Playing by the rules in a globalised world
Commissioner Margrethe Vestager
It is a privilege to come to Ditchley. Thank you so much for inviting me. The European Commission though is already part of the Ditchley history. It was back in December 1976, when the President of the Commission at the time, Roy Jenkins, brought the new Commissioners here to Ditchley. As he wrote in his diary, “I am not sure that excursion was a total success … The weather was raw and misty, and some at least of the visitors were more struck by the coldness of the bathrooms than by the splendours of Ditchley.”
Thank you very much for inviting me here in July. And it seems to be all sorted from what I can see from the comfort of this house!
Thank you also for being Ditchley and for your ambition to spread the Ditchley mission even further. Because when you look into the Ditchley mission, it is more needed than ever:
- to address current challenges and aim to shape the future,
- to connect people and to connect ideas. Last but not least,
- to renew and re-define how liberal democracies can lead and engage in an evolving world.
But the thing is, we need to take a closer look at the liberal democracies in themselves. We see more and more illiberal tendencies. And it is on purpose that I use "illiberal" instead of "populist". That's because part of what is labelled the "populist" agenda concerns things we ought to discuss. I see the problem rather with illiberal tendencies and actions taking place: we see the rule of law undermined; media plurality and a free press questioned, and –– a change in electoral laws to stay in power, once in power.
If this can happen – and it has happened – we need to revisit the very basics. Not just in a foreign country far away, but here in Europe. We have to figure out how to address this, how to regain engagement for a liberal democracy. One reason why illiberal actions are happening, and citizens not revolting against, might be that some citizens feel left behind by their societies, feel powerless and disabled. We have to show people the benefits of living in a liberal democracy and that you count as a citizen, that you are not powerless, and that you are expected to and can take part in your society.
I have been in politics for more or less 30 years in many different roles, legislative and government. I have come to realise – maybe a little late – that not many people share this passion. Most people don’t think about politics every day and not even every month. Some people don’t vote, they just leave it. But there is one thing they cannot leave and that is going to the marketplace. They need to shop for food, clothes and other essentials. And the place where they work puts goods or services on the market. People need to be in the marketplace so often that the way you are treated in there also affects how you see yourself treated by your society. We made it very clear in the early days of building up Europe and the Single Market that the market should serve the customer and not the other way around. It's like that in most European societies and liberal democracies. That a market is part of building a society and not the other way around. In order to make that happen you need to create and frame the marketplace.
When you look at how to shape the future (as is part of Ditchley's mission), the glasses you use are made in the past. There is no way to escape that. The glasses we are looking through to form and shape the future are made in the past, with history built into them - the defeats, the victories and the interpretations – all that comes with it. There is no escape from this legacy.
It was also the case back in the 50s, when the founders of the European Union were writing the first treaties. Their glasses were made in a past of monopolies; where market dominance played a role in the build-up of the Second World War. They were glasses made in a destroyed Europe, in a Europe after many bloody wars and they realised that if you can have one global war and repeat the error and have a second world war, then obviously you can also have a third. And they realised that markets are also a part of the puzzle that needed to come together to maintain peace. That markets should also serve a purpose of building peaceful societies.
They did the obvious and took inspiration from the United States of America, where they had been at it since 1890 with the Sherman Act. Something we could look at as an inspiration.
The first thing was fighting cartels and monopolies. We still do that. Just last year we concluded our cartel investigation into six European heavy truck makers. They agreed on gross list prices and when to launch the next environmental improvement for 14 years. For that illegal behaviour, they got a fine of EUR 3.8 billion. We also fight monopolies if we find a misuse of a dominant position. As you know Europe is open for business. If customers like a company and buy their products or services, you are more than welcome to grow as a business. But with strength comes responsibility. When you are very strong in a marketplace, obviously competition against you is weakened. You are not allowed to misuse your dominant position by denying others the chance to compete against you. This was the situation in the Google Shopping case, where we imposed a fine of EUR 2.4 billion last year. We continue to monitor how Google puts the prohibition decision into effect.
