European Union

The role of multinational corporations in promoting European integration

European Integration has been and indeed still is a rather complex phenomenon to fathom. Sovereign countries pooling their resources together in order to mutually benefit members, in a fashion never seen before in world politics. There is a large academic debate about the roots of integration on the continent. Some scholars date the first steps back to the Concert of Europe in 1815, whilst others hold the Schuman proposal in higher regard. In both these claims, scholars put states as the main actor in integration. Most European integration theories in fact, put Member States at the core of any integration process.

However, this is a very state-centric view on it on the integration journey, and it leaves little room for the agency of other actors and their influence. An actor that has been somewhat disregarded in European integration discourse, is that of multinational corporations (MNC). Enterprises that stretch across multiples borders, giving them a transnational dimension, are a huge part of the everyday life of a 21st century European. Despite that, their agency is hardly mentioned in regards to integration.

What are multinational corporations?

An MNC can be described as a company that has facilities and other assets in at least one country other than its home country. Some scholars go further and say that MNCs are any enterprise that engages in foreign direct investments (FDI) and which own or, to a certain extent, control value-added activities in several countries (Dunning and Lundan, 2008, p. 3). They are the main force of modern enterprises. So much so that the world’s largest MNCs make more money than most countries on Earth combined. In fact, the top 10 largest multinational corporations in 2016 had a combined $2.9 trillion, otherwise expressed as larger than China’s tax revenue from a population of 1.4 billion.

Nowadays, one cannot ignore the importance of these transnational companies. Some academics even believe that MNCs have gotten so large and powerful nowadays that they have destroyed the very fabric of our democratic society. Europe is one of the biggest markets in the world for these companies. In turn, there is a huge presence of them and their activities on the continent.

Setting the scene: theories of European integration

From a theoretical perspective, some of the main theories regarding European integration are both inter-governmentalism and supranationalism. Both of these theories place the state as the most important actor and decision-maker in integration, and thus are both state-centred approaches to explaining the integration process in Europe. These theories leave little room for the agency and influence of multinational corporations.

In particular, inter-governmentalism focuses on the most powerful Member States, national political and economic agendas and bargaining power. With inter-governmentalism, states remain the only important actors within European politics. Supranationalism, on the other hand, is problematic as it fails to offer an explanation of the roots of transnational interests or why multinational corporations would be powerful. This is in fact one of the main criticisms of international relations generally speaking.

That being said, many academics believe multinational corporations play a significant role in European politics and affairs. Theories that offer an explanation to the agency of MNCs in European integration are transnationalism and Neo-Gramscian transnationalism.

Antonio Gramsci
Antonio Gramsci

Gramsican school of thought seeks to interpret how “class strategy plays a role in the construction of hegemony.”. Gramsci goes further to say that a plethora of actors such as think tanks, far-sighted bankers or industrialists can be “organic intellectuals”. This is a group of intellectuals that can have influence in “social and political fields. Furthermore, it can be a viewed as élites who are capable of being “an organiser of society in general”.

In fact, scholars Sandholtz and Zysman (1989) and Coleman and Underhill (1998) claim that the European integration process, primarily the relance européenne of the 1980s, can be viewed as an elite response to collectively perceived challenges. These élites they speak of, in the cadre of this article, are the capitalist and business elite – the force that is the MNC.

Multinational corporations in Europe: a history

MNCs and Europe have a long relationship together. In today’s world, most large companies have a headquarters in Europe. One of the reasons for this is to avail of the opportunities presented in the European Single Market. However, it has not always been plain sailing for MNCs on the European continent.

Between the first and second World War, the European market turned from a relatively liberal trade area into a collage of cautiously protected national markets. Throughout the inter-war years, companies functioned in a business landscape of segmented national markets, divided by tariffs and exchange controls, and that is before mentioning the historical inheritance of different languages, cultures, and consumption patterns.

States put tariffs in place and deliberately set out to build powerful, national industries. Protectionism became the norm. This made transnational transactions very difficult as countries were more focused on building up and developing their own national companies before looking abroad. Effectively, it meant that there was little space for MNCs in Europe during this time period.

