The European Union under construction.

American associations antsy for full unification of Europe to enhance members' opportunities abroad can celebrate some recent border-breaking developments on that continent. Here's an EU construction update.

HIGHLIGHTS

* The long-running and massive effort to integrate European nations has a major impact on American associations serving industries involved in EU trade or considering the lucrative opportunities. Each broken border further facilitates trade.

* U.S.-BASED associations are finding ways to participate diplomatically in Europe's unification. Involvement is important, as American industries have a great stake in such processes as unifying standards, streamlining regulations, and protecting intellectual property.

The Netherlands - Belgium border, Nov. 1 - As Alfons Westgeest travels south on a train from the Netherlands to Belgium, he's a moving illustration of the subject he's discussing by cellular phone: European unity. While the connection between Westgeest and the party on the other line in Washington, D.C., is rough, the virtual link between the Netherlands and Belgium allows for a smooth railroad ride. No border checks required: These 2 countries are among the 15 that, as members of the European Union, enjoy free movement of people and products across EU country lines.

This is one of the many advantages of European integration to residents and businesses in the EU, Westgeest says, pointing out ways in which U.S. businesses and professionals benefit as well. Westgeest, director of Ernst & Young Association Management in the EU "capital," Brussels, Belgium, serves as Ernst & Young International representative on the EU Committee of the American Chamber of Commerce in Brussels. His intimate knowledge of EU developments leads him to conclude that the near future holds further advancement of the multifaceted integration efforts and additional advantages for Europeans and Americans alike.

Not everyone would agree with Westgeest, though: Opinions are not united on Europe's unification. In the eyes of some Europeans and Americans, much progress has been made toward integrating European nations since border-busting efforts began almost 50 years ago, and the benefits have been significant; but other voices from both continents express dissatisfaction with the pace of progress and skepticism of integration's advantages.

On this, all appear to agree: Europe and the United States are extremely important to each other, especially from an economic standpoint. Combine the countries of the EU and you create America's largest trading partner. According to U.S. government statistics, in 1995, total EU-U.S. trade was $256 billion. U.S imports from the EU that year were $132 billion and represented 18 percent of total U.S. imports. The $124 billion in U.S. exports to the EU represented 21 percent of total exports from the United States. (See chart, "EU-U.S. Trade," for 1990-1994 statistics.) In addition, the United States and the EU are each other's most significant source of direct investment. By the end of 1994, the EU had more than $274 billion invested in the United States, and the United States had more than $251 billion invested in the EU.

Talk in terms of population and again it's apparent why U.S. businesses are wise to build ties with Europe - and why U.S. associations must attune their members to developments in EU affairs. The EU represents a market of 370.5 million people (see table, "EU-U.S. Stats"), and the population density is more than four times that of the United States.

Sensible, but not simple, objectives

Single market. No one debates the simple fact that it makes economic sense to reach out to those 370.5 million via a single entry point, if possible, rather than through 15. That's what the single-market aspect of the 15-member EU is all about. As with all aspects of unification, however, the single market is complex. While it came into force in 1993, unresolved issues remain under discussion.

Single currency. Mimi Kestelijn, a member of the European Parliament who represents Belgium and the Liberal party, and president of the Brussels-based Flemish Institute for the Self-Employed, works intensively at promoting the progress and positives of European integration. Her most pressing current concern is the European monetary union, which will introduce a single currency (the "euro") and the European Central Bank. This is a major EU objective that has been under way for several years and is targeted for achievement by 1999. "If the single-currency project fails," Kestelijn says, "Europe will not move a similar step forward in its integration process for more than a generation, I believe."

Kestelijn's words are less of a cautionary and dire prediction and more of a representation of her belief that the need for monetary union is critical. She believes success will come - which is why she's often irked by what she reads and hears about U.S. opinion on the subject. "I think that [people] in the United States feel very negative about anything which is coming from Europe, like the euro and the European monetary union," Kestelijn says. She mentions reading a recent article that quoted an American as calling the European monetary union "crazy."

