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Home , European Union law, Laurent Fabius, United States of Europe

Session 1: Introduction

Welcome to : Comparative !

For our first meeting on Tuesday, August 23, please read the following extracts from:

Robert Schuman, “The Schuman Declaration” (1950) Margaret Thatcher, “A Family of Nations” (1988) Jürgen Habermas, “Why Needs a ” (2001) Anu Bradford, “The Brussels Effect” (2012) Editorial: How the European financial crisis affects you (USA Today June 10, 2012) East-west tensions break out over call to migrant burden (The Financial Times, August 31, 2015) EU Files Additional Formal Charges Against Google (Wall Street Journal, July 14 2016) Rules and Britannia; After the vote (I) (The Economist, July 9, 2016) Picking losers; After the Brexit vote (II) (The Economist, July 9, 2016)

The assigned casebook will be:

Bermann et al., Cases and Materials on , (4th edition)

For the first class, please read from the casebook: pp. v-vii, 3-9, 12-26. These pages are included in this packet.

1 Schuman Declaration of 9 May 1950

This is the full text of the proposal, which was presented by the French foreign minister and which led to the creation of what is now the European Union.

World cannot be safeguarded without the making of creative efforts proportionate to the dangers which threaten it.

The contribution which an organized and living Europe can bring to civilization is indispensable to the maintenance of peaceful relations. In taking upon herself for more than 20 years the role of champion of a united Europe, has always had as her essential aim the service of peace. A united Europe was not achieved and we had war.

Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto . The coming together of the nations of Europe requires the elimination of the age-old opposition of France and . Any action taken must in the first place concern these two countries. With this aim in view, the French Government proposes that action be taken immediately on one limited but decisive point.

It proposes that Franco-German production of coal and steel as a whole be placed under a common High Authority, within the framework of an organization open to the participation of the other countries of Europe.

The pooling of coal and steel production should immediately provide for the setting up of common foundations for economic development as a first step in the of Europe, and will change the destinies of those regions which have long been devoted to the manufacture of munitions of war, of which they have been the most constant victims.

The solidarity in production thus established will make it plain that any war between France and Germany becomes not merely unthinkable, but materially impossible. The setting up of this powerful productive unit, open to all countries willing to take part and bound ultimately to provide all the member countries with the basic elements of industrial production on the same terms, will lay a true foundation for their economic unification.

This production will be offered to the world as a whole without distinction or exception, with the aim of contributing to raising living standards and to promoting peaceful achievements. [...] In this way, there will be realized simply and speedily that fusion of interest which is indispensable to the establishment of a common economic system; it may be the leaven from which may grow a wider and deeper community between countries long opposed to one another by sanguinary divisions.

2 Margaret Thatcher Speech to the ("The ")

Below are extracts from a speech by British Conservative politician and Prime Minister Margaret Thatcher, delivered to the College of Europe on September 20, 1988

BRITAIN AND EUROPE Mr. Chairman, you have invited me to speak on the subject of Britain and Europe. Perhaps I should congratulate you on your courage. If you believe some of the things said and written about my views on Europe, it must seem rather like inviting Genghis Khan to speak on the virtues of peaceful coexistence! I want to start by disposing of some myths about my country, Britain, and its relationship with Europe and to do that, I must say something about the identity of Europe itself. Europe is not the creation of the of Rome. Nor is the European idea the of any group or institution. We British are as much heirs to the legacy of European culture as any other nation. Our links to the rest of Europe, the continent of Europe, have been the dominant factor in our history. The European Community is one manifestation of that European identity, but it is not the only one. We must never forget that east of the , people who once enjoyed a full share of European culture, and identity have been cut off from their roots. We shall always look on Warsaw, Prague and Budapest as great European cities. Nor should we forget that European values have helped to make the of America into the valiant defender of freedom which she has become.

WILLING COOPERATION BETWEEN SOVEREIGN STATES My first guiding principle is this: willing and active cooperation between independent sovereign states is the best way to build a successful European Community. To try to suppress nationhood and concentrate power at the centre of a European conglomerate would be highly damaging and would jeopardise the objectives we seek to achieve. Europe will be stronger precisely because it has France as France, as Spain, Britain as Britain, each with its own customs, traditions and identity. It would be folly to try to fit them into some sort of identikit European personality. Some of the founding fathers of the Community thought that the United States of America might be its model. But the whole history of America is quite different from Europe. People went there to get away from the intolerance and constraints of life in Europe. They sought liberty and opportunity; and their strong sense of purpose has, over two centuries, helped to create a new unity and pride in being American, just as our pride lies in being British or Belgian or Dutch or German. I am the first to say that on many great issues the countries of Europe should try to speak with a single voice. I want to see us work more closely on the things we can do better together than alone.

