EC 1992: the writing's on the wall.

EC 1992: The Writing's on the Wall

It was only a three-sentence campaign slogan posted on a wall somewhere in southern Germany. It got my attention because of its obvious global ramifications. It read, simply: "Our state is Bavaria. Our country is Germany. Our future is Europe."

What the slogan was referring to was the European Community 1992. The EC represents a commitment by 12 countries to create a single, common market by the end of 1992. The member countries are Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, West Germany and United Kingdom.

While there are a great number of factors underlying formation of the EC, its primary thrust is to develop common trade practices and agreements between the 12 member states that will eliminate tariff and quota restrictions, and remove technical barriers, such as the various national product standards.

And whether or not you're concerned about international business and competition, EC 1992 will in some way affect the way you do business, just as surely as it has already begun redefining the global marketplace.

Here's just one small example. On a macro-basis, we, here in the States, could always be secure in our belief that the U.S. market was the largest and most diverse anywhere in the world (or at least in the free world). There simply was no comparison between the markets in any single European or Asian country to that of America.

If and when the EC becomes a reality, it will become the largest trading bloc in the world (or at least the free world), with an internal market of some 320 million people. Compare this with the 220 million people in the U.S. and 120 million in Japan. And, in terms of world trade, in 1987, the 12 countries which comprise the EC accounted for nearly 21% of trade worldwide. This compares with almost 13% for the U.S. and about 12% for Japan.

Closer to home in the foundry business, almost throughout the 1980s, Western Europe accounted for about 16% of total world casting production, while North America produced about 2% more, or 18% of the total. On the other hand, a Chicago-based consulting firm recently released a report that shows that Western European manufacturers of foundry equipment shipped more than twice as much (in current U.S. dollars) in 1987 as did their counterparts in North America.

In other words, the markets of these European countries can hardly be compared with the sheer size of that in the U.S. But collectively, they will indeed be a force to be reckoned with. If you thought competition in the 1980s was fierce, the 1990s could be absolutely brutal.

John F. Magee, chairman of Arthur D. Little, Inc, in a recent issue of Harvard Business Review, bluntly described the potential scenario involved with the formation of the EC. He wrote: "The vision that Europeans hold for Europe is conflicted, so the form the single market will take is uncertain and the precise outlines of the future European business environment are still dim . . . If the outcome is anywhere near as radical as some Europeans hope, the American eagle and the so-called Asian dragons are about to meet a kind of European wolfpack."

But, as often has been said, with adversity comes opportunity. It will be up to American management to recognize it and to act upon it. In that same issue of Harvard Business Review, Wisse Dekker, former chairman and president of N.V. Philips, the huge electronics firm, had these thoughts for American managers: "American managers should really understand, not just say they understand, that there are other parts of the world besides the United States. They know about Japan, because they have been attacked by the Japanese so much...But that huge U.S. market is a problem for American managers because so few of them look outside it ...If Americans started doing business with other countries, they would develop greater understanding as well as more trade. And that is the most important thing, after all--that societies be open to each other. To close yourself off is the worst thing that can happen."