As European firms operating in the United States face disruptions to their supply chains from home, they also seem to be less able to benefit from resources that could help their American competitors more quickly recover from a pandemic-induced recession.
European subsidiaries are huge employers in the U.S., with a substantial multiplier effect for the economy given that many operate large manufacturing plants. The extensive German automotive presence in the South is one of many examples of this. Trade with and investment from the 27 European Union nations supports nearly 200,000 jobs in Georgia alone.
Still, the EU mission in Washington has had to “make quite some noise” in Washington to ensure European firms gain access to recovery measures outlined in the $2 trillion CARES Act.
That’s according to Tomas Baert, the delegation’s head for trade and agricultural policy, who joined a virtual call organized with the Metro Atlanta Chamber and the European consulates and chambers in Atlanta to celebrate Europe Day and highlight the unity of the bloc and its importance for the U.S. economy.
Mr. Baert made clear that this wasn’t an issue of discriminatory treatment, a key distinction at a time of acrimony over trade. In theory, European firms incorporated here and employing Americans are eligible for the same treatment as their domestic counterparts.
“But the validation by the banks that are running this in practical terms has become onerous, difficult and perhaps discriminatory vis-a-vis foreign entities,” Mr. Baert said during an otherwise optimistic conversation.
A survey conducted in advance of the forum by the binational European chambers and consulates in the South lent some credence to the idea that European firms have been in the dark on whether or how to apply.
According to French-American Chamber President Jacques Marcotte, only about a third of survey respondents — which themselves were split about evenly between American and European firms — had applied for the U.S. Small Business Administration’s Paycheck Protection Program, while an even smaller proportion vied for Economic Injury Disaster Loan meant to provide immediate relief.
Metro Atlanta Chamber Vice President for Global Commerce John Woodward, who moderated the call, said this level of utilization stands in stark contrast to numbers for Georgia as a whole, which is the No. 6 state recipient of economic injury loans and grants so far.
Still, some of the details around foreign eligibility have been cloudy. During a web conference for foreign companies looking at the U.S. market last week, attorneys at Atlanta’s Arnall Golden Gregory LLP said a lot of the confusion surrounds how a company certifies it’s a small business in the eyes of the SBA.
They can be classified using a few different metrics: number of employees (fewer than 500 in most industries, with some higher thresholds in manufacturing), annual revenues (also dependent on industry classification) or proof that assets are below $15 million and profits under $5 million.
If they don’t meet any of those limitations globally, companies are clearly eligible for the PPP.
What makes things murky is that the SBA has never clarified whether it will count toward these totals employees, assets and revenues outside the U.S. which may cause European subsidiaries and even some American firms to exceed sizing thresholds.
Tenley Carp, an AGG partner and leader of its government contracts practic in Washington, urged companies to exercise caution and lean toward transparency while filing.
“We are recommending that if you apply for the funds you disclose the number of employees in affiliated entities outside the United States,” Ms. Carp said.
One thing that is clear PPP money is not forgivable if spent on the wages of foreign employees, an indicator of how various countries are working to protect their own during the crisis.
EU Ambassador Stavros Lambrinidis laid out European efforts in this regard on a call with the World Affairs Council of Atlanta Wednesday. The bloc’s initial half-trillion-euro relief package included €100 billion for the SURE plan to help impacted countries and sectors keep workers afloat.
Germany, Consul General Heike Fuller said on the Europe Day call, has instituted its own measures whereby the state covers the bulk of the salary shortfall for employees who have been furloughed or have seen their hours reduced. The goal, like the PPP, is to enable quicker recovery by “(making) sure companies do not lose valuable knowhow that will be needed in the future.” The kurzarbeitergeld program is expected to cost the German state about $11 billion.
Echoing Mr. Lambrinidis’ earlier remarks, she said this blend of centralized recovery funding and leeway for individual member states is a sign European strength to overcome this “existential threat.”
“If Europeans can put the principle of solidarity to work in the next phase and also overcome the economic emergency, (the EU) has every prospect to be stronger than before this crisis,” Dr. Fuller said.
The European Commission made it clear that the continent is in a deep recession, issuing a report that projected economic output will fall by 7.7 percent this year.
To shore up the economy while addressing a health crisis on the fly has been challenging, said Mr. Baert, but the EU has acted in a concerted way despite some early hiccups.
To ease companies’ cash crunch, it authorized member states to refrain from collecting duties and value-added taxes on imports. To ensure access to equipment, it has centralized authorization for exports of medical products and kept open “green lanes” to allow essential goods to be shipped across the newly erected national borders in the Schengen area. Short-term rules have also been issued to prevent takeovers of companies left vulnerable by the crisis.
Behind all this, however, is the fundamental goal of keeping trade open and fair, while addressing vulnerabilities the crisis has laid bare, like the need to rejigger medical supply chains, Mr. Baert said.
Still, he insisted that the European focus on “strategic autonomy” was not a drive to “re-shore” jobs, as the discussion has been explicitly cast in the U.S.
“We will not strive to be self sufficient; this is not about bringing back jobs in manufacturing. This is about diversifying, however, our supplies and our imports from third countries.”
Mr. Baert has spoken to Atlanta audiences before, including during a meeting of EU-member trade counselors held here in 2018.
Atlanta is home to diplomatic outposts of 17 EU members, including the six career consulates covering multiple states in the South — Greece, Germany, France, the Netherlands, Ireland and Belgium. The group meets regularly and travels jointly around the region, but post-pandemic, they have been holding weekly virtual meetings organized by Dr. Fuller, the rotating chair.