OPINION:
As we prepare to celebrate 250 years of independence, the United States faces a new trans-Atlantic threat to its regulatory sovereignty and economic future: the European Union’s Corporate Sustainability Due Diligence Directive.
Although European officials, in response to pressure from U.S. diplomats and international business groups, recently reached an agreement to scale back the number of companies directly regulated by this directive, drop an expensive climate plan mandate and delay compliance until 2029, the EU did not address the extraterritoriality of the directive. U.S. policymakers should not let down their guard.
The latest version of the Corporate Sustainability Due Diligence Directive still would impose substantial compliance costs, reporting obligations and legal liability on U.S. manufacturers. Although it would nominally apply to U.S. companies with more than $1.76 billion in annual sales to Europe, those companies will have to prevent, mitigate and account for environmental and social harms in their global supply chains. As a result, the directive’s requirements could stretch deep into manufacturers’ U.S. supply chains, implicating small and privately held firms.
Thousands of American businesses — from Lexington to Concord, from Valley Forge to Yorktown — will be subject to EU environmental and labor standards that have not been approved by Congress, vetted by U.S. administrative agencies or scrutinized by American courts. Although larger companies may be able to absorb these costs, the directive could pose an existential threat to smaller businesses.
Ultimately, American consumers will pay the staggering costs of this extraterritorial EU mandate.
A recent Hudson Institute study estimates that U.S. companies could face more than $1 trillion in new compliance costs because of the Corporate Sustainability Due Diligence Directive and other EU regulations. This European red tape could undo much of the progress the U.S. is making under President Trump’s leadership to secure our economic future through modernized regulations, new tax incentives to encourage manufacturing, expanded energy production and bipartisan, comprehensive permitting reform.
American leadership is critical at this moment, as the EU Parliament moves to finalize the text of the Corporate Sustainability Due Diligence Directive. We appreciate the advocacy of U.S. diplomats abroad, including our ambassadors to the EU and France, in communicating to our European allies on the unworkable nature of the directive and its threat to trans-Atlantic trade.
U.S. policymakers must continue to stand strong for American companies and maintain firm pressure on European officials as they pursue a costly regulation that would discourage trade and harm economic growth on both continents.
As we honor the courage of George Washington, Thomas Jefferson and our other Founding Fathers, we must continue their fight to preserve our sovereignty and economic independence from foreign interference.
• Charles Crain is the managing vice president of policy at the National Association of Manufacturers.
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