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Q&A: ‘Corporate Lobbying Affects EC Credibility’

David Cronin interviews OLIVIER HOEDEMAN, expert on corporate lobbying

BRUSSELS, May 3 2010 (IPS) - The intimate relationship between Europe’s top policy-makers and major corporations has been underscored once more in recent days. Barely six months after they ceased being members of the European Commission, Germany’s Günter Verheugen and Ireland’s Charlie McCreevy have been handed lucrative posts with the Royal Bank of Scotland and the no-frills airline Ryanair.

Olivier Hoedeman Credit: Olivier Hoedeman

Olivier Hoedeman Credit: Olivier Hoedeman

‘Bursting the Brussels Bubble’, a newly-published book, draws attention to how a pin-striped army of lobbyists are shaping the European Union’s economic, social and environmental laws. One of its authors – Olivier Hoedeman, research coordinator with Corporate Europe Observatory – has been campaigning for 15 years to ensure that this increasingly powerful army is subject to the rules of engagement.

Q: Why does your book describe Brussels as a paradise for corporate lobbyists? A: There are a lot of lobbyists in Brussels. Nobody knows how many but you can safely say that it is the world’s second capital in terms of lobbying and has become a real hotspot. So after Washington DC, Brussels is the place where you find the heaviest concentration of lobbyists.

That is because there really is something to gain for lobbyists. Lobbying has become a rather central part of EU decision-making.

Another reason why it’s a paradise is that lobbying is seriously under-regulated on the EU level. Five years ago the European Transparency Initiative was launched; the first time that the European Commission acknowledged that there was a problem around lobbying. Now, five years later, the progress has really been minimal.

Q: Are corporate lobbyists a threat to democracy? A: It’s safe to say that it cannot continue like this: a growing stranglehold by commercial lobbyists on the decision-making process, where they in virtually all cases have a foot on the brake. That’s deeply undemocratic and it will alienate Europeans even more than is the case today.

Q: The centre-piece of the European Transparency Initiative was the introduction of a register for lobbyists. Has it made lobbyists more accountable? A: The European Transparency Initiative promised to create a visibility about who is lobbying on whose behalf, on which issues and with what budgets. That’s really what is needed to give citizens, parliamentarians and the media the real picture of who is influencing EU decision-making. If you look at what the transparency initiative has achieved, it’s very far from achieving that level of visibility.

At the moment it’s still a voluntary register. It only captures a minority of those who should be in the register. There’s a very widespread boycott of the register. There are no sanctions for those who opt to stay out. And for those who are in, the information that they are obliged to disclose is very limited.

Although consultancies in principle have to list all their clients, they do not have to disclose what they are doing for these clients. And the financial reporting in the register is so limited, there are so many loopholes, you actually cannot see whether being a consultancy for a large company is a minor job or a major lobbying campaign. This really creates a false impression that there is transparency around lobbying.

Q: Neelie Kroes, one of the European commissioners, has argued that it is essential for her to have first-hand knowledge of how companies operate. When she was in charge of competition policy, she likened herself to a referee in a football match and claimed it is necessary to understand the rules of the game. A: It’s true that they need to understand the sector that they are regulating. But it’s very wrong to allow a situation where that sector can have undue influence on decisions. So the Commission needs to move to a different model of consulting with industry and with others, much more formalised. A model that does not allow those with money and opportunities privileged access to gain advantages.

The “revolving door” problem is part of this. If you as a company are able to nurture relations with a commissioner and then the moment this person leaves the Commission, he or she moves into a job with your company, it really raises question marks about what the relation was like before and when the agreement about future employment was made. At the moment, the Commission seems to simply rubber-stamp all applications or notifications for commissioners and high-level officials who want to go into the private sector, including into direct lobbying jobs. There is no cooling-off period whatsoever. Really, the credibility of the Commission is at stake here.

Q: The influence of corporations on European trade policy is especially pronounced. How do you respond to the case made by David O’Sullivan, a leading EU trade official, that it his job to help European companies find business abroad? A: It is based on very flawed ideological assumptions: that trade policy should primarily serve the expansion of EU-based corporations across the world and that other concerns are far less important. DG Trade (the Commission’s trade division) has a very explicit ideological justification for giving big business privileged access. Big business is seen inherently as a force of good, as the ones who are bringing economic development.

This will have to change. There will have to be a stronger challenge against this very simplistic and, I would say, dangerous ideology-based approach before we really tackle the excessive influence of big business.

