A regulatory war has erupted between the European Union and the United States. Don’t believe me—just ask executives at Microsoft. Last week, they were forced to set aside their whiskey sours and golf clubs and dig out their pin-striped suits and law books when EU Competition Commissioner Neelie Kroes initiated a new antitrust investigation into the goliath of American companies.

Kroes’s January 14 announcement was salt on an already painful wound for Microsoft. Barely three months have passed since the American behemoth caved in and ended its opposition to a 2004 decision by the European Union that exposed the inner workings of Microsoft’s operating system to European competitors, reduced its royalty collection, and ensured that it would pay, without opposition, fines imposed by the EU.

Microsoft is not alone. The suits in Brussels have their legal cannons pointed at other American companies too.

“[S]ince September,” the Wall Street Journalreported recently, “EU antitrust regulators have dialed up a case against Qualcomm, continued processing claims against Intel, charged MasterCard with setting illegal fees, searched for reasons to block Google’s purchase of DoubleClick, and forced Apple to cut prices for digital songs (though the iPod maker was cleared of any wrongdoing).”

Worse still, it appears the antitrust angle is evidently just a single theater in a much broader war by Europe on American business.

Analysts at Stratfor wrote last week: “The European Union’s strategy to take the regulatory helm is evident in issues such as climate change, chemicals regulation, genetically modified organisms and antitrust regulation, for which Europe has adopted legislation or enforcement regimes that are stricter than those of the United States—and that, through the ‘California effect,’ are forcing changes globally” (emphasis mine throughout).

For most people, watching their fingernails grow is more fun than thinking about the inner workings of the American-European economic relationship, especially when terms like antitrust, legislation, chemicals regulation and genetically modified organisms enter the discussion.

Nonetheless, this is a subject of critical importance to the lifestyle of every American, and indeed the whole world outside of Europe. Fact is, there is an unnerving reality behind the EU’s efforts to become the global trendsetter in regulations and business practices.

When Microsoft waved the white flag before the EU last October, the Wall Street Journalsaid this showed that “Europe now writes the rules for global business across the board—unapologetically to the benefit of its own industry” (Oct. 31, 2007). Microsoft’s capitulation to the EU, and the American government’s relative impotence in persuading the Europeans to cut it some slack, sent a clear message to U.S. companies looking to conduct business on the Continent: Your only option is to obey!

The term “California effect,” mentioned in the above Stratfor quote, refers to the broad phenomenon in America in which California, as the largest and wealthiest state, has at various times “dictated national policy by adopting a stricter regulation than the federal government, forcing corporations to choose whether to follow California’s law or give up on selling goods in the country’s largest market” (Stratfor, January 17).

In the same manner that major U.S. companies cannot afford to ignore California’s market, few multinational corporations can risk giving up their presence in the massive and highly lucrative European economy by rejecting EU rules and regulations. This explains why Microsoft caved to EU demands last October.

But the EU has emerged as a power to be reckoned with beyond the field of antitrust.

In June 2007, the European Parliament signed into law the Registration, Evaluation and Authorization of Chemicals (reach) regulation. Ostensibly designed to protect the health of Europeans, the regulation bans the use of certain chemicals, imposes strict restrictions on the use of others, and demands a strict regime of testing, reporting and registration of all chemicals imported into Europe.

It’s a law that could revolutionize the global chemical industry. Any company wanting to sell chemicals to Europe will be forced to meet its guidelines. Of course, reach’s effects will likely affect American chemical companies the most; they are the largest in the world, and are being forced to spend millions of dollars testing, reporting and registering their products to conform to EU standards.

But the ramifications of this law ripple beyond the chemical industry. For instance, all foreign cosmetic companies wanting to export to Europe are being forced to register the chemicals contained in their products. To be fair, this regulation will also apply to European companies. The only difference is, foreign companies have until June 1 this year to comply, while their counterparts on the Continent have at least three years before they are required to comply. U.S. cosmetic companies have $2 billion worth of exports at stake.

The madness is compounded by that fact that American companies are trying to meet this deadline even as they wait for “Brussels to approve new alternates to animal testing, which is banned for products sold in the EU starting 2009” (Wall Street Journal, Oct. 31, 2007).

To the average American, reach is an innocuous, consumer-friendly regulation. Few recognize the impact it could have on the United States. The reality is, reach equips the European Union with an unmatched ability to exert its influence far beyond its own borders and into the chemical and manufacturing industries—hence the economies—of other countries.