Nevertheless, multinational corporations have been present on the European continent for quite a large period of time. Prior to the Schuman proposal and the creation of the ECSC, different countries opted for different strategies and ways to secure the liberalisation of markets, which ultimately lead to great uncertainty and confusion in Europe at the time for multinational corporations. The creation of the ECSC was a huge step, and indeed a huge benefit for companies based in any of the six initial member states.

Following on from the Rome Treaty of 1957, import tariffs were diminished bit by bit, eventually leading to the establishment of a common external tariff charge. This meant both advantages and indeed disadvantages for European firms. Disadvantages included increased competition, whereas free trade between Member States was looked upon as a plus for companies with intentions to expand their trade to other markets in other countries.

That being said, many American MNCs tried their luck on the European market. In fact, many scholars argue that the United States played a large role in European integration. The chemical companies Dow, Monsanto, and Du Pont, which had few investments in Europe before 1939, moved to build European organisations which became a fundamental aspect of post-war entry strategies. US companies were, at the time, much more accustomed to doing business in a geographically diverse and heterogeneous market, and due to this, were more willingly to try and enter the European market.

Historically speaking, US big businesses have been a step ahead of any other nationality. 54 of the 100 largest firms in 1912 (and eight of the top ten) were American, as against 15 for the UK, 14 for Germany and six for France. In many respects, big businesses and MNCS could be seen mainly as an American phenomenon.

The Unilever Case

European big businesses as a whole, were not as willing or as experimental. Having said that, one cannot generalise all European businesses into having the same mindset or even into having a common or shared perspective. One company that engaged in transnational behaviour before many other European competitors on the market was Unilever, who pushed the UK’s bid for membership of the European Economic Community.

Unilever was arguably Europe’s largest firm when formed in 1929. Following a merger between the Lever Brothers and Margarine Urin, the company was a dominant force in the soap market. Unilever had a significant impact on European integration, in lobbying in European decision and policy-making. Unilever were huge believers in further European integration, to the point where they were even described as a “child of Europe”.

Unilever De Brug building in Rotterdam
Unilever De Brug building in Rotterdam.

It supported the numerous drives and attempts to further deepen and expand the European Economic Community (EEC). The company fully supported Britain’s application to join the Community. When the British government put membership of the EEC to a vote to the British people in the form of a referendum, Unilever posted a “briefing sheet” explaining their interest in the UK’s membership (Unilever Information Bulletin, 1975 as cited in Jones & Miskell, 1990).

In aiming to benefit from the European Community’s trade policy to compete with global US firms such as Coca-Cola present in Europe already, and to internationalise their business, Unilever had much to gain from the UK’s membership. Britain imported around 70% of the world’s butter exports in the 1960s. The market price for butter in the UK was 55% of the average price in EEC countries in 1960. They were a formidable force in Europe, with market shares in Germany, the Netherlands, and Britain—the main consumers of the product—of over two-thirds.

The company were a huge component of the UK’s membership bid and pushed their agenda throughout the membership process. One could argue that efforts of the MNC that pushed for further European integration domestically, truly aided Britain in its bid to become a member of the EEC, thus deepening and widening European integration in 1973.

What we can learn from Unilever

Unilever is a very interesting company to use an example of how multinational corporations play an active role in developing integration in Europe. First of all, it is an Anglo-Dutch company, thus fundamentally European in principle and indeed in turn, multinational in nature. The president of Unilever, around the time that the idea of European integration was building a head of steam in the 1950s, was a man called Paul Rijkens. As well as being president of one of Europe’s largest companies, he was also on the board of Rotterdam Bank.

