Europe 1992: how will it affect international competition?

• Author: Hexter, David R.
• Position: International

Europe 1992: How will it affect international competition? What is the European Community of 1992 all about? What are its implications for international competition?

The impact of 1992 is far from clear. Will it be a panacea for the economic ills of Europe and a liberalizing influence on international competition? Or will it result in a "fortress Europe" that will give the continent a competitive advantage over its trading partners?

I will look at 1992 from two perspectives: first, the likely effect of 1992 within Europe and, second, how 1992 will influence competition between Europe and the rest of the world.

The impact within Europe

In regard to the European Community, it should be emphasized that Europe is a collection of sovereign states, each with its own language, culture, and talent pool. Despite all the hype surrounding 1992, Europe is not a single operating environment. The Community does, however, have the potential to become the world's largest unified trading area and economy. This market will comprise 322 million inhabitants , engaging in 37.1 percent of global trade, with an annual GNP of $ 4.1 trillion.

The push to complete the economic union has a thirty-year history. The decisive turning point, however, was in 1985. In the early 1980s, the performance of the European economy was sluggish. No European Community nation had been able to get unemployment back to the levels that existed before the first oil shock levels of the early '70s. The economy needed a shot in the arm. The significance of the appointment of Jacques Delors as European Commission president in 1985 cannot be overestimated. He has mounted a skillful public relations and marketing campaign. Many critics consider it a triumph of form over substance. Nonetheless, Delors remains a dynamic symbol of the market integration.

The physical, technical, and monetar y barriers now hindering the economic potential of the Community were the s ubject of Delors' 1985 white paper, Completing the Internal Market. The potential benefits of enhanced competition within Europe could be enormous, it said. Completing the internal market could well be the "short in the arm" the European economy requires. The Commission has estimated a 5-percent growth in GDP if the market were fully opened and a substantial rise in employment took place.

At the heart of the 1992 proposal are some 285 directives aimed at breaking down the economic walls within Europe. Central to this is the principle of "mutual recognition." This means that any good or service that is acceptable to authorities of one member state will be acceptable to those of any other. This is evolving to include, for example, automotive standards, insurance policies, investment funds, professional qualifications, and technical standards.

To date, good progress has been made. Almost 100 directives have been approved. A major institutional step forward has been the adoption of majority decision-making within the Community. The historic veto power of any one nation dating back to De Gaulle has been removed--except on...