The second thing we learned from the US was merger control. One thing is to be successful, because you serve customers well, competing on the merits. It is a completely different thing to buy yourself a cosy duopoly, or monopoly for that matter. Among our responsibilities is that we have to ensure that post-merger you have someone else to turn to, if the merging parties increase prices, limit choice or stop you from innovating. An example would be the Bayer/Monsanto merger that was only accepted after a divestiture of assets with a value of well over to EUR 6 billion – to make sure that even after the merger farmers can turn to someone else, when it comes to seeds or pesticides. The most fundamental thing in the food chain.
Since this is Europe – and knowing Europeans – our founders added a third element, which was State Aid Control. They knew that one European country might start oiling a company with taxpayers’ money to the detriment of another company. They decided you couldn’t give these harmful subsidies. Harmful in that they would disturb competition and trade. These were the stories of companies like Apple’s unpaid tax bill worth EUR 13 billion and the tax bills for Starbucks, FIAT, and the French company Engie etc.
This is rules-based competition, because we agreed not to follow the laws of the jungle, but the laws of our democracies. It has allowed Europe to globalise in a balanced way. A marketplace that is not designed just for the bigger businesses, but for competitive businesses.
The model of enforcement we have chosen shows one of the very fundamentals of Europe. We enforce this in very close co-operation with the National Competition Authorities and over 85% of competition decisions, based on European antitrust rules, are taken by National Competition Authorities. This works and together we protect consumers from being exploited.
And the word has spread: Now, we have more than 130 competition authorities all over the world. They did not copy us one to one, but many took inspiration from how we do this in Europe. We also have an International Competition Network. We work together.
As we see globalisation in terms of production and trade, you need law enforcement to also scale-up. You may have an orderly home, but how does that help if the rest is chaos? You want a rules-based approach. We have to figure out how to live in the dilemmas of globalisation. Right now the US Administration is threatening Europe with tariffs and trade restrictions, but at the same time we agree with countries like the US, Japan and within the WTO to fight harmful subsidies.
To give you a specific example why this matters. The European steel sector is a key industry – it employs about 360,000 people in more than 500 production sites in 23 Member States. But EU steelmakers have been facing difficulties with overcapacity – within the EU and worldwide – and there is stiff competition from other parts of the world, including of course China. Right now, the world has nearly 50% more steelmaking capacity than it needs. And that has a lot to do with the effect of unfair global subsidies. We have dealt with this in Europe and been instrumental in setting up a global forum on steel excess capacity.
This is a high priority and Europe has been instrumental in working with our partners in the G20 Global Forum on Steel Excess Capacity, which brings together countries that produce 90% of the world’s steel, including the EU, China, and the United States. Last November, those countries agreed on the goal of removing subsidies that harm competition. To discuss what to do about it, is how we approach things.
At the same time, President Trump back in the first days of the new US Administration said that he would not do a trade deal with Europe. My colleague Cecilia Malmström received calls from all over the world of others wanting one. One of the things we have been doing is to retire the old concept of doing trade. It is not only about lowering tariffs. It is also about shaping societies. Because also global markets should serve consumers. And not the other way round. If you trust what I do, you will buy my goods or services. If I trust what you do, I will buy your goods or services. In that respect, you have a different way of using trade. A fair marketplace and fair trade relations will shape globalisation and allow citizens to see themselves as empowered.
In the coming week we will finalise the trade agreement with Japan, we are in the last stages of a trade agreement with Mexico and Mercosur and we just opened discussions with New Zealand and Australia. We are connecting the world in a new way. A way to shape trade and allow for things we believe in to be present. This is happening at the same time as we are confronted with what we consider illegal trade barriers, tariffs being put on steel and aluminium - and more may be put on cars as well. Our response is rules-based - we use the rules of the WTO when we respond to illegal trade barriers.
In a few months, we will celebrate the 60th anniversary of the Universal Declaration of Human Rights. Fundamental rights also fundamental to liberal democracies. So why this talk about competition and trade and markets, when liberal democracies are at threat?