3 Europe is stronger when we do so, whether it be in trade, in defence or in our relations with the rest of the world. But working more closely together does not require power to be centralised in Brussels or decisions to be taken by an appointed . Indeed, it is ironic that just when those countries such as the , which have tried to run everything from the centre, are learning that success depends on dispersing power and decisions away from the centre, there are some in the Community who seem to want to move in the opposite direction. We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level with a European super-state exercising a new dominance from Brussels.

ENCOURAGING CHANGE My second guiding principle is this: Community policies must tackle present problems in a practical way, however difficult that may be. For example, the task of reforming the Common Agricultural Policy is far from complete. Certainly, Europe needs a stable and efficient farming industry. But the CAP has become unwieldy, inefficient and grossly expensive. Production of unwanted surpluses safeguards neither the income nor the future of farmers themselves.

EUROPE OPEN TO ENTERPRISE My third guiding principle is the need for Community policies which encourage enterprise. If Europe is to flourish and create the jobs of the future, enterprise is the key. The basic framework is there: the itself was intended as a for Economic Liberty. But that it is not how it has always been read, still less applied. The lesson of the economic history of Europe in the 70's and 80's is that central planning and detailed control do not work and that personal endeavour and initiative do. That a State-controlled economy is a recipe for low growth and that free enterprise within a framework of law brings better results. The aim of a Europe open to enterprise is the moving force behind the creation of the Single European Market in 1992. By getting rid of barriers, by making it possible for companies to operate on a European scale, we can best compete with the United States, Japan and other new economic powers emerging in Asia and elsewhere. And that means action to free markets, action to widen choice, action to reduce government intervention. Our aim should not be more and more detailed from the centre: it should be to deregulate and to remove the constraints on trade. And before I leave the subject of a , may I say that we certainly do not need new which raise the cost of employment and make Europe's labour market less flexible and less competitive with overseas suppliers. If we are to have a European Company , it should contain the minimum regulations.

4 And certainly we in Britain would fight attempts to introduce collectivism and corporatism at the European level—although what people wish to do in their own countries is a matter for them.

EUROPE OPEN TO THE WORLD My fourth guiding principle is that Europe should not be protectionist. The expansion of the world economy requires us to continue the process of removing barriers to trade, and to do so in the multilateral negotiations in the GATT. It would be a betrayal if, while breaking down constraints on trade within Europe, the Community were to erect greater external protection. We must ensure that our approach to world trade is consistent with the liberalisation we preach at home. We have a responsibility to give a lead on this, a responsibility which is particularly directed towards the less developed countries. They need not only aid; more than anything, they need improved trading opportunities if they are to gain the of growing economic strength and independence.

EUROPE AND DEFENCE My last guiding principle concerns the most fundamental issue—the European countries' role in defence. Europe must continue to maintain a sure defence through NATO. There can be no question of relaxing our efforts, even though it means taking difficult decisions and meeting heavy costs. It is to NATO that we owe the peace that has been maintained over 40 years. We must strive to maintain the United States' commitment to Europe's defence.

5

Jürgen Habermas

WHY EUROPE NEEDS A CONSTITUTION (extracts)

Below are extracts from an article by German sociologist and philosopher Jürgen Habermas, published in the New Left Review in September of 2001

There is a remarkable contrast between the expectations and demands of those who pushed for European unification immediately after World War II, and those who contemplate the continuation of this project today—at the very least, a striking difference in rhetoric and ostensible aim. While the first generation advocates of did not hesitate to speak of the project they had in mind as a ‘’, evoking the example of the USA, current discussion has moved away from the model of a federal state, avoiding even the term ‘federation’. Does this shift in climate reflect a sound realism, born of a learning-process of over four decades, or is it rather the sign of a mood of hesitancy, if not outright defeatism?

More than two hundred years later, we are not merely heirs to a long established practice of constitution-making; in a sense, the constitutional question does not provide the key to the main problem we have to solve. For the challenge before us is not to invent anything but to conserve the great democratic achievements of the European nation-state, beyond its own limits. These achievements include not only formal guarantees of civil rights, but levels of social , education and leisure that are the precondition of both an effective private autonomy and of democratic citizenship. The contemporary substantification’ of law means that constitutional debates over the future of Europe are now increasingly the province of highly specialized discourses among economists, sociologists and political scientists, rather than the domain of constitutional and political philosophers.