Kestelijn acknowledges that the concept of unity has critics in Europe itself. An article in the December 2 Washington Post covers the heated disagreement between two German leaders over the steps toward monetary union. According to the Post, an open letter by former German chancellor Helmut Schmidt that was published in November accuses Germany's Bundesbank president, Hans Tietmeyer, of trying to sabotage Europe's plans for a single currency within the next couple of years so that the German mark's dominance and Tietmeyer's authority can be sustained. Schmidt accuses Tietmeyer of insisting on unattainable economic goals before cooperating with the introduction of the euro. The Post also notes generally that "European governments are grumbling about Germany's imperious manner in dictating the destiny of their economies." In addition, the newspaper cites polls showing that two thirds of German voters are reluctant to part with the mark.

Across the Atlantic, Bill Krist, CAE, senior vice president for international trade with Europe and the Americas at the Washington, D.C.-based American Electronics Association, indeed has doubts about a European monetary union by 1999, but he has a strong interest in seeing it come to fruition as soon as possible. "You can lose an enormous amount of profit if you ship things across borders and you have to constantly exchange the currencies from dollars to pounds to marks to francs to lira," says Krist, expressing the concerns of AEA members. He estimates that two thirds of the approximately 3,000 companies that belong to AEA export to Europe. The great interest that U.S.-based members have in Europe, along with the growing European membership, prompted AEA to open an office in Brussels in 1992 to follow EU progress.

Reduced tariffs. A major issue that AEA follows is tariff reduction. The association supports the development of an agreement to eliminate tariffs on information technology products. "Right now the duties just increase the cost for European industry to move with information technology," Krist comments. The duties not only reduce sales from the United States, he says, but also lower Europe's economy and growth rate.

On December 13, The Washington Post reported significant progress on this issue. A broad agreement to eliminate tariffs on more than $500 billion worth of computer and telecommunications products by the year 2000 was endorsed on that day by major technology trading countries, including the United States and those in the EU. The report quoted Sir Leon Brittan, vice president of the European Union Commission: "We have achieved the biggest tariff-busting deal since the Uruguay Round" of trade talks, which ended in 1994.

Unified standards. Standards issues also garner a lot of AEA's attention, as its members strive to cost-effectively manufacture and sell products that meet the evolving requirements of all European countries. Mentioning the CE mark, an example of one of the standards applicable to the electronics industry that AEA represents, Krist emphasizes the importance of unification in this area: "In the past, companies had to worry about complying with 15 national standards. In the areas where the EU has a common standard, it's easier."

He goes on to note that the EU study of standards is relevant to companies whether they export to Europe or not, because more and more standards that are developed in Europe - rather than those established in the United States - become the globally accepted norms.

Standards are major items on the agenda of the Transatlantic Business Dialogue, an ongoing series of meetings that bring together EU and U.S. industry leaders and government officials to discuss strategies for improving business. According to Krist, "a number of associations are involved in the dialogue, and it has had a significant impact on policymakers in the U.S. and the European Union."

At the beginning of this year, the chief executive officers of Philips Electronics in Europe and of Tenneco in the United States took over the helm of the Transatlantic Business Dialogue. According to Westgeest, they plan to focus on areas where progress can be made relatively quickly. The current main issues include intellectual property rights and liberalization of the energy markets. Progress is anticipated this year with issues concerning the chemical and biotechnology industries.

Streamlined regulations. Another key component of the Transatlantic Business Dialogue concerns regulations. An active player in the discussion of safety and environmental regulations affecting the automotive industry is the 700-member Motor and Equipment Manufacturers Association, which has headquarters in Research Triangle Park, North Carolina, and offices in Washington, D.C., and Brussels. Approximately 10-20 percent of MEMA's manufacturer members export to Europe; approximately half of this group also have facilities there. MEMA was a co-sponsor of the Transatlantic Automotive Business Conference held last April in Washington, D.C. The event offered an opportunity for MEMA to meet with European automotive authorities and share views about effective and cost-efficient regulation.

