A Guide to Exporting to Europe
Europe today consists of the Member States of the European Union (EU), the Member States of the European Free Trade Area (EFTA), and the Central and Eastern European States most of which were, until recently, under the political, economic, and military umbrella of the former Soviet Union.
This paper outlines what the potential corporate investor or exporter of goods and services must know of the EU and describes the general aspects of doing business in France.
The EUROPEAN UNION (EU)
The fifteen current Member States of the EU are France, Germany, the United Kingdom, the Netherlands, Spain, Portugal, Belgium, Denmark, Greece, Luxembourg, Italy, Ireland, Austria, Finland and Sweden. The EU was initially called European Economic Community (EEC). The basic principles of the Economic Union, known as the « Four Freedoms », set up a uniform economic area free from distortions in competition and thus free from customs barriers within the Member States. The « Four Freedoms » are the free movement of goods, persons, services and capital. The Treaty of Maastricht dated February 7th, 1992 organized economic and monetary union, unanimity in foreign policy and cooperation in defense among the Member States. In May 1999, the Treaty of Amsterdam added significant improvements on social and employment matters, to the Treaty of Maastricht.
The EUROPEAN FREE TRADE AREA (EFTA)
The current Member States of EFTA are, Iceland, Norway, Switzerland and Liechtenstein. EFTA essentially creates a « privileged » trade area and is not in any sense an economic or political union. This organization has nonetheless concluded some conventions with EU, namely on jurisdiction, free trade relationship (excepted Switzerland).
It is worth noting that a number of current EEC Member States were previously members of EFTA and that the extension of the EU will probably lead to the disappearance of the EFTA.
THE FORTHCOMING ACCESSION OF THE CENTRAL AND EASTERN EUROPEAN STATES
The accession of new Member States will enhance the Union’s international influence. Although economic and political realities in these countries are often very different, the Union will certainly prove its ability to merge the economic interests of nations with a long common history of exchanges.
With accession of Central and Eastern Europe countries, as well as Malta, Turkey and Cyprus, the EU’s population could rise by 25% to 500 million but its total GDP would grow no more than 5%.
The Copenhagen European Council started the pre-accession process in 1993. Negotiations started in 1998 with a first wave of 6 countries : Cyprus, Czech Republic, Estonia, Hungary, Poland, Slovenia. This has been followed by a second wave of 5 countries : Bulgaria, Latvia, Lithuania, Romania, Slovakia.
The Copenhagen European Council defined the criteria which applicants would have to meet before joining the EU : Stability of institutions guaranteeing democracy, existence of a functioning market economy, adherence to the aims of political/economic and monetary union.
The PHARE program is the pivotal financial instrument in the pre-accession strategy. ECU 21 billion are to be provided to the Central and Eastern European Countries for the period 2000-2006. 30% are to be allocated to the reinforcement of the applicant’s administration and institutions, 70% in investment financing.
Lately, the Berlin European Council (March 1999) set up 2 pre-accession instruments : A structural instrument (ISPA) and an agricultural one (SAPARD). This European Council decided to double pre-accession aid from 2000.
TRANSATLANTIC ECONOMIC RELATIONS
The EU and the U.S are each other’s single largest trading partner : In 1997, they traded goods worth ECU 277.000 million, around 20% of their total world trade. High added value goods like high-tech products account for 20% of this transatlantic trade. The EU and the U.S have by far the world’s most important bilateral investment relationship and are each other’s most important source and destination for Foreign Direct Investment. 51% of FDI stocks in the E.U originate in the U.S.
The WTO is the scene where the EU and the U.S can exercise considerable influence on global trade & investment (FDI). In this context, the EU and the U.S have worked together to conclude the Information Technology Agreement and the Basic Telecommunication Services Agreement, which together liberalize approximately one trillion ECU in trade in goods and services and most recently, the Financial Services Agreement.
Recently, the EU and the U.S went further in their attempts to enhance a closer economic co-operation. Despite many efforts on both side, a number of barriers, mainly of a non-tariff kind continue to hamper Transatlantic Trade. It was with this mind that the European Commission made a proposal in March 1998 on the creation of a New Transatlantic Marketplace (NTM). This led the EU and the U.S to agree to the launching of the Transatlantic Economic Partnership (TEP) at the 18 May 1998 EU/U.S summit in London.