On the other hand, we should not underestimate the symbolic weight of the sheer fact that a constitutional debate is now publicly under way. As a political collectivity, Europe cannot take hold in the consciousness of its citizens simply in the shape of a common currency. The intergovernmental arrangement at Maastricht lacks that power of symbolic crystallization which only a political act of foundation can give.

An ever-closer union?

Let us then start from the question: why should we pursue the project of an ‘ever- closer Union’ any further at all? Recent calls from Rau, Schroeder and Fischer—the German President, Chancellor and Foreign Minister—to move ahead with a European Constitution have met sceptical reactions in Great Britain, France and most of the other member-states. But even if we were to accept this as an urgent and desirable project, a second and more troubling question arises. Would the European Union in its present state meet the most fundamental preconditions for acquiring the constitutional shape of any

6 kind of federation—that is, a community of nation-states that itself assumes some qualities of a state? Why should we pursue the project of a constitution for Europe? Let me address this question from two angles: (i) immediate political goals, and (ii) dilemmas stemming from virtually irreversible decisions of the past.

If we consider the first, it is clear that while the original political aims of European integration have lost much of their relevance, they have since been replaced by an even more ambitious political agenda. The first generation of dedicated - federalists set the process in train after World War II with two immediate purposes in mind: to put an end to the bloody history of warfare between European nations, and to contain the potentially threatening power of a recovering post-fascist Germany.

Of course, there was always a third strand in European integration— the straightforward economic argument that a unifi ed Europe was the surest path to growth and welfare. Since the Coal and Steel Community of 1951, and the subsequent formation of Euratom and the European Economic Community of 1958, more and more countries have become gradually integrated through the free exchange of people, goods, service and between them—a process now completed by the single market and single currency. The European Union frames an ever denser network of trade- relations, ‘foreign’ direct investment, financial transactions and so forth. Alongside the US and Japan, Europe has gained a rather strong position within the so-called Triad. Thus the rational expectation of mutual benefits within Europe and of differential competitive advantages on world markets could, to date, provide a legitimation ‘through outcomes’ for an ever-closer Union.

But even making allowances for the consciousness-raising impact of the Euro, which will soon become a unifying symbol in everyday life across the continent, it seems clear that henceforward economic achievements can at best stabilize the status quo. Economic expectations alone can hardly mobilize political support for the much riskier and more far-reaching project of a political union—one that deserved the name.

Beyond a ‘mere market’

This further goal requires the legitimation of shared values. There is always a trade-off between the efficiency and legitimacy of an administration. But great political innovations, such as an unprecedented design for a state of nation- states, demand political mobilization for normative goals. Constitution-making has hitherto been a response to situations of crisis. Where is such a challenge, we might ask, in today’s rather wealthy and peaceful societies of Western Europe? In Central and Eastern Europe, by contrast, transitional societies striving for inclusion and recognition within the Union do face a peculiar crisis of rapid modernization—but their response to it has been a pronounced return to the nation-state, without much enthusiasm for a transfer of parts of their recently regained national sovereignty to Brussels. The current lack of motivation for political union, in either zone, makes the insufficiency of bare economic calculations all the more obvious. Economic justifications must at the very least be combined with ideas of a different kind—let us say, an interest in and affective

7 attachment to a particular ethos: in other words, the attraction of a specific way of life.

The last wave of economic did not stem from any inherent evolution of the system: it was the product in large measure of successive GATT rounds—that is, of conscious political action. Democratic governments should therefore also have the chance, at least in principle, to counter the undesired social consequences of globalization by complementary social and infrastructural policies.

Such policies have to cope with the needs of two different groups. Their purpose must be to bridge the time-gap for short-run losers by investments in capital and temporal transfers, and to offer permanent compensation to long-run losers in—for example—the form of a basic income scheme or negative income tax. Since neither group is any longer in a strong veto position, the implementation of such designs is a difficult task. For the decision on whether or not to maintain an appropriate level of general social welfare largely depends on the degree of support for notions of distributive . But normative orientations move majorities of voters only to the extent that they can make a straightforward appeal to ‘strong’ traditions inscribed in established political cultures.

In Western Europe, or at any rate its continental nations, this assumption is not quite unfounded. Here the political tradition of the workers’ movement, the salience of Christian social doctrines and even a certain normative core of social still provide a formative background for social solidarity. In their public self-representations, Social and Christian Democratic parties in particular support inclusive systems of social security and a substantive conception of citizenship, which stresses what John Rawls calls ‘the fair ’ of equally distributed rights. In terms of a comparative cultural analysis, we might speak of the unique European combination of public collectivisms and private individualism. As Göran Therborn remarks: ‘the European road to and through modernity has also left a certain legacy of social norms, refl ecting European experiences of class and gender . . . , trade unions, public social services, the rights of women and children are all held more legitimate in Europe than in the rest of the contemporary world. They are expressed in social documents of the EU and of the of Europe’.

