Can They Make Us Do That?

A topic of some relevance to the teaching of Global Business is the different ways countries exercise their power. In my international business classes I sometimes discuss this in the context of regional integration and the power that attends large regional entities. Two relatively recent articles on a ruling against Microsoft highlight this phenomenon.

The Wall St. Journal in “Microsoft Loss In Europe Raises American Fears” minces few words in calling the ruling by the European Commission a stinging defeat for Microsoft (Microsoft was accused of improperly bundling a media player with its operating system and denying competitors information necessary for interoperability). The Journal further suggests that the EU regulatory machine has rewritten the rules for competition in Europe. According to the article, other American firms, including Intel and Rambus, also have reason to be concerned.

Another article from the Economist, “Brussels rules OK; How the European Union is becoming the world’s chief regulator,” further explores this ruling, and contrasts the “cost-benefit analysis” approach of the Americans to the “precautionary principle” employed by the Europeans with regard to regulatory policy. The authors conclude that the balance of power to set global standards is shifting away from the U.S. and toward the EU.  Even major transnational firms like Procter & Gamble are beginning to comply with EU directives. For now…

The growing importance of the Chinese market may soon have both Europe and the U.S. scrambling to comply with yet another global standard. Beijing has been pushing its own telecommunication standards for a while, and last year demanded that a Chinese inscription be added to tires along with the present international symbol. Western firms are reluctant to incur the additional and onerous retooling expense of compliance with this and other standards, but like Microsoft in the EU, may have no choice.

This topic generates good, if sometimes heated, discussion, and challenges my American students to consider the growing clout of other countries and regional entities. It also highlights the cultural and philosophical differences among different countries.