Anti-trust ‘split’ may test Bush relations with EU

Date: 21/12/00

By Tim Jones

Al Gore must have lost the November election on his personality since George Walker Bush certainly did not win it with his policy programme.

Nowhere is this more vividly illustrated than in the former Texas governor's prescriptions for business, including the hundreds of EU-based multinationals dependent on Washington's whims. Although his tax plans are clear - a €1.8-trillion tax cut which is sure to be shredded by Congress - Bush's platform on protecting companies against lawsuits, multilateral trade negotiations, anti-trust and electronic commerce is as vague and confusing as his syntax.

The president-elect's most lucid policy pronouncements have been on the environment and this area also benefits from an analysis of his record.

Bush has stated that he considers the Kyoto protocol on climate change to be flawed, since it puts too much of a “burden” on the US. Four years ago, when Texas' environmental agency advocated eliminating a provision in the state's clean-air law which exempted older plants, heavy-hitting representatives of the oil refining, chemical and electricity industry lobbied Bush to overrule the organisation.

The governor's only experience in business was as founder of Arbusto (Spanish for 'bush') Energy and as an executive at Harken Energy. In 1978, he campaigned for Congress as a “friend of the industry”. Faced with the clean-air problem as governor, he asked two oil industry chiefs to devise a programme of voluntary compliance.

This is likely to be the model for his presidency. Bush has said he accepts the scientific majority opinion that pollution causes global warming, but he advocates market-based solutions such as emissions trading rather than regulatory demands.

But it is in the area of anti-trust cooperation that EU experts are watching Bush most closely, after he dropped a heavy hint during his campaign that the days of anti-trust activism under Joel Klein's team at the US Justice Department are over.

The Bush posse are convinced that the Clinton administration has been dominated by lawyers who favour the US litigation culture over every other policy goal. Apart from Clinton's failure to reform tort law, which famously allowed a woman to win €14 million from McDonalds because she spilled their hot coffee on her lap, the White House law lobby has undermined the country's biggest business success story.

At least, that is the view in Austin, Texas. In June, Judge Thomas Penfield Jackson ruled that software giant Microsoft had violated anti-trust laws by 'bundling' its Windows operating system with Internet browsing programmes to unfairly extend its market dominance.

Asked for his assessment of the case, Bush said he was “on the side of innovation over litigation” - a refrain repeated by Microsoft chairman Bill Gates throughout the case. Oral arguments and final written submissions in the case will take place in the same week Bush is sworn in. Analysts are convinced that a Bush justice department will not demand that the company be split up and may choose to settle the case. This will isolate the European Commission's inquiries into allegations that Microsoft designed its Windows 2000 system so that it would only work properly if the same programmes ran on the PCs and office-wide 'servers'. Anti-trust officials say Klein and Competition Commissioner Mario Monti and their teams have worked hand-in-glove on these cases.

Bush's views on competition go further, and could lead to a fissure between Brussels and Washington. He has said that “the application of anti-trust laws needs to be applied where there are clear cases of price-fixing. Everything evolves into price-fixing over time ... I think that is the ultimate extension of the accumulation of power. Price-fixing up and price-fixing down; price-fixing down to eliminate competition, price-fixing up to accumulate profit.”

Limiting the anti-trust laws to cases involving price-fixing would sharply reduce their application, says Bruce Bartlett of the National Centre for Policy Analysis. This could end the federal government's routine involvement in monitoring corporate mergers, predatory pricing and retail price maintenance, and return policy to the days of Ronald Reagan, when the number of cases analysed by the Justice Department and Federal Trade Commission tailed off sharply.

Microsoft is not the only high-tech company with the incoming president's ear. Last year, Bush appointed an information technology advisory council including top executives from Microsoft, Dell, Autodesk and Cisco Systems. He is also close to executives from Compaq Computer and Texas Instruments.

These advisors convinced Bush to make the federal research and development tax credit permanent rather than renew it annually, persuaded him that the numbers of visas for skilled workers from overseas should be raised and advocated a slackening of the rules limiting the export of civilian computer technology.

The EU will also have a battle on its hands over plans to levy value added tax on non-physical US services downloaded from the web. John Chambers, Jim Barksdale and Michael Dell have convinced the president-elect to extend the Clinton administration's Internet taxation moratorium until at least 2004.