But if we grant this assumption, there remains the question of why national governments should not be in a better position to pursue countervailing policies more effectively than a heavy-handed EU bureaucracy. At issue here is the extent to which intensified global competition affects the scope of action of national governments.

National governments, whatever their internal profiles, are increasingly entangled in transnational networks, and thereby become ever more dependent on asymmetrically negotiated outcomes. Whatever social policies they choose, they must adapt to constraints imposed by deregulated markets—in particular global financial markets. That means lower taxes and fiscal limits which compel them to accept increasing inequalities in the distribution of the gross national product. The question

8 therefore is: can any of our small or medium, entangled and accommodating nation states preserve a separate capacity to escape enforced assimilation to the social model now imposed by the predominant global economic regime?

9 Anu Bradford, The Brussels Effect, Northwestern Law Review (2012)

It is common to hear Europe described today as the power of the past. Europe is perceived to be weak militarily. Its relative economic power is declining as Asia’s is rising. Its common currency may be on the verge of disintegrating. On the world stage, the European Union is thought to be waning into irrelevance due to its inability to speak with one voice. Given its seemingly declining power status and inability to get its way alone, the EU must retreat to weak multilateralism and international institutions.

Contrary to this prevalent perception, this paper highlights a deeply underestimated aspect of European power that the discussion on globalization and power politics overlooks: Europe’s unilateral power to regulate global markets. The European Union sets the rules for global markets across a range of areas, such as food, chemicals, competition, and the protection of privacy. EU regulations have a tangible impact on the everyday lives of citizens around the world. Few Americans are aware that EU regulations dictate the make-up they apply in the morning (EU ), the cereal they eat for breakfast (EU rules on Genetically Modified Organisms, “GMOs”), the software they use on their computer (EU Antitrust ), and the privacy settings they adjust on their Facebook page (EU Privacy Directive). And that’s just before 8:30 a.m. The EU also sets the rules governing the interoffice phone directory they use to call a co-worker (EU Privacy Laws, again). EU regulations dictate what kind of air conditioners Americans use to cool their homes (EU electronic waste management and recycling rules) and are even the reason why their children no longer find soft-plastic toys in their McDonalds happy meals (EU Chemicals Directive).

10 Editorial: How the European financial crisis affects you

6/10/2012 By Jean-Pierre Filatriau

The United States has deep cultural ties to Europe. But on economic matters, Americans have long harbored a standoffish, even smug, attitude toward a continent that is less entrepreneurial and more regulated than their own.

Like it or not, however, Europe's inability to resolve its financial problems has become the single biggest factor influencing U.S. employment and stock markets. President Obama acknowledged this Friday in calling on a reluctant Congress to enact a jobs bill. A Europe-led downturn could cost him his own job in November.

Europe accounts for 21% of all U.S. exports and roughly 7.1 million jobs, making a serious slowdown there keenly felt here, particularly in sectors such as tourism, technology, food and apparel. More ominously, Europe's precarious financial state — with several nations struggling to avoid default and a banking system unprepared for that event — is giving U.S. employers and investors a serious case of the jitters.

"The crisis in Europe has affected the U.S. economy by acting as a drag on our exports, weighing on business and consumer confidence, and pressuring U.S. financial markets and institutions," Fed Chairman Ben Bernanke told Congress last week.

Perhaps the most tangible way that Europe's woes can be measured is in U.S. stocks. On any given day, chances are good that Europe is behind up and downs for your 401(k). On down days, investors are pessimistic that Europe's problems will be resolved in a way that avoids a calamitous financial meltdown. On up days, they see hope.

Behind these gyrations is a realization that debt defaults could trigger a 2008-like calamity, bringing down major European banks with contagion here because the world financial system is interlinked. Just this weekend, European authorities — at U.S. urging — put up $125 billion to rescue Spanish banks in danger of failing because of a real collapse. Sound familiar?

That rescue was just the latest stopgap measure. Europe, decentralized and unable to move quickly, never forced its banks to retain adequate capital for emergencies as the U.S. did. So it leaps from crisis to crisis — Ireland, , , Spain and, probably next, — putting fingers in dikes.

Meanwhile, measures have pushed the continent into recession, and in some cases depression. Spanish unemployment is at 25%, and Greeks appear likely to see the value of their savings cut in half. It's a vision of what might have happened here had the 2008 crisis not been addressed so aggressively.