This strict regulation essentially gives European nations the power to dictate global policy pertaining to the chemical manufacturing industry! This study from the Washington Legal Foundation explains the significant ramifications of reach on American industry in greater detail.

The EU’s modus operandi is virtually the same in relation to the topical and highly politicized issue of climate change. In Brussels yesterday, EU leaders announced “a sweeping package of measures to combat climate change that sets a global standard and means major changes for how Europe gets its energy” (Time, January 23). Apparently, the plan is the boldest EU initiative since the euro.

Problem is, the EU’s new strategy for solving climate change is so extreme, there is a fear that some European companies will be driven to relocate to countries with less-stringent environmental laws. How does the EU plan to prevent such an exodus? Instead of re-thinking its idealistic ambitions—perhaps tempering them to make them more achievable or cost-effective for European companies—it plans to impose “carbon tariffs on imports from countries that fail to sign up to a global climate change deal, such as the U.S. and China” (ibid.).

Europe has every right to seek to blaze the path toward solving what it sees as the problem of climate change. But what right does it have to impose its standards on the rest of the world, and then propose the idea of penalizing other nations for not meeting its codes of law? Codes, mind you, that even European companies say are impossible to comply with.

Then there’s the issue of genetically modified foods and crops. In November 2005, the World Trade Organization decided that some European states were breaking international trade rules by not allowing the import of GM crops and foods. The wto gave the European Commission the responsibility of bringing its member states into line with wto rules regarding GM crops and foods. After two years, that deadline expired January 11.

Needless to say, the European Commission failed to enforce the widely accepted wto rules on its member states, instead telling the wto that it needed more time to work with the member states to help them bring their national regulations in line with global trade laws. Two years wasn’t enough?

Let’s get this straight: On antitrust issues, climate regulations and its new reach law, the EU is quite happy to impose new regulations—oftentimes at great cost—on America and the rest of the world—but when it comes to genetically modified foods, the EU lives by its own rules. Talk about double-standards.

This problem of Europe’s regulatory imperialism is only going to grow more intense.

European stock markets have been pummeled this week—many suffering their worst single-day drop since 9/11—as a result of growing fears that the emaciated and poorly managed American economy is on the precipice of a recession. “As if climate change and chemicals policy regulations … were not enough,” wrote Stratfor, “the subprime mortgage crisis’s impact in Europe has heightened Europe’s perception of the United States as a laggard. Bankers and regulators in Europe argue that lax U.S. regulation of mortgage-backed securities is responsible for the problems in Europe emanating from the subprime crisis …” (op. cit.).

As America’s economic recklessness ripples out to impact European economies, surely this will cause European leaders to brainstorm for ways to regulate, protect and perhaps even guide the global economy. Surely it cannot be long before we see the European Union lead the way in imposing new laws and regulations to protect its monetary interests and safeguard the global economy?

Tumultuous times demand far-reaching solutions.

After the European Union victory over Microsoft last year, Mario Monti, the former EU competition commissioner responsible for Europe’s success, told an Italian newspaper that putting such U.S. giants in their place was “the true strength of a united Europe” (Wall Street Journal, Oct. 31, 2007).

That’s a telling statement!

Neelie Kroes, the current European commissioner for competition, celebrated the decision against Microsoft by musing about how low she’d like Microsoft shares to fall.

Americans need to capture the spirit of these statements. We cannot afford to perceive this crisis as a series of independent, unrelated battles between Europe and certain specific companies or industries in America. This is not Europe versus Microsoft; Europe versus Google; Europe versus GM foods and crops, or Europe versus American chemical companies.

This is Europe versus America!

Recognize that Mr. Monti and Ms. Kroes are not backwoods political renegades with isolated and extreme views on Europe’s place in the world: They both made these statements while holding the post of EU competition commissioner. The person in this high-ranking position is responsible for shaping the European business environment, and managing, to a large extent, the ability of foreign companies to participate in the European market.

More importantly, the actions, decisions and viewpoints of this person are directed and motivated, moved and inspired by the highest officials inside the European Union!

“EU Competition Commissioner Neelie Kroes wields much more prestige and power than her counterpart in the United States,” said Stratfor. “The power given to the competition commissioner likely reflects the EU view that such regulatory powers offer political and strategic benefits …” (op. cit.).

“Political and strategic benefits”! Ultimately, this is the crux of the matter! By using its own economic largess to enhance its ability to set global regulations and define global business practices, the European Union is steadily gaining the power and ability to transform, at its own pace and by its own means, the global economy.

History shows that any nation that manages to control the world economy possesses the political and strategic power and ability to shape world events!