It is generally accepted that big business has significant influence on EU and member state decision-making processes. This is perhaps unsurprising, knowing that that there are more than 30,000 corporate lobbyists working in Brussels alone, whose main goal is to influence policies in their favor, with many more in the national capitals. A March 10 article in Politico asserted, “Not even a pandemic can keep Brussels lobbyists down for long.”
Yet European firms have been surprisingly silent in recent years when confronted with a major threat to their economic interests – rising protectionism due to developments like Brexit and the 2016 election of Donald Trump. Both events threatened a sea change in market openness in two key markets for European firms. Given that such shifts are clearly against their interests, why haven’t we seen the responses academic work suggests we should expect - with many companies speaking out against new tariffs and taking a public stance in favour of more open markets? This question puzzled us, so we sought some answers in a recent research project.
While we were conducting our research there were some pretty major protectionist shifts. In addition to its high profile “trade war” with China, the Trump administration imposed tariffs on metal exports from their key allies pleading “national security” risks and undermined the World Trade Organisation by blocking its everyday work. On the other side of the Atlantic, Brexit talks were going badly and a “hard Brexit”, with wholesale re-imposition of tariffs, was a real and concerning possibility.
Protectionism on the rise
Over four years we interviewed representatives of European industry and policy makers in the “Brussels bubble” about their concerns on this rise in protectionism. What were they were doing about it and why were their member companies relatively passive? All of those we interviewed acknowledged that the backlash against globalisation was a real and sometimes existential threat and they were actively lobbying against new barriers to trade. However, they often lamented the lack of active support from individual companies which they felt undermined their message. As one said to us:
“We really need companies to come out publicly for what they stand for… and to explain why they need trade.”
In a forthcoming paper based on our research we highlight several reasons why companies have not been more active. Partly it reflected a certain amount of complacency in business. Today’s executives have grown up with open markets, so they can’t imagine that things could backtrack. And yet they can, as EU steel exporters discovered to their cost, when they were hit with a 25% tariff on the US market. Yet, until they are themselves directly affected, “its difficult to get companies to wake up”. In addition, many firms are too small to have a public relations department, so they rely on their associations to do that work for them – “that’s what our members pay us for”.
However, even some large companies were rather passive in the face of rising threats to their business. The reasons why they didn’t speak out were, partly, a perception that public statements are not very effective. Especially in the United States, there was a feeling that “There is no listening voice in administration” and so firms thought it wasn’t worth risking a negative Trump tweet for limited results. Those that did lobby in Washington did so “under the radar”. Although the Biden administration is less antagonistic to ‘foreign’ interests, it is also strongly focused on protecting the US economy. Thus, although there is undoubtedly a shift in rhetoric, it will not necessarily translate into greater market openness.
A “toxic” debate
Another key reason why firms did not speak out publicly was that trade was considered to be a polarising issue. In Europe, many considered that the public debate on the unsuccessful trade negotiations with the United States had been hijacked by the anti-traders and several described it as “toxic”. Some companies felt that they risked reputational damage if they publicly defended open markets. This was particularly so in relation to Brexit, where customer-facing companies were worried “that if they stick our heads above the parapet… they risk to be boycotted”.
Still, firms were not entirely absent from the public debate on all issues. As the Brexit negotiations advanced, we found quite widespread interventions by individual companies. There had been some efforts to raise awareness of the risks of Brexit prior to the referendum, although academic analysis found such business support to be relatively low key, partly because of a fracturing of business interests.
As the deadlines loomed, several companies spoke out. However, most of the companies which came out strongly against a hard Brexit – BMW, Airbus, Nissan… - were foreign. There was a perception that it was easier for companies headquartered overseas to publicly oppose Brexit, than British companies, worried about antagonising the half of the population that supported leaving the EU. Here too, lack of understanding could partly explain company inaction. Since Brexit actually became a reality there have been many reports of companies, especially smaller ones, not being prepared for trade after December 31, as they were unaware that things would change for them.
Finally, one interesting strategy which we perceived in the Brexit debate was a tendency for industry to ally with civil society on trade issues. Concerned industry associations worked with non-governmental organisations (NGOs) and trade unions with whom they had common interests to highlight the risks of a hard Brexit. We see this in the joint statements by the Confederation of British Industry and the Trade Union Congress about the threat to jobs and common calls by the pharmaceutical industry and patient’s NGOs to ensure continued coordination and access to medicines post-Brexit. In a context where trade has become highly divisive and controversial, cooperating with NGOs helps to increase the credibility of the message with the public.
What is clear is that firms are concerned about new barriers to trade and the public is skeptical of business messages. There are good reasons for such skepticism. There are many examples of businesses lobbying against policies that are clearly in the public interest. Big business has lobbied against climate change policies, while the banking lobby succeeded in softening financial regulations after the financial crisis and the tobacco industry has been extremely active opposing the introduction of health warnings and plain packaging. Such campaigns have undermined public trust in business and rebuilding it is likely to be a long and complex task. In the meantime, industry representatives continue to try to motivate their members to speak out, often in vain. “Nothing. No one moves. For me it’s a bit of a mystery”.