11 The U.S. has many advantages over Europe, particularly southern Europe, where heavy regulation, excessive labor protections and ineffective government have produced anemic economies. America has deposit insurance to deter bank runs, like those starting in Greece and Spain. Moreover, the USA is fortunate not to have the nightmare faced by 17 nations that share a common currency without a common government, and needing unanimous consent to make even modest policy changes.

But even taking these things into consideration, the crisis in Europe suggests that the U.S. response to 2008 — fiscal and monetary stimulus, short-term focus on growth over reducing deficits, and a push to stabilize banks — is the better one. Or to be more precise, the less bad one. Though U.S. economic growth of 1.9% and unemployment of 8.2% is dispiriting, it is, sadly, what passes for success among developed economies these days.

No simple answer to Europe's crisis exists. The best case is that it serves as a drag on the economy for some time to come. The worst case is that a messy breakup of the spawns a new financial meltdown. Either way, Europe's choices will continue to serve as a useful measure of our own.

12 The Financial Times - August 31, 2015 East-west tensions break out over call to share migrant burden

Jeevan Vasagar in , Andrew Byrne in Budapest and Alex Barker in Brussels

Hungary's government has started to construct a 175-km-long (110-mile-long) fence on its border with Serbia in order to halt a massive flow of migrants who enter the EU via and head to western Europe. Long-simmering tensions between Europe’s east and west over how to handle a massive influx of migrants burst back into the open after Chancellor on Monday warned Germany’s eastern neighbours that the bloc’s prized passport-free zone was at risk unless they shouldered more of the burden.

Hundreds of thousands of migrants, including many fleeing the war-torn Middle East, have crossed the Mediterranean and Aegean in recent months to seek refuge in the EU, with their ultimate destination often the economically prosperous north.

But the mass movement has strained Europe’s existing arrangements on migration, inflamed the politics of immigration, raised doubts over maintaining open-borders, and prompted fraught debate over creating a system for routinely sharing refugees.

Ms Merkel rebuked eastern European states reluctant to accept Muslim asylum seekers and cast the refugee crisis as a test of the union’s founding values. “I believe that our values in Europe are based on the dignity of every individual, without starting to say — ‘we don’t want Muslims, we are a Christian land’,” she said. Warning that the passport- free was at risk if the EU could not agree a fair distribution of refugees, Ms Merkel called on Europe to collectively accept responsibility for hosting refugees.

Yet with a special summit of interior ministers just a fortnight away, the EU appeared increasingly at odds. Slovak prime minister Robert Fico on Monday strongly rejected criticism from western EU capitals, accusing other European leaders of not “telling the truth” about the background of the majority of migrants. “Ninety-five per cent of these people are economic migrants . . . We will not assist this foolish idea of accepting anybody regardless of whether or not they are economic migrants,” he said.

Strains from the crisis were evident on Monday along Hungary’s border with , a thoroughfare for thousands of migrants. Claiming the controls were consistent with passport-free travel, Austria introduced traffic spot-checks causing long tailbacks — part of its response to the deaths of 71 migrants who suffocated in a lorry on the - Budapest highway.

We will not assist this foolish idea of accepting anybody regardless of whether or not they are economic migrants - Robert Fico, ’s prime minister -

13 Hundreds of migrants also boarded overcrowded trains bound for Vienna and Munich at Budapest rail stations on Monday, as frustration among thousands camped in the city appeared to prompt an easing of controls by Hungarian authorities.

Budapest Keleti station has become a makeshift refugee camp for thousands of migrants in effect trapped in Hungary by stringent passport checks on western-bound trains. Many seek covert means of reaching Austria, by car or lorry. Crowds confronted at the station on Saturday, chanting “Let us go!”

Police guarding the trains on Monday allowed hundreds of migrants, many of them without passports or visas, to board the carriages. By early afternoon, Austrian authorities had given orders to halt two trains at Hegyeshalom, a Hungarian town near the Austrian border, citing reports of “overcrowding”. Hungary has struggled to deal with more than 140,000 migrants who have entered the country this year despite a contentious 175km razor-wire fence built to seal its southern border.

Laurent Fabius, France’s foreign minister, singled Budapest out for criticism on Sunday, blasting as “scandalous” the response of central and eastern European countries to the migrant crisis.

The EU is struggling to respond to a growing refugee crisis that has resulted in an estimated 1,600 deaths in the Mediterranean since the beginning of the year

Hungarian officials dismissed Mr Fabius’ “ignoble” slurs over what they see as legal means to protect the EU’s external borders. “It’s strange that French authorities are criticising the border fence when they are building their own wall at Calais,” said Levente Magyar, state secretary at the ministry of foreign affairs.

