- The Washington Times - Tuesday, July 3, 2001

Treasury Secretary Paul H. O'Neill sharply criticized European Union regulators yesterday for blocking the proposed merger of General Electric and Honeywell, accusing the EU body of abusing antitrust authority to meddle in U.S. economic affairs "outside their jurisdiction."
On the eve of a vote by the 20-member European Commission today that was widely expected to reject GE's acquisition offer, Mr. O'Neill attacked the commission as a body "not elected by anyone" that was unfairly "reaching into the affairs of other countries" to protect its members from foreign competition.
In an interview with The Washington Times, President Bush's chief economic adviser called the EU regulatory process deeply "flawed" and said "there is a need to make some correction in their mechanism."
Until recently, the Bush administration had been trying to negotiate a way out of the EU opposition to the deal. Mr. O'Neill escalated the rhetoric last week, calling EU resistance "off the wall." But his remarks yesterday were the administration's strongest criticism to date, appearing to challenge the whole notion that the European Union can block a merger between two global U.S. giants that happen to do a lot of business in Europe and compete with European companies.
"The European [regulatory] process is in my judgment flawed in the sense that the people who are making the judgments are not elected by anyone and their judgments are not subject to a judicial review or any kind of relief," Mr. O'Neill said.
"And it seems to me that there is a need to make some correction in their [regulatory and antitrust review] mechanism," he said, "especially in those cases where they are making judgments about business combinations of companies that are completely located outside their jurisdiction, such as General Electric and Honeywell, which are both headquartered in the U.S. …
"What the EU is doing is a far reach from looking at questions that are directly of interest to the European Union and reaching into the affairs of other countries," he said.
The EU's commission wanted GE to make substantial divestitures that GE said would make it financially unattractive and thus undermine the basis of the merger. GE agreed to sell its stake in an aircraft financing and leasing unit to win EU approval, but EU officials announced late last week that it backed Competition Commissioner Mario Mont's opposition to the merger.
That resulted in an administration decision over the weekend to "take the gloves off," said one administration official, and attack EU opposition to the deal in much stronger language.
"I'm troubled by the procedure and I'm troubled by the theory of the case, which is not one that focuses on the economic benefit of the customer but rather on protecting competitors which seems to me to be inconsistent with the original founding notion of antitrust, that combinations not be permitted that will ultimately hurt the customers," he said.
"And I've not seen anything in the things that I've read about [EU] findings that suggested that their finding was based on injury to customer rather than on injury to competitors," he said.
On other issues, Mr. O'Neill believes that the U.S. economy has stopped declining.
"I don't think we're going down anymore. We're bouncing around at a low level of real positive growth," he said.
The economy was growing by 1.2 percent in the first quarter, and the administration has said it expects the economy to pick up in the fourth quarter and grow by 3.1 percent in the first six months of next year.
Mr. O'Neill pointed to a consensus forecast by private economists that saw economic growth running at 2.7 percent in the fourth quarter. "But I still think we have the potential to grow by 3.5 percent to 4 percent," he said.

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