Market Scene : EC Practicalness or Protectionism? : The European Community is trying to establish product standards. Some U.S. firms fear the move could shut them out of certain markets.
Here in the Flemish-speaking countryside of Belgium, an American-based manufacturer of home water-softening systems has figured out how to play the export game by European rules--and to win.
Ecodyne, a sister company of EcoWater Systems of St. Paul, Minn., is complying with a strict German standard designed to eliminate the breeding of bacteria in home water softeners. The two companies, which are part of Chicago’s Marmon Group Inc., should be well situated if the German standard, as part of the drive toward a single European market, becomes the norm for the 12 nations of the European Community.
“We are aware, and we are acting accordingly,” Ecodyne’s general manager, Sylvain Claes, said at his small plant, where mostly American-made parts are assembled into water softeners.
It wasn’t easy for Ecodyne, and it won’t be easy for other American companies and their European subsidiaries that want to maintain sales in the quickly changing European market. The European Community has undertaken an extraordinarily tedious and complicated process of setting EC-wide standards for everything from infant formula to earth-moving machines.
The ultimate purpose of establishing a single European market by the end of 1992--a deadline that will surely not be met--is to simplify life for manufacturers. No longer will they have to make up to 12 different products if they want to sell in all 12 EC nations.
But some Americans wonder if there is not a more sinister purpose as well: to write standards in ways that confer a competitive edge on European manufacturers. This is at the bottom of the fear that the EC-92 movement, as it has come to be known, will lead to a “Fortress Europe,” open to European products but closed to imports.
With a collective gross national product of $4.8 trillion--just a shade lower than the U.S. figure of $5.2 trillion--the 12 EC countries constitute an enormous market. So the concern of American marketers is understandable.
European officials hotly deny the “Fortress Europe” scenario. “Nothing of the kind is happening,” Martin Bangemann, a German who is EC commissioner for the interior market, insisted in a recent interview. “EC-92 is an opening, not a closing.”
Commerce Secretary Robert A. Mosbacher, interviewed during a recent trip to Brussels, said the development of EC-wide product standards should generally help U.S. exporters. But whether intentionally or not, he said, the Europeans seem to be developing some standards that would effectively close their markets to Americans.
“Sometimes it’s easier, sometimes it’s harder to do business here,” Mosbacher said. “There’s some movement toward an open market, and I’m heartened by that. There are also some serious obstacles left.”
American business echoes that view. “There is some suggestion that some groups within the EC, particularly in Germany, are determined to keep out non-EC products,” said Stephen Cooney, an economist with the National Assn. of Manufacturers in Washington.
Indeed, U.S. exports to the EC nations have been booming since 1985, when the dollar began losing value on international currency markets and American goods became less expensive overseas. Exports roughly doubled from 1985 to 1990.
“By and large,” Cooney said, “we view EC-92 as an opportunity to do even better in Europe. Whatever barriers there may be on the micro level, we’re doing fine on the macro.”
But at the micro level, some U.S. industrial sectors are running scared. Particularly vocal have been timber producers.
John Mentis, director of cross-industry programs for the National Forest Products Assn. in Washington, has his eye on a proposed EC standard requiring that all softwood products shipped from the United States be kiln-dried. The stated purpose is to prevent the introduction in Europe of a timber pest called the pinewood nematode.
“The United States and Canada have been shipping green (not kiln-dried) softwood to Europe for over 100 years without mishap to European forests,” according to the forest products group. It argues that the proposed standard would freeze out the 85% of Pacific Northwest softwood that is not kiln-dried.
Mentis complained that U.S. interests have been frozen out of the meetings of the Brussels-based European Committee on Standardization (CEN, its acronym in French) at which the standard was prepared.
Gaston Michaud, the manager of CEN’s secretary general’s office, conceded that until two or three years ago, its deliberations were largely private. Foreign representatives are still not allowed to participate, he said, because the meetings would be unwieldy.