Germany expects to receive 800,000 asylum seekers this year, a fourfold increase in arrivals equivalent to about 1 per cent of its population. The numbers are confronting Ms Merkel with one of her most serious domestic political crises, with public resources under strain and the far right mounting a violent backlash.

The chancellor has sought to steer Germany’s debate over refugees and immigration in a liberal direction, challenging the far right while recasting Germany as “ein Einwanderungsland” — a country of immigration.

“The world sees Germany as a land of hope and opportunities. That hasn’t always been the case,” she said.

14 The Wall Street Journal, July 14, 2016

EU Files Additional Formal Charges Against Google: Google’s advertising and shopping services have attracted more scrutiny in Brussels By NATALIA DROZDIAK and SAM SCHECHNER

BRUSSELS—The European Union’s antitrust regulator hit Alphabet Inc.’s Google with its fourth round of formal charges in just over a year, threatening the Silicon Valley company with years of litigation on multiple fronts.

The on Thursday issued a so-called statement of objections accusing Google of breaching EU antitrust rules by restricting how a website that offers a Google search function can show advertisements sold by other companies. allegations last year

At the same time, the EU issued a supplementary charge sheet to boost its allegations last year that the U.S. technology firm uses its eponymous search engine to harm competitors of its comparison-shopping service.

The latest charges augment formal accusations in April that Google abuses the dominance of its Android mobile-operating system by “strong-arming” smartphone makers and telecom firms into pre-installing its search engine as the default on mobile devices.

Each of the charges aims at a relatively narrow slice of the internet behemoth’s $68 billion-a-year advertising business. But taken together, the charges are building into a broader threat to the Mountain View, Calif., firm.

Each case could lead to fines of up to 10% of Google’s revenue and orders to change its behavior. But perhaps just as damaging, each could be fought out over years, blunting Google’s ability to offer—or profit from—new products across the EU, one of its largest markets after the U.S.

In response to the latest charges, a Google spokesman said, “We believe that our innovations and product improvements have increased choice for European consumers and promote competition. We’ll examine the commission’s renewed cases and provide a detailed response in the coming weeks.”

Police in France and Spain raided the company’s local offices in tax probes in recent months, and executives—including Google’s general —are facing charges of evading taxes in Italy. The company is in litigation in France over an order by a privacy regulator to apply “right to be forgotten” globally.

For Google, the growing number of cases—combined with new interest from U.S. regulators—could signal a new normal with which the company will have to cope.

15 The possibility of a prolonged antitrust battle has drawn allusions to the fight a decade ago between the EU and Microsoft Corp. The software maker eventually was fined €2.2 billion ($2.4 billion). But nearly two decades of fighting also led the Redmond, Wash., company to adopt more stringent processes to building new products, baking what some observers say is conservatism into its DNA.

Google for more than two years tried to negotiate a settlement with the EU. But outcries from competitors, as well as from politicians in Germany and France, led the EU in late 2014 to reject Google’s offers as insufficient.

People close to Google have said the firm is confident in its arguments and ready to fight antitrust charges on multiple fronts. But as the number of cases mount, some say the company will face a reckoning about whether it should return to the bargaining table to work out a settlement with the EU.

“Google will think seriously about a settlement as it finds multiple aspects of its business under attack, but the question is whether Google can offer enough to make the European Commission happy,” said Michael Carrier, a professor of antitrust law at Rutgers University in New Jersey.

Some complainants are worried about the potential for a lengthy process because they fear rival services won’t still exist by the time the commission orders Google to change its behavior.

In the advertising case filed Thursday, the EU specifically targeted part of Google’s ad service called AdSense, through which the company provides third-party websites search functions embedded in their sites. The EU accuses Google of imposing restrictions on the way those third-party websites display search ads from Google’s rivals.

Google obliges web operators to take on a minimum number of search ads from Google and to display them in a prominent position on the webpage, according to the EU.

The new case strikes closer than past EU charges to Google’s core online advertising business, which generated more than 90% of its revenue in 2015. But it still steers clear of Google’s main cash cow: selling targeted advertisements on its own websites based on what people are searching.

Google pulled in $15 billion—or about 20% of its overall revenue—in 2015 by selling ads on other companies’ websites. It isn’t clear how much of that revenue came from the AdSense ads in search results. The company has said for more than a year that AdSense for search is a declining “legacy” business from which it is pruning websites.

The supplementary charge sheet related to shopping fine-tunes the commission’s argument in its previous charges to address arguments Google made in its response last summer. Supplementary charges are typically issued so as to ensure that any final EU decision can withstand scrutiny in , where the company will most likely challenge it.