Rijkens, along with Joseph Retinger, played a fundamental role in the establishment of the Bilderberg group and their first Bilderberg meeting of 1954. The meeting was paid for by both Unilever and the CIA. Here, world leaders, both from political and business backgrounds, discussed transnational issues and concerns in a very private manner, behind closed doors. It has also been described as a place where European and North American elites unite. Perhaps the best definition of the group came from Van der Pijl (1984) when he said that:

“Bilderberg served…as the environment for developing ideas in that direction, and secrecy was necessary for allowing the articulation of differences rather than for keeping clear-cut projects from public knowledge. In this sense, Bilderberg functioned as the testing ground for new initiatives for Atlantic unity”.

Multinational corporations make up a large part of these meetings. The Bilderberg group were very keen on the idea of a unified Europe from early on. At the third Bilderberg conference in Garmisch-Partenkirchen, September 1955, the relance européenne was discussed at length. Representatives from MNCs such as Lehman Brothers, Bundesverband der Deutschen Industrie, Société Générale Belgique, and Chase Manhattan Bank were present, along with Unilever and others.

Paul Rijkens, along with two other members present, advanced arguments for a European common market. Rijkens believed that there would be “an immediate positive effect on the European economy, even if it would take a decade to establish a common market”.

It is quite remarkable that many CEO’s of large MNCs, such as Rijkens of Unilever, in 1955 were advocating for a common market in Europe. With the president of Unilever and the fact that his opinion was backed by many leaders at the conference, this idea of further market integration in Europe was taken very seriously by the politicians present at the conference.

Based on this evidence, it is plausible to argue that the ideas and agendas pushed by the MNCs and their representatives at the Bilderberg meetings, especially that of 1955, helped advance this idea of further European market integration, which would take place barely two years later. In 1957, the European Economic Community and in turn, the European common market with the signing of the Treaty of Rome, came into play.

The signing of the Treaty of Rome on March 25, 1957
The signing of the Treaty of Rome on March 25, 1957

Industrialists for the common market: the ERT example

Another group of MNCs and their respective representatives who are said to have impacted European affairs is the European Round Table of Industrialists (ERT). The ERT have been largely disregarded concerning their influence of European integration, but wrongly so.

This group is another example of a “transnational capitalist elite” group and their rise as key actors in global politics.  The former chairperson of the ERT Wisse Dekker, described it as “more than a lobby group as it helps to shape policies”. The group was formed in 1983 after an initiative from then Volvo CEO Pehr Gyllenhammer and Etienne Davignon, a European Commissioner. The first meeting included 17 industrialists from major European companies. Today, this number stretches to 45.

The fact that ERT members control Europe’s largest multinational corporations in turn results in a power that at least in its immediacy cannot be matched by any interest group. Peter Sutherland, a former EU Commissioner for competition, stated the ERT has privileged political access to “the highest level of government” with “unimpeded access to government leaders because of the position of their companies”.

It was in the 1980s, with the relaunching of Europe, that the influence of the ERT can be observed. In the late 1970s and 80s businesses were able to exert a high level of political autonomy at an international level. They did so by raising the agenda of deregulation at home and the creation of a single market in Europe.

The ERT’s campaign for a completed internal market began directly following its foundation in 1983. Commissioner Davignon expressed his dissatisfaction with the current “separated national markets” that prevented lots of European firms “from reaching the scale necessary” in order to compete with non-European competitors. This new market, had to serve as a unified home base so that European firms could develop as powerful competitors in world markets.

The ERT members were amongst the first in Europe’s elite to publicly propose this idea of an integrated European market. Wisse Decker’s “European Community Home Market” proposed programme in 1984, which passed through the ERT, is said to have acted as inspiration for the Commission’s White Paper in 1985. Former commissioner Peter Sutherland went as far as saying that the ERT played “a significant role in the development of the 1992 programme” with “Dekker… and Philips playing a significant role”.

Sutherland also claims that “one can argue that the whole competition of the internal market project was initiated not by governments but by the Round Table”. In using their influence and indeed position of privilege, it could be argued that the ERT helped push their agenda of a fully integrated European market, which in turn seemingly had a knock-on effect politically with the Commission adopting many of the ERT’s ideas in their White Paper just one year later. Their efforts pushed further European market integration. It is plausible to suggest this backing from the transnational elitist CEO’s of European multinational corporations furthered market integration in Europe.

