A shared interest in refining Europe’s competitive edge

Date: 30/04/1998

Keith Chapple explains why he believes European business will benefit if the EU makes itself a more attractive place for US investment

AMERICAN companies have long played an important part in the European economy. Indeed, American business alone employs more than 3 million people in the EU and has invested more than 330 billion ecu in Europe.

Despite the trade disputes which appear in the newspaper headlines from time to time, both the EU and the US regard the transatlantic relationship as stronger than ever.

European companies are just as committed to the US, where they have made similar large-scale investments. We are each the largest trading partner of the other, with about 19% of both imports and exports in the balance.

The relationship between the EU and the US is important as both are major players in the process of globalisation. Cooperation is vital, and this is the central aim of the EU Committee of the American Chamber of Commerce in Brussels.

In recent years, there has been a significant growth in the high-technology sectors and many of the key players in this field have plants in the Union which are equipped with the latest technology and staffed by the highly trained workforces for which Europe is particularly noted.

The markets they serve are global in nature and highly competitive, with competition from the Asia Pacific region particularly fierce.

Europe must nurture and protect these investments by making sure that when the time comes for them to be reviewed and upgraded, they will still be seen to be attractive in comparison to facilities in other parts of the world.

As Renato Ruggiero, director-general of the World Trade Organisation, once said: "In today's economy, trade and investment are increasingly inseparable as two sides of the coin of the globalisation process."

Of course, the very existence of the European Union as one of the world's largest markets and the expansion envisaged into central and eastern Europe will mean that many businesses will be established on EU soil whatever the conditions.

But technology is moving very quickly to level the playing-field for the major regions of the world, and Europe will feel the squeeze if it lags behind in making itself a truly competitive place to do business.

So what does US business bring to Europe? Certainly employment, but much more than that. The very presence of these companies stimulates European firms to respond. US companies typically have a pan-European focus and this is very much in line with the development of the single market.

To their employees, they frequently bring a culture of open and direct communications and of ownership of their company culture through compensation plans and bonuses linked to performance. These are pervasive throughout the whole company and not just at the top.

These investments are also an effective mechanism for the diffusion of technology and product know-how around the world.

Indeed, my own company, Intel, has the most advanced plant in its world-wide manufacturing network located in Ireland and it has proved to be a very productive facility.

These technology transfers stimulate innovation and expand the skills of the population.

You may assume from the size and success of these investments that they will always remain in place. But consider what is happening around us.

Helped by fast-developing communications and information technology, geographical boundaries matter less in the selection of sites by businesses making products which are not of a bulky or perishable nature. This also applies to services.

Although the Internet is still in the early stages of its development, it is essential for every business or organisation to review how it will be affected by the changes it will bring about.

Middlemen will be eliminated, new channels of distribution will become available and new businesses are already blossoming based on innovative marketing, efficient logistics, and easy and instant communications - not on location.

Europe will be increasingly in competition with developing countries which can offer attractive alternative bases for business. To be competitive in this shrinking world, Europe has to be flexible, drive out unnecessary costs and be open in its trading relationships.

This is very much in line with the recent proposal from the European Commission for a New Transatlantic Market-place (NTM) and the steady progress towards making the euro a single currency for the EU.

Both of these will act to strengthen Europe's position in world trade and ensure continuing investment in European production.

However, improving conditions for competitiveness in Europe must be a priority for the Union.

There is plenty of scope to continue this drive. If Europe is a good place for US companies to invest in, it will also to be a good place for European firms themselves to choose, rather than moving offshore.

Flexible workforces are a necessity for these global businesses - and there is no reason why flexibility should be equated with less than excellent working conditions.

Companies simply need to be able to respond to the rapid changes which occur in business today by being able to retrain and reassign their staff to assure the success of the enterprise. Just one tangible example of how the EU could help them do this would be agreement on the elusive pan-European pension plan.

Continuing to work on further liberalisation and a competitive regulatory environment is also a recipe for creating jobs.

This will stimulate the information technology and creative sectors in particular, both being important areas of growth and with a strongly competitive business culture.

The IT industry in the US has directly created 1.2 million additional jobs in the last seven years. Moreover, the average wage for those jobs is double the national average.

Given continued progress in these areas, Europe can retain its inward investment in the face of the increased challenges from other regions.

A COMPETITIVE culture, better availability of venture capital and early encouragement of electronic commerce will ensure that the Union does not miss out on the next phase of globalisation. The strong interdependency between competitiveness, inward investment, job creation and the upgrading of skills is clear.

The EU Committee tries to provide a path for Union legislators to understand and discuss issues affecting the position of the EU both internally and within the global market-place.

This is possible through the combined experience and unique position of European companies of American parentage.

The committee also acts to increase US knowledge about Europe. We are deeply committed to a constant exchange of views between companies in the US and the EU, and are pleased with the results obtained so far through the Transatlantic Business Dialogue (TABD).

But there is still a long way to go to realise the goals that the New Transatlantic Market-place proposal has set.

There remains a need for continuing initiatives to make the views of the business community clear, and we must be persistent in following up the recommendations made by the TABD.

To this end, the EU Committee will continue to position itself to support multilateral and bilateral initiatives, and to function as a bridge between transatlantic business and governments.

Keith Chapple is chairman of the EU Committee of the American Chamber of Commerce in Belgium.

Author is chairman of the EU Committee of the American Chamber of Commerce in Belgium. He argues that European business will benefit if the EU makes itself a more attractive place for US investment.