Chris Bates, vice president of international operations for the association, explains that the goal is to establish a common set of regulatory approaches. "This is obviously a long-term process," Bates points out, "but it's one that has taken on new life in the last couple of years."

Simplified distribution. A main EU issue mentioned by Krist reflects the difficulty that many U.S. companies have in getting distribution in Europe - "how they get their agent or distributor, and whether they need a separate one for each country. Each country has different laws and regulations that govern the agent-distributor relationship."

Intellectual property protection. Not much progress toward a unitary patent system has been made recently by the EU in the hot area of intellectual property protection, says Krist. "The European Union does not have a common patent system," he explains. "If you really want to get protection, you still have to file in each country, and you have to pay patent-maintenance fees in each country, and those can be very high. So the strategy of how you protect your intellectual property in Europe is a tricky one."

He notes that the EU established a European patent some time ago, "but it's not at all like a U.S. patent, because you still have to go file in each country."

Krist suggests a reason for the lack of significant movement to a unitary system: "It's a scary thing for a government to accept another country's patent. That's a real leap in a world where national sovereignty still matters."

Sticky issues to address

The nationalism issue referred to by Krist and noted in the December 2 Washington Post report is certain to grow stronger as the EU continues working toward another of its chief goals: expansion of membership to Central and Eastern European countries. Discussion of this goal and of the several countries in this region that have applied for membership since 1994 is a primary component of the intergovernmental conference that began in 1996. This conference of representatives of the 15 EU member states is reviewing the Maastricht Treaty and will culminate, most likely this year, with a vote on a new treaty. While adding member states is considered advantageous, the EU will have more sovereignty issues with which to deal.

As Krist describes the situation, "A lot of the countries in Europe are wrestling with how they preserve their cultural identity. That's a very important and powerful question. You have country governments that have a way that they are used to operating. The organizations and people only surrender that very reluctantly."

Westgeest notes additional reasons for reluctance: "The European, the individual, is interested in the opening of borders from the perspective that it will increase competition for consumer products and services. In the last couple of years, we've seen the breakdown of monopolies in the telecommunications field, the airline industry, and several basic services. In that sense, Europeans accept the European Union as a good thing. However, there's also some concern about whether too many details are being regulated in order to make that cross-border trade possible - in other words, too much bureaucracy.

"At the same time," Westgeest continues, "we are faced with a pretty high unemployment rate in Europe and, therefore, the European citizen is somewhat doubtful about whether this is all worth it. Though people used to be very excited about the European Union a few years ago, now it is less exciting."

Bates brings up an American perspective that needs to be addressed for complete unity: "It's important to realize that while a lot of progress has been made in the EU, the markets continue to be very much national and subnational. You can remove formal tariff barriers, you can remove standards barriers - and that obviously helps you on the cost side - but you still have issues of distinct customer requirements that vary tremendously from region to region within Europe.

"On the other hand," says Bates, "I think you do have more and more of a European mindset, as distinguished from a French or German or English mindset. People should not expect European unification to be something which proceeds very quickly."

Involvement of U.S. associations. Bates, Krist, and Westgeest are among the many association executives who are closely monitoring EU affairs for their U.S.-based associations, many of which are participating directly in the integration process. For example, the MEMA office in Brussels, Bates notes, helps the association communicate its concerns and preferences regarding regulations to the European Commission.

Krist's association, too, works with the commission, and he describes an amicable relationship: "We find that they seek out our opinions and respect them." Various committees operating out of AEA's Brussels office - standards, environmental, customs, intellectual property, and so forth - express views to the commission on what are considered good policy approaches.

Aside from working with EU governance institutions, Westgeest advises U.S. associations to establish partnerships with their counterparts in Europe. These organizations can be key in helping to monitor and influence EU developments.

