New winds blowing in worldwide capital markets.

• Author: Cangemi, Michael P.
• Position: President's page

Investments in capital markets around the world continue to mount, and more of the action is taking place overseas--a key trigger for the Treasury Department, U.S. Chamber of Commerce and others to officially study the issue of the competitiveness of U.S. markets. Huge initial public offerings are being done in markets like Hong Kong, and a far higher percentage of market activity is taking place in emerging markets like India and Brazil (see table)--yet the U.S. market continues to grow as well.

While the U.S. still has a dominant position, and Great Britain, Japan and France are high on the market capitalization list, the situation is fluid and is becoming more difficult to assess because of the mergers of national exchanges, such as the New York Stock Exchange's merger with Paris-based Euronext--creating a trading colossus. Nasdaq's bid for the London Stock Exchange was a related attempt at creating a trans-Atlantic powerhouse.

As the bourses become more electronic, they naturally become more international, less keyed to time zones and trading floors. U.S. investors are already finding it easier to trade on foreign exchanges. At some point, issues will arise about where companies should physically list--and Europe may actually have an advantage in a couple of areas.

One is listing costs, since listing fees, compliance costs related to the Sarbanes-Oxley Act and U.S. exchange rules and the current need to comply with U.S. accounting standards have been a stated deterrent for some foreign companies. Recently, major European firms like Bayer AG, BASF and British Airways have announced they will delist from U.S. exchanges, though the real reason may have less to do with compliance costs than low average trading volumes (statistics suggest that trading of many foreign firms' American Depositary Receipts, or ADRs, is relatively minor).

Another advantage that Europe may have, paradoxically, is in tax rates. The days of so-called confiscatory taxes are waning (though they still exist in some countries), and U.S. corporate rates have remained relatively unchanged in recent years. The result, says economist David Kotok: "Amazing as this statement may sound, business and corporate taxation in Europe is friendlier than in the U.S."

The accompanying table was put together with the help of Booz Allen Hamilton, which...