Competition policy is an enabler for people to feel empowered, counted in and seen - most European businesses are small and medium-sized, they are the ones paying taxes and creating jobs, taking on young people to teach them the trade. By doing that they build the society. When they compete against the guy next door, they create society. This is part of the key to feel empowered, counted in, that you have a fair chance of making it. When you see this can work and the big guys have to pay their taxes, too, abiding by the same rules as you do, then maybe other things can be made to work as well. If we can make one thing successful, then probably we can make the next thing successful as well. No wonder people are asking – can you make it work?
We are in the middle of climate change. Probably the biggest impact on the way we live, how we produce and use energy, how we organise our lives. If we are going to make that happen, we really have to come together, we need to all take upon us the obligations, and change our societies in doing that.
We are in an industrial revolution of digitalisation and it is not only production and value creation that changes. It is the very nature of human relationships that to some degree are now upside down. We need to have the strength in our democracies to shape the rules, so that this revolution is serving us as citizens and so that we keep building up societies. This is why we want privacy, platform to business relationships to be fair and transparent. This is why we also want digital companies to pay their taxes where value is created and have a taxable presence. This goes for everyone else.
Talking about privacy it is to some degree the same as with virtues of a liberal democracy; you don’t think you need it, as you have nothing to hide. But this is only until someone is looking thoroughly. The second thing is that it may seem like a detail now, but you might need privacy later. You might need it when getting a divorce, a nasty disease or a point of view not well seen. Then you need respect of privacy. Privacy is something we give one and another and it is the very basis of a liberal democracy.
All of this has been achieved, because over 60 years ago we agreed on common rules. Not just on paper, but enforceable. We have international, European and national institutions that have decided not just to agree on paper or discuss it, but to put it in action to make you feel protected and empowered. This progress has not always been fast and is certainly not perfect. But it is much better than the alternative and much better than it was before. As with so many things in life, there is no reason to take what is given for granted. We have to renew it every day. Even when it is challenging and difficult for us. The problem with rules is we are more likely to follow them when it suits us than when they don't.
But we cannot pick and choose. Then it wouldn't be rules-based anymore.
We have built these national, European and global communities based on the rule of law, but we still wear the same glasses made in the past when we look into the future. So we will have different interpretations, different ways and different feelings about it. We won’t become the same and are still as different as were before. Living in a society and a Union based on the rule of law doesn't change us to become the same. The fact that we live in a rules-based world gives us equal rights as citizens, but still has plenty of room for our identity as Danish, English, European, men, women or whoever we are. That is so good: we can have different identities and yet share the fundamentals of being equal as citizens when living in societies based on the rule of law.
In September 1946, Winston Churchill gave a speech in Zurich about what he called the tragedy of Europe. But that speech was not so much about tragedy, as about hope. He saw a positive future for Europeans – as long as its people were willing to build a new union.
And he believed that was possible – even though it meant Europe’s powerful countries would have to follow the same rules as everyone else. Mighty Britain and a small Danish society would have to abide by the same rules. Because he saw that Europeans were deeply interconnected. So that in the end, none of us could succeed unless we all did.
And he was right. It was possible – and it still is. Churchill’s speech, and his support for the idea of European unity, helped to create what is now the European Union – a Union much like the one he pictured in 1946. One where, as he described it, the material strength of each country would be less important. We have now shaped a Europe, a prosperous Europe, a Europe of security – possibly the best place to live in history – especially if you are a woman. And if we go about it by rejecting the laws of the jungle, and living by the laws of democracy, we can shape globalisation and markets to make us all better off and will never ever be the same. That's good.
Delivered by the European Union Commissioner for Competition, Margrethe Vestager at Ditchley Park on Saturday 7 July 2018.
© The Ditchley Foundation, 2018. All rights reserved. Queries concerning permission to translate or reprint should be addressed to the Communications Officer, The Ditchley Foundation, Ditchley Park, Enstone, Chipping Norton, Oxfordshire OX7 4ER, England.