Worth the effort. If your association has any doubt, despite the State Department statistics, that the tremendous job of following the ongoing and complex reconstruction of this continent is worth it, Krist presents this wrap-up: "The European Union is far and away the place where U.S. companies export the most and do the most business. It's a market that basically has a system comparable to ours: You go in, you look up the rules, those are the rules, that's how you do business. If you go into the court system, you can get a fair hearing or respect for your intellectual property. You only have to pay your duty once. When you go in, you can ship anywhere in the European Union. So that's a pretty positive picture."

Krist rests his case: "I think that any U.S. company that is selling commercially in the U.S. ought to be doing business in Europe or they're leaving money on the table."

EU Origins and Governance

The European Union is an institutional framework for forging unity among European countries. Unification was launched in the wake of World War II, as a devastated Western Europe sought ways to rebuild its economy and prevent future wars. Since May 9, 1950, when the French foreign minister, Robert Schuman, proposed pooling Europe's coal and steel industries as a step toward a united continent, the movement toward European integration has undergone numerous phases, expanding its list of goals and evolving from various organizations and treaties into today's European Union (see sidebar, "Milestones in European Integration").

Begun with 6 countries that accepted the French proposal and signed the European Coal and Steel Community Treaty in 1951, the EU has grown to represent 15 member "states" (see map). While all current members are located in Western Europe, EU plans call for further expansion, including countries in Central and Eastern Europe.

Member states combine some of their sovereign powers for the sake of unity. Members retain sovereign powers in such fields as security and defense, although they take joint actions in foreign policy.

Institutions

Here's how the European Union is governed.

The European Commission proposes and implements legislation. The 20 commissioners, including the president, are appointed by agreement among the member states and approved by the parliament.

The Council of the European Union enacts legislation, sometimes in co-decision with the European Parliament. The council is composed of ministers representing the national governments of the member states. The presidency rotates every six months.

The European Parliament has final approval of the EU budget and powers of co-decision in certain areas. The parliament, which is composed of 626 members, is elected by the citizens of the member states for five-year terms.

Source: Excerpts from The European Union and the United States in the 1990s, published in April 1996 by the Delegation of the European Commission to the United States, Washington, D.C.

Milestones in European Integration

1952: Belgium, France, the Federal Republic of Germany, Italy, Luxembourg, and the Netherlands create the European Coal and Steel Community (ECSC) by pooling their coal and steel resources in a common market controlled by an independent supranational authority.

1957: The six ECSC countries expand integration efforts by signing the European Economic Community (EEC) Treaty, designed to merge national markets into a single market and ensure the free movement of people, goods, services, and capital. The six also sign the European Atomic Energy Community (Euratom) Treaty, designed to further the use of nuclear energy for peaceful purposes.

1967: ECSC, EEC, and Euratom merge to form the European Community (EC).

1973: The United Kingdom, Ireland, and Denmark join the EC.

1979: The first European Parliament is elected.

1981: Greece becomes an EC member state.

1985: The program to complete the single market by 1992 is launched.

1986: Spain and Portugal join the EC.

1990: East and West Germany are reunited after the fall of the Berlin Wall and become the EC member state of Germany. The EC and the United States adopt the Transatlantic Declaration, laying down principles for greater EC-U.S. cooperation.

1993: The single market comes into force. The Treaty on European Union, signed in Maastricht, the Netherlands, in 1992, comes into force (and is called the Maastricht Treaty). This treaty creates today's European Union (EU), founded on the European Communities (ECSC, Euratom, and EEC). The EU grants the European Parliament and the European Commission additional power. The EU also establishes new policies for political, social, and economic cohesion, including the development of a monetary union.

1994: The EU and the European Free Trade Association form the European Economic Area, a single market of 19 countries.

1994-1996: Several Central and Eastern European countries apply for EU membership.

