NEWS ANALYSIS : European Pact Apt to Help U.S. Firms : Commerce: The agreement removes trade barriers among 19 countries, making the Continent more open.
The intra-European trade pact reached this week will make it easier for British insurance companies to do business in Sweden, allow more Greeks to work in Austria and will gently pry open the secretive Swiss banking system.
What it will decidedly not do, experts on both sides of the Atlantic said Wednesday, is create a European trading bloc that will close its doors to imports from the United States and elsewhere. On the contrary, the accord should mean more European business for American firms.
“The removal of barriers to intra-European trade will have the effect of opening new opportunities for Americans and Japanese as well,” said Brendan Brown, research director of Mitsubishi Finance International in London. “I don’t see it as penalizing outsiders at all.”
The accord, reached Tuesday in Luxembourg after 16 months of sometimes acrimonious negotiations, will create a “European Economic Area” made up of the 12 European Community nations and the seven countries in the European Free Trade Assn.
Together, the 19 countries have a population of nearly 380 million and make up virtually all of Western Europe.
The European Economic Area would become reality at the beginning of next year upon ratification of the new accord by the EC’s European Parliament and the legislatures of all 19 nations. Switzerland--where ratification by voters is required--may be the most difficult case; a thumbs-down there could torpedo the entire agreement.
The accord, comparable in many respects to the U.S. free-trade pact with Canada, will bring down many but not all barriers to the movement of goods, services, workers and capital among the 19 countries.
“There is nothing in this agreement that would turn Europe inward,” said Jeffrey Schott, a research fellow at the Institute for International Economics in Washington.
The accord should boost economic growth throughout Europe, Schott said, by eliminating cumbersome trade barriers. That in turn should enable Europeans to buy more not only from each other but from the world’s other two major trading centers, North America and Asia.
Barbara Boettcher, an economist with Deutsche Bank, Germany’s biggest, pointed out that the 12 EC nations increased their trade with the rest of the world in recent years even as they boosted trade with each other. She predicted a similar impact from the EC-EFTA accord.
“No one is talking about building new walls,” added Aake Landquist, an EFTA spokesman. “No one would profit from what is called a ‘Fortress Europe.’ ”
Stephen Cooney, director of international investment and finance for the National Assn. of Manufacturers in Washington, sounded a cautionary note.
EFTA countries, which already give their own companies priority for government procurement contracts, will have to give equal access to EC companies, Cooney said. And that will make it more difficult for U.S. firms seeking North Sea oil contracts from Norway and telecommunications contracts in Sweden, he said.
“But for the most part,” Cooney said, “we don’t see the new agreement as a direct threat. For most of our members, it shouldn’t make much difference. We don’t think EC-EFTA will be more of a threat than the EC by itself.”
Within Europe, the rich and relatively small EFTA countries have both the most to gain and the most to lose. They will have increased access to the EC market, whose population is 10 times that of the EFTA countries--but also be more open to EC exports.
The impact will be felt most in trade in services--such as banking, insurance, transportation--and in easier flows of capital and workers across European national borders, according to Kari Jalas, who represents Finnish industrial groups at EC headquarters in Brussels.
The EFTA countries, if they approve the accord, will have to adopt the 12,000 pages of EC laws that will create a single market within the EC by the end of 1992.
That will entail a certain amount of anguish--particularly in historically insular Switzerland, which will have to relax its prohibitions against foreign workers, scale back its restrictions against foreign ownership of land and open up its secretive banking system.
A New European Economic Union Negotiators for the 12-nation European Community and the European Free Trade Assn., consisting of seven smaller states, agreed this week to form a common “European Economic Area” by 1993 that would be the biggest free-trade zone in the world. European Community nations Netherlands Ireland Britain Belgium Luxembourg Portugal Spain France Denmark Germany Italy Greece European Free Trade Assn. Iceland Norway Finland Sweden Liechtenstein Austria Switzerland
