EU: TIME FOR PAINFUL CHANGE - THE SINGLE MARKET DREAM.

EU: TIME FOR PAINFUL CHANGE - THE SINGLE MARKET DREAM. - The single market dream is tarnished by a bias towards mediocrity.

by Peter Wilsher.
Last Updated: 31 Aug 2010

The single market dream is tarnished by a bias towards mediocrity.

Looking eastward, do you, your company and your commercial rivals see a Europe bathed in sunshine and promise? Or has it rather become, after all the dashed hopes of growth and job-creation, more a storm-centre, wrapped in perpetual lowering cloud? The argument is still open, but there is little doubt at the moment that, on a free vote, the gloomsters would win by a landslide.

It is still possible, of course, to find the odd bit of up-beat hope. I have on my desk at this moment a document put out by TSB (The Bank That Likes To Say 'Yes') under the title, Are You Fit for Europe?, which is packed with advice on tracking new opportunities and urgent injunctions to keep abreast of Brussels-directed change. But such evangelistic tracts are looking increasingly old-fashioned and out of touch with reality when the Financial Times polls its business readers and finds that 77% of them claim to have gained absolutely nothing from last year's completion of the single market. Even the normally supportive Economist gave its last major European survey the apt headline, 'A Rude Awakening'.

Thanks to widespread economic recession and the virtually simultaneous collapse of world Communism, all the comfortable assumptions that underpinned the Community's first 30 years have been blown away - including the one maintaining that periods of stagnation and self-doubt would always revert, sooner or later, to renewed growth and ever-greater unity and social cohesion. In a world no longer dominated by stand-off rivalry between the nuclear superpowers, and subject everywhere to fears about jobs, crime, immigration and the enfeeblement of political leadership, there can be no such certainty. 'Europe,' for the next few years, looks much more likely to be a major source of problems than a reliable generator of solutions.

That likelihood is hardly diminished by the current anxieties over European competitiveness. In a recent survey, the Commission in Brussels set out to identify leading and lagging industrial sectors. Among those that had maintained or improved their claims to world leadership during the second half of the 1980s it was able to pinpoint only four clear winners - wood processing, cotton textiles, leather tanning and ethyl alcohol. More worrying, though, was the much longer list of also-rans, where, among the most dismal performers, were to be found such mainstream, high-volume products as computers, office and medical equipment, and automotive components.

It is not particularly encouraging, either, to set that depressing picture against some careful Scandinavian research into the structure of trans-Atlantic export flows. This established that, even during the late 1980s before the current downturn set in, more than half US sales to Europe fell into the 'high technology' category, with 29% 'medium' and only 20% 'low'. But traffic the other way was rated at 33% 'low' and 44% 'medium', with only 23% qualifying for the top of the sophisticated, innovative and high-value-added range. It is very doubtful that the proportions have much improved since that time; and if it were not for the drug-producers, where Roche has just moved into the world's number one slot and there are plenty of other local high-achievers, the overall balance would almost certainly look a great deal worse.

Europe still has many great companies - in fact slightly more than the 60-odd that America contributes to the world's top 200 - and the Shells, Michelins and Unilevers can hold up their heads with anyone in their respective fields. But overall there is a deeply uncomfortable bias towards mediocrity. Far too many contenders, even among the household names, are no longer able to hold their own at the frontiers of innovation and first-rank production skills; and still less are they able to match the cost, quality and reliability standards set increasingly by producers in the developing nations of the Pacific Rim (who are themselves now being caught up by even newer newcomers, in China, Latin America and Eastern Europe).

In the short term the current stand pat stance is perhaps just about sustainable, through a mixture of qualified protectionism ('Let the Japanese in, but not until 1998') and taking in our own washing. Europe's share in world exports shrank from 21.9% in 1980 to just 17.6% in 1992, while trade between members rose from 54.1% to 59.7%. But in a longer perspective it cannot be viable, neither as a guarantee of well-paid employment for the favoured few nor as a funder of ever-rising social welfare costs for the dis-advantaged many.

Indeed, many of Europe's more far-sighted employers are already making their alternative dispositions. BMW, that most German of car manufacturers, is shifting production to such lower-cost areas as Alabama and Solihull, and, with rather less of a publicity fanfare, Unilever has quietly restructured its workforce so that two-thirds of its operation is now outside the EU periphery.

The Single Market Act, the 1992 programme, and the whole process leading up to Maastricht were postulated on the proposition that the European Union was, and would continue to be, one of the world's economic powerhouses. It may still be - and the queue of East, North and Central Europeans queueing up to join suggests that there is still plenty of life in the dream. But there are no guarantees that it will retain its present privileged existence, without a great deal of drastic and probably painful change. It is no time for rose-coloured spectacles, when all efforts should be concentrated on dissipating those threatening storm clouds.

Peter Wilsher is a freelance consultant and writer.

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