16

17 Rules and Britannia; After the Brexit vote (I) The Economist. (July 9, 2016)

Uncertainty, especially about regulation, spreads among industries most exposed to Britain

NO, GOOGLE is unlikely to move jobs to continental Europe, nor invest more there, said Eric Schmidt, the chairman of Alphabet (parent of the online giant) at a conference in Paris last week. Just because Britons voted to quit the European Union, businesses need not react hastily. But he added a warning that Britain and the EU must not let a digital gap open up; they need as "great a unification as possible" in technology regulation.

Tech bosses fret that Britain and the EU will end up with different policies towards their most important resource: data. On July 12th the EU is expected, at last, to approve "Privacy Shield", an agreement to let companies transfer personal data across the Atlantic. (In October the European Court of Justice struck down an old deal as unsafe.) But if Britain leaves the union, nobody knows whether the new shield will cover it, too. So might the EU block data flows across the Channel, unless Britain negotiates a privacy agreement of its own? Since some in Brussels are suspicious of intrusive British surveillance, that could prove messy.

Uncertainty leaves not just big cloud-computing firms such as Google unsure where to put data centres. After the Brexit vote, the U-word is muttered everywhere in boardrooms--from carmaking to airlines, energy to telecoms. Shareholders are already feeling the pain, although not all recent losses on stockmarkets are due to Britain's (see chart).

Before the vote, European corporate leaders gave surprisingly little thought to what a split might mean for them. Matthias Wissmann, head of VDA, a German car lobby, says car firms made "no contingency plans" and the result caught them unaware despite Germany's export of [euro]89 billion ($99 billion) of goods, especially cars, to Britain each year. A survey, pre-referendum, by BDI, Germany's industry federation, found that nearly 70% of firms had no clue how to respond to Brexit. The boss of a big French defence firm says nobody, banks aside, made serious plans for it, beyond currency hedging.

Regulatory uncertainty will dog firms for at least as long as Britain and the EU are negotiating a divorce agreement, which will determine whether British access to the single market will continue. Airlines are particularly exposed. Since the 1990s EU-based ones have been free to fly between any European airports without regulatory approval. Open-skies agreements with America and other third parties give EU airlines flexibility on long-haul routes, too. Outside the single market separate regulations kick in, for example on ownership and the need for official route approval. Firms with extensive continental operations, such as easyJet or IAG, will be sorely tempted to shift headquarters inside the EU. Dreams of a "European Single Sky", to centralise air-traffic

18 control and cut costs, are fading on the assumption that liberalising Brits will no longer push them.

Aircraft-makers, too, are facing a lack of regulatory clarity. Britain boasts the world's second-largest aerospace industry, which, among other things, builds wings for Airbus aircraft. Before the vote, the firm already warned that Brexit could jeopardise future investment. Nobody knows whether the EU's "launch aid" for aerospace, which helps with the setting up of big new plants, will still apply to Britain.

Energy is another big source of uncertainty. On July 4th Electricite de France, a French utility, reiterated its plan to build an [pounds sterling]18 billion ($23 billion) nuclear- power station, Hinkley Point C, in Britain. The project is underpinned by British state aid, in the form of long-term electricity and a debt guarantee. The European Commission agreed to these subsidies in 2014, but that could change if relations sour. Even before the vote, Austria's anti-nuclear government had brought the matter to the European Court of Justice. Britain, at least, might be blocked from selling subsidised surplus electricity from Hinkley Point into the European grid, adding to doubts over Hinkley Point's viability.

Pharmaceutical companies, for their part, were expecting a " system" for Europe by 2018, with an intellectual-property court in Britain specialising in drugs and chemicals. This would have brought work resolving legal disputes into , and boosted the pharma credentials of a country that is already home to the EU body that approves drugs for the entire European market. That now looks unlikely: Britain may not ratify the agreement, and will probably not get the court.

Similarly, in the chemicals industry, firms fret that British partners may no longer be covered by a EU framework, REACH, by which chemicals registered centrally can be sold in all member states. An industry insider in Germany says that without shared standards "customers may ask questions about the security of the supply chain", and may be put off trading with British suppliers or investing in Britain.

The list goes on. In telecoms it is unclear whether British mobile carriers would be free to levy roaming costs on customers travelling inside the EU; such charges are to be scrapped in the union. For big food firms, such as Mars, worries about currency swings and tariffs are compounded by dismay that standards for factories, labels on packages, product recalls and employment conditions may soon differ in Britain. Matthias Berninger, the firm's vice-president for public affairs, expects more complexity because British politicians will not "copy and paste European rules".