Q: Has José-Manuel Barroso, the Commission’s president, fallen under the spell of big business? A: One of the flagship policies of the European Commission in the last term (2004-09) was the Lisbon Agenda (a programme aimed at transforming the EU into the world’s economic powerhouse). Although it originally contained different priorities, it became – under Barroso – an attempt to make international competitiveness and economic growth the overarching priority for all policy areas.

When Corporate Europe Observatory complained to the European Commission that its advisory group on the use of research funding for biofuels was almost exclusively composed of representatives of industries who themselves had a commercial interest in biofuels, the response was that this was exactly the way it is supposed to be because the Lisbon Agenda defines international competitiveness as the overarching priority.

Q: Your book highlights how companies routinely succeed in altering legislative proposals by alleging that jobs would otherwise be lost. How can you counter this argument? A: The way to counter it is to look at whether those job claims are true. In some cases, they might be true in the short term. But by trying to block a transformation of the economy, for example, towards a greener model of production, you may save jobs in the short term but you are definitely losing them in the medium and long term.

There are so many examples of companies or sectors claiming that a policy is unacceptable because it would force them to close down – sometimes they even mention specific plants. And then it emerges that the company – even if they have won that particular lobbying battle – are still leaving because they have a medium-term strategy of relocating to countries where they can produce slightly cheaper.

One very illuminating example was in the second half of the 1990s, British American Tobacco was campaigning against restrictions on smoking and on advertising for smoking. And they used a job argument, also pointing to a specific plant in the UK that they would have to close down if this would go ahead. Soon after it was revealed that BAT used these specific plants but long before had decided to close them down and move them to Eastern Europe. It was simply an argument of convenience.

The Commission has gone along very far in appeasing the corporate sector. They have introduced, for example, this elaborate circus of business impact assessment, which all new policy initiatives have to go through. Already at that early stage, businesses put forward assessments of job consequences that really are not checked for their accuracy. You cannot rely on these data; they are used as a political tool – for lobbying, basically.

Q: One of the largest ever mobilisations of corporate power seen here was during the debate over REACH, a law on registering chemicals. Since that directive came into effect in 2007, EU officials have not proposed that a single hazardous chemical should be phased out. Is this the kind of consequence we should expect when vested interests manage to twist the arms of legislators? A: The lesson from the REACH battle was that there was a massive lobbying offensive to generally water down the proposal and the scope: the amount of substances that would be covered. And then in the last phase, when most maybe thought that the main battle was over, there was a successful attempt to complicate the actual procedures. That shows indeed how obstructive the results of industry lobbying can be.

Since then there have been a number of other lobbying battles. What seems to be the biggest lobbying battle at one point is then overtaken by the next one. At the moment, the lobbying that goes on around the proposals to re-regulate financial markets is also of an unprecedented scale. Here you see – even more than in the case of REACH – the very serious imbalance between the ability of industry to mobilise both in numbers and in spending power to influence in this case the European parliamentarians and the weakness of civil society and trade unions on the European level.

There are 13 pieces of legislation going through now, all very complex but all crucially important: ranging from capital requirements for banks to the role of hedge funds and private equity investors.

With REACH, you had these figures of the numbers of amendments that were proposed to the legislation, which is an indicator of the size of the lobbying battle. With REACH, it was around 1,500 amendments. And it was observed at the time that a lot of those amendments were written by industry lobbyists (though formally put forward by MEPs, members of the European Parliament).

With some of these battles, the share of amendments written by industry is actually higher than the share of amendments written by parliamentarians. With the hedge fund directive, the latest figure I heard is that 900 out of 1,600 amendments that were voted on in the economic affairs committee (in the European Parliament) were written by the hedge fund lobby. The figures are really mind-blowing; those that the regulation are supposed to regulate are writing the regulation with the help of some MEPs, who really are too close to industry. And you can really wonder if this is a healthy situation.

Q: In the 1990s, you documented how the blueprint for the euro currency was written by only a handful of corporations. Is the crisis in Greece an example of what occurs when big business calls the shots? A: It’s an example of what happens when you give corporations far too big a role on the political drawing board. Corporations are not able to see the whole picture, to develop proposals for the economy or for society that are in the public interest.

For a very long time, corporations were given that role. There was almost a fetishism around the role of the CEO (chief executive officer) of large companies. They were treated as a kind of superhero in the 1990s. That was the phase in which the European Round Table of Industrialists developed this very strong agenda-setting role. Of course, today after all the various scandals there have been around CEOs of large companies and the financial crisis itself, there are the beginnings of a more realistic assessment. But still this tradition of giving large corporations a strong and direct political role has developed very strong roots in the way the European Commission does things. It’s really something that has to be thoroughly reassessed.

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