But he said the agency now provides the American National Standards Institute with draft proposals of new standards during the development stage. He said American businesses, working through the institute, have ample opportunity to comment before standards become final.
Dan Smith, who heads the institute’s Brussels office, acknowledged that his access to CEN’s deliberations have improved substantially in the past two years. “We’ve been finding mostly cooperation,” he said.
A handful of CEN standards have already taken effect, starting with one governing toy safety as of Jan. 1 of this year. Michaud said 220 technical committees, with about 700 working groups, are still formulating standards. He acknowledged that they would not finish by the end of 1992, as scheduled.
Home water-softening systems provide a handy illustration of the standard-setting process in all its complexity.
Currently, about 150,000 water softeners are sold annually in Europe compared to about 500,000 in the United States--despite the fact European water is generally harder than America’s, according to Ecodyne’s Claes. Even so, that means about $150 million in potential water softener sales on the continent each year, he said.
John Scott, director of marketing for Minnesota’s EcoWater Systems, is of two minds about the EC-92 process.
“At first,” he said, “the prospect was exciting that barriers would drop to the sale of our products across the 12 EC nations. The concern then became that the new norms might be so restrictive that we wouldn’t be able to sell anywhere in Europe.”
Scott’s concern had its roots in a controversy in Germany over the danger that home water-softening systems can breed bacteria if they are left idle during family vacations or other absences.
Claes explained that the German Institute for Standardization, influenced by the Greens party, held that systems should regenerate themselves at least every four days. Standard No. 19636 lacked the force of law, but it carried considerable public-relations weight.
It happened, Claes said, that a German company named Judo manufactured water softeners with a four-day regeneration cycle. “The norm was not created to promote German industry,” Claes said. “But it had that effect.”
But he said his company and its sister company in Minnesota were able to quickly meet the German standard, allowing it to keep its roughly 15% share of the German market.
Culligan, a major American water treatment company, has also met the standard, if grudgingly. “The standard is just another defense in Fortress Europe,” said Michael Maloney, chief financial officer of Culligan’s European operations.
Donald Rosuck, president of Culligan International in Northbrook, Ill., said the German standard substantially increased the cost of home water-softening systems, which cost upward of $1,000 in Belgium. But companies such as Culligan, he said, face a choice of meeting national and international standards or getting out of the market.
Now, CEN is considering a Europe-wide standard for home water softeners. Or to be more precise, Working Group No. 2 of CEN Technical Committee No. 164 is debating such a standard. And the German standard is a possible model.
Consulting engineer Yves Henderyckx is the Belgian member of that working group. He said trade protectionism--keeping out American products--is not the motive behind the German water-softener standard.
“If there is any kind of protectionism,” he said, “it is protectionism of the customer, not of the industry.”
Henderyckx, speaking last week on the eve of a meeting of his working group in Munich, conceded that the standard-setting process was nothing if not complex. Working Group No. 2 has been active for a year and a half, he said, and it will probably not finish its work before the beginning of 1994--more than a year after the EC-92 process is supposed to end.
Trade Tensions
CONCERNS AND ANSWERS
U.S. business has raised three basic concerns about the process for setting the standards that will govern products to be sold in the 12 European Community nations. Here they are, with the responses of Gaston Michaud, manager of the secretary general’s office of the European Committee for Standardization.
CONCERN
The precess is conducted behind closed doors, and American firms have no way of knowing what is going on until it is too late.
MICHAUD’S RESPONSE
“A few years ago it was difficult to talk to us. But now the process is transparent.”
CONCERN
American and other foreign firms have no way of influencing the standards before the Europeans accept them.
MICHAUD’S RESPONSE
“American firms do not have the right to participate; otherwise, we would have to allow everyone in, and that would be impossible. But they can comment through ANSI (the American National Standards Institute).”
CONCERN
Whether intentionally or not, the Europeans are considering standards that in some cases would freeze out U.S. exports.
MICHAUD’S RESPONSE
“We cannot speak about Fortress Europe. These are words that are no longer valid.”
