Be Wary of EC Lures, Firms Advised : Incentives: The Danish consul-general says U.S. firms expanding in Europe should focus on factors other than low taxes or other financial inducements.

U.S. companies considering setting up operations in the European Community should not base their decisions on low tax rates or other financial incentives offered by different nations because these “baits” can give a false picture of the market’s competitive nature, a Danish diplomat said Thursday.

Instead, U.S. companies should focus on their future expansion plans in the European Community and match their technical and managerial needs with those currently available in the 12-nation trade bloc, Danish Consul General Henning Kristiansen said.

Some U.S. companies that have set up operations in Western Europe have later moved to other countries after discovering that “when the incentives disappear, they couldn’t compete in the European marketplace,” Kristiansen said in an interview after a speech to the Orange County Chamber of Commerce in Newport Beach.

With plans to integrate most of the EC economies in 1992, Kristiansen said companies will have to move fast to capitalize on market opportunities.

Beside tax breaks, other incentives being offered by some European nations include research, relocation and training grants, and low-interest, long-term loans. The Danish government has jumped in with incentives of its own. Earlier this year, Denmark lowered its corporate tax rate from 50% to 40%, said Kristiansen, who represents Denmark’s interests in 11 western states, Alaska and Hawaii.

Although Denmark offers fewer financial incentives than other EC countries--Ireland, for example, has a 10% corporate tax rate--Kristiansen said such inducements aren’t the only way to lure foreign investment.

Companies should not be blinded by financial incentives offered by countries, he said, because other factors such as training an unskilled work force could cost a company more in the long run.

“Foreign companies who obtain incentives will get a false picture of the real competitive situation in the market because, as the incentives are slowly lifted, the real market situation will surface,” he said.

Despite the high start-up cost for foreign companies, Denmark has been able to entice more than 230 U.S. companies to establish subsidiaries in the country. Last year, International Business Machines Corp., which is the largest U.S. company operating in Denmark, located its European, Middle Eastern and African software distribution operations in a suburb of Copenhagen.