake goods advertisements on online market place
(eBay). In US, the response was that the online market places are not responsible provided they
remove the ads when asked to do so by a producer. In the EU, the Court of Justice ruled that the online
market place provider was responsible for removing advertisements for fake goods if it played active
role in helping sellers in the promotion or advertising of fake goods.