1995: Austria, Finland, and Sweden join the EU. Building on the 1990 Transatlantic Declaration, the EU and the United States agree on a Transatlantic Agenda that aims for more effective cooperation and leadership in areas including trade liberalization. The Schengen Agreement comes into force, removing border controls for people traveling within several EU countries.

1999: Target date for completing the monetary union, with the introduction of a single currency (the "euro") and a European central bank.

Source: Delegation of the European Commission to the United States, Washington, D.C.

Resources

A wealth of information is available from the Delegation of the European Commission to the United States. Functioning like an embassy, this delegation represents the commission in encouraging American support for European integration and in working with the U.S. government. At its Web site (www.eurunion.org) you can find details about the delegation, a profile of the European Union and its member states, EU-U.S. partnership information, news of EU events, and the current issue of Europe, the official magazine of the European Union. EU maps, guides, booklets, brochures, and listings of commissioners are available by calling (202) 8629500 or sending a fax to [phone]. Or you can visit the delegation's library at headquarters: 2300 M St., N.W., Washington, DC 20037.

Highly recommended for its clear and comprehensive explanation of the European Union's mission, structure, institutions, history, policies, issues, and progress with integration is Europa, a Web site run by the European Commission at www.europa.eu.int.

Another excellent resource is Welcome to Showcase Europe, a Web site run by the Commercial Service of the U.S. Department of Commerce, Washington, D.C., at www.telepac.pt/Uscommerce.europe. You'll find information geared toward fostering commerce between the United States and Europe, including country commercial guides. This site also displays other trade services of Commerce, including the NationalTrade Data Bank and the Economic Bulletin Board. You can call Commerce at [phone].

The U.S. Department of State, Washington, D.C., explains EU-U.S. relations and other EU issues at the European Union segment of State's Web site. To go directly to this segment: www.state.gov/www/regions/eur/fs_european_union.html. To access from State's home page: www.state.gov. Or call State at [phone] and ask for the Bureau of Economic and Business Affairs or the Office of the Coordinator of Business Affairs.

The U.S. Chamber of Commerce's International Division, located in Washington, D.C., offers free publications, such as a brochure listing American chambers in Europe and the trade services they provide, and publications for sale, such as EC 1992: A Practical Guide for American Business. This guide is updated every couple of years (published in 1989; latest update in August 1993). For information about publications and other services, call (202) 4635460, or go to www.uschamber .org/international. You can also access this Web site through ASAE's "Gateway to Associations" at www.asaenet.org.

The U.S. Small Business Administration, Washington, D.C., can answer questions about world markets, including those of the European Union. Call (800) 8275722 and press 8 for the Office of International Trade.

ASAE's International Section can be of assistance in several ways. Its bimonthly International News features EU-focused articles, such as "Lobbying in the European Union," by Kurt Vandenberghe, which appeared in the September/October 1995 issue. The International Section Peer Networking and Resource Directory includes contact information for association executives and various organizations that can provide information about Europe. You can learn more about the International Section and access some of its resources through ASAE's home page: www.asaenet.org/sections/international. Or call (202) 6262828.

Get on-the-spot EU information of pertinence to associations by contacting the European Society of Association Executives, Brussels, Belgium. Call (011) (32) (2) 743-1545; fax to (011) (32) (2) 743-1550; or send an e-mail to [e-mail].

Financial Times of London closely monitors the European Union. To order, contact New York City-based F.T. Publications: phone [phone]; fax [phone].

EU Brief is a bimonthly newsletter that reviews EU policy initiatives and other developments affecting business in Europe. To get on the mailing list, contact the publisher: Ernst & Young International, European Union Office, Avenue Marcel Thiry 204, B-1200 Brussels, Belgium; phone (011) (32) (2) 774-9610; fax (011) (32) (2) 774-9690; e-mail 100113.1555 @compuserve.com and info @eyam.be. EU Brief also can be found at the Ernst & Young Web site: www.ey.be/eyam.

Gerry Romano, CAE, is a senior editor of ASSOCIATION MANAGEMENT.