All this uncertainty means that firms planning to invest in Britain are putting decisions on hold. A leading Swedish industrialist, Jacob Wallenberg, says he knows "companies that have withdrawn investment decisions from Britain since the referendum". Given the British economy's reliance on inflows from abroad, any slowdown is worrying: Britain holds roughly 7% of the world's stock of foreign direct investment, some [pounds

19 sterling]1 trillion, and more than anywhere except America. Around half of Britain's foreign direct investment comes from the EU.

Yet dramatic divestment may not loom. Instead the fear is of a "slow erosion", says Juergen Maier, head of Siemens's British operations. "Lots of little decisions" may be made away from Britain, to build plants or run research projects elsewhere. He points to researchers and firms that could be excluded from the EU's [euro]80 billion Horizon 2020 fund, which supports science and innovation.

Even if concerns over regulatory gaps prove overdone, there is a second worry: that future policy in the EU, drafted without direct British influence, will become more hostile to business. Mr Wallenberg calls Britain a free-market country and is concerned that new regulations will be dominated by a statist axis of Paris and Berlin. He is not alone. "Europe loses a sensible voice and a counterweight to the protectionists," says an executive at a German chemicals firm. Surprisingly, perhaps, the chairman of a French industrial company volunteers: "A lot of us don't like the idea of the Brits out. We like their business-friendly agenda."

20 Picking losers; After the Brexit vote (II)

The Economist. (July 9, 2016)

How different industries are exposed to the turmoil in Britain

SPARE a thought for Brammer, a British supplier of bearings and other industrial gear for factories in Europe. The exporter had boasted revenues of [pounds sterling]717m last year (then $960m), but sales dipped before the referendum. Brammer now faces a rout, amid warnings of slumping demand and currency headaches (because the firm has lots of dollar- and euro- denominated debt). By July 5th its share price had tumbled by two- thirds since day--more than any firm listed in London.

If Brammer is a contender to be the company worst-affected by Brexit, it is not alone in the gloom. By one measure of global connectedness--combining indices of cross-border loans, legal relationships, data-storage hubs and so on--Britain's economy is one of the most open in the world. The earnings generated by foreign firms from their investments in Britain amount to [pounds sterling]70 billion, equivalent to about 10% of all of the profits made by the top 500 European listed firms, or roughly 1% of global business profits.

Plenty of these investors have placed bets on Britain's domestic market, which had previously been buoyant but now faces the risk of recession. Li Ka-shing, a Hong Kong tycoon, owns utilities and a mobile network; Walmart, an American retailer, controls Asda, a chain of supermarkets; investors from Qatar have piled into commercial property; Ferrovial, a Spanish infrastructure firm, has interests in a string of British airports, including London Heathrow. The new economy is not immune from pessimism. Analysts see earning prospects for Netflix, an online video-service, dampened by slower GDP growth in Britain and the rest of Europe, for example.

Carmakers face a double whammy. First, the brakes are being slammed on in a market that had been one of the biggest and fastest-growing in Europe. Motorists in Britain bought 2.6m new cars in 2015, but Exane BNP Paribas now expects a 10% decline in demand in the second half of this year, plus a further 10% fall early in 2017. A Europe- wide downturn may follow. Morgan Stanley suggests car sales, once forecast to grow by 5% this year, will now only expand by 3.7%. In 2017 it suggests a 2.2% contraction is possible.

Second, Brexit threatens carmakers' access to European export markets. Two-thirds of all vehicles produced in Britain are exported to the EU, and mass-market models, sold with slender margins--such as those made by Toyota, Nissan and Honda--are most vulnerable to currency swings or any future tariffs. Small wonder that Nissan's boss, Carlos Ghosn, said this week that "we are a little worried".

For other exporters, such as Nippon Sheet Glass, which bought Pilkington, a British glassmaker, in 2006, and BASF, a German chemicals giant that operates ten plants in

21 Britain, any loss of access to the big EU market would be disastrous. About 80% of what BASF makes in Britain is exported, largely to continental Europe. Aerospace suppliers, such as GKN Aerospace, which sells 67% of its output to EU customers, are similarly exposed.

By contrast, firms that are headquartered in London for cultural, legal and tax reasons, but that have little exposure to the British economy and do not use Britain as an export hub--companies such as SABMiller, a brewer, or ArcelorMittal, a steelmaker--will not be fazed by recession and the falling pound. Promises, for instance, to bring below 15% in Britain, will cheer them too--even as this annoys the country's European partners.

And a select few professions might even prosper from the turmoil and its divorce from the EU: lawyers, headhunters, tax consultants, relocation firms, budding trade negotiators and soothsayers could all be in demand. This week, for example, KPMG, an accounting firm, announced a new "head of Brexit". (It is not Boris Johnson.)

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