In her guest column “America must act to avoid Eurosclerosis” (Opinion, October 4) Suzanne Clark, the president and chief executive of the US Chamber of Commerce, implores US policymakers to heed the warnings coming from Europe and consider the adverse impact that overregulation can have on America’s economic growth and competitiveness.
In that regard, there is a looming contagion that must also be addressed — extraterritorial regulation — which will lead to unintended and adverse consequences.
On September 26, in a bicameral US congressional effort, a letter signed by more than 60 Republican members of Congress urged Treasury Secretary Janet Yellen to seek a delay of the implementation of the EU rule, known as the Corporate Sustainability Due Diligence Directive (CSDDD).
This will place substantial legal obligations on US multinationals operating in the EU by converting various UN provisions and other international human rights and environmental, climate and labour law conventions into binding law.
Thus, for many US multinationals doing business in the EU, CSDDD as constituted will require a range of compliance to include reporting across not only their EU operations, but also their global operations, as well as all the companies in their supply chains.
The strategic implications of this directive driven by extraterritorial regulation is profound. Faced with this directive and others, multinationals will incur the burden of adhering to multiple overlapping directives and laws across global jurisdictions. The directives will expose these companies to increased worldwide legal liability risks, as they become accountable not only for their own practices, but also for those of their suppliers and business partners across the world.
As multinationals and their global suppliers work to meet a wide range of regulatory requirements, the risk of operational disruptions and delays will increase. At worst, investment will be stalled along with capital formation, with unintended and negative consequences for economic growth and competitiveness.
Every effort must be made to avoid the unnecessary regulatory reach and unintended consequences of extraterritorial provisions.
This can be done while still supporting the inherent sustainability and human rights goals that the directives seek to achieve, but which can only be attained if supported by growing economies and strong alliances.
Mike Roman
Senior Fellow, American Council for Capital Formation, Washington, DC, US