Furthering the European Monetary Union

The launching of the internal market in Europe contributed greatly to the renewed desire for a European Monetary Union in Europe. The creation of an EMU represented a substantial development in European integration and an important departure from national sovereignty over monetary policy.

Another body of transnational cooperation seldomly mentioned in European integration discourse is the Association for Monetary Union of Europe (AMUE). This association was a break-away organisation created by the members of the ERT that were in favour of an EMU, formed in 1987. Companies such as Fiat, Siemens, Total and Philips were amongst the founding members, with Wisse Decker once again acting as chairman. The committee had close ties with many European politicians, but especially with the prominent figure in French and indeed European affairs: Jacques Delors.

The European Central Bank
The European Central Bank

In a joint conference held by then European Commission President Delors and the EMUE, Delors claimed that “company managers not only follow us, but often precede us”, thus granting MNCs great agency in European decision-making. It is a popular rhetoric in European integration discourse that the Delors committee of June 1988 paved the way for a common EMU.

However, many scholars believe that the EMU was created due to transnational actors, such as multinational corporations. Transnational actors and their politics were influential throughout the development of the EMU initiative, from the first meeting of the Delors Committee in 1988. The efforts from the EMUE representatives, and their close relationship with Delors, could be argued to have influenced European integration, this time furthering monetary integration within the European Community.

Multinational corporations as actors for integration

Coming back to European integration theories and where the Bilderberg group, the ERT and the EMUE lie, this has been a very debated issue in both intergovernmental and supranational theory circles. Moravcsik (1988) from the intergovernmental camp firmly believes that “structural economic conditions translated [only] into diffuse business support”. Businesses, on the other hand, did not play an active role, only offering “essential support” and “reacted to initiatives from the Commission and the Parliament, as well as member governments.”. In doing this, Moravcsik denies both bodies any agency in European initiatives and ideas.

Nevertheless, applying a neo-Gramscian translationalist theoretical scope, all bodies with MNCs at the heart of their organisation, have played a fundamental in European integration, especially in the examples cited. That being said, European integration, as aforementioned, is primarily viewed upon from a state-centric phenomenon.

In my personal opinion, multinational corporations have truly had a significant impact on further European integration and will continue to do so. In fact, I would go as far as saying that their influence in European affairs is only going to increase as time goes on. Nowadays, we are really beginning to see just how impactful multinational corporation are, in an economical but also a political sense.

Facebook CEO Mark Zuckerberg at the European Parliament
Facebook CEO Mark Zuckerberg at the European Parliament

Companies such as Facebook are substantially influencing elections through the use of personalised data targeting, as we all saw in the election of Donald Trump as the US president in 2016. The American MNC had so much power that when summoned to speak to the European Parliament, the CEO Mark Zuckerberg, spoke vaguely for 10 minutes. It’s hard to fathom that his company has a user base of over 2 billion people worldwide, compared to the EU population of 510 million.

One begs the question, where does the real power lie in this modern age? It would be fascinating to see what the Bilderberg group or the ERT are currently saying about Brexit.  Are they having any influence on decision-making? It’s difficult to tell. European integration is a very complex phenomenon and has happened due to an array of factors. Nevertheless, although less mediatised and generally not as well-known, multinational corporations have had, for a long time in European history, a strong influence and agency in EU affairs.

Although there are prominent scholars in the field, especially from the Amsterdam Transnational Studies school, this remains a field heavily under-researched. At the end of the day, the relationship between multinational corporations and European affairs boils down to a question of power and influence. Once again, European integration is rather complex phenomenon to fathom. However, so is the multinational company.

Guest article by Sean Pender. This content does not necessarily reflect the official opinion of My Country? Europe. Responsibility for the information and views expressed therein lies entirely with the author.

An earlier version of this article was originally written for the University of Leiden. 

 

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This article was written by a guest. The content does not necessarily reflect the official opinion of My Country? Europe. Responsibility for the information and views expressed therein lies entirely with the author.

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