Special challenge to European business

The plans for the creation of a truly common market within the European Community in 1992 have posed a special challenge to European business and businesses elsewhere which wish to operate in the giant European market. Some of these challenges are commercial. As the advocates of a truly common market after 1992 intended, the abolition of remaining trade barriers within the Community will increase competitive pressures. The cheaper, more efficient and lower-cost producers will in theory be able to compete for business on the home ground of rival businesses without government interference. Yet 1992 has other implications for business. Corporations manufacturing outside Europe but trading with it are anxious to avoid free trade within Europe being accompanied by greater restraints on imports from outside Europe, a ‘fortress Europe’ as its critics call it. Firms within Europe will be reminded by 1992 of a development that precedes it, the increase in the importance of the European Community as a governing institution. Firms will find increasingly that, like the British water industry, important decisions are being made in Brussels, not London.

The prospects for a privatised water industry in Britain were affected significantly by the enforcement by the Commission of European rules on water safety. The growing significance of the European Community as a decision-making institution raises crucial questions for business about its political tactics. In the first place, business needs to build up a set of interest groups in Brussels as strong as any found in individual European capitals. This process has of course begun. Employers’ associations exist in Brussels to defend the interests not only of employers in general but of individual industries. However, these organisations are not yet fully authoritative, perhaps because employers, like other interest groups, are often attracted to lobbying their national minsters on how to vote in the Council of Ministers where the final decisions are made. But as political scientists are fond of saying, setting the agenda is an important power, and the agenda in Brussels is set primarily by the Commission’s staff, not by the individual national ministers.

A further challenge from the growth in the importance of the Community as a policy-making institution reflects the fact that styles of policy making and implementation in Brussels will often differ from the national tradition with which a business is familiar. British business, for example, will find itself faced with important differences in policy formulation and implementation between the Community and London. Whereas British business executives turn increasingly to political activity at the company level, many Community administrators from continental European nations will expect to deal with trade associations or general employers’ organisations. Employers’ associations at the Community level will be far more important than in Thatcher’s Britain, even if Community officials also maintain some direct links with corporations. A second difference will be in the style of regulation. Community regulation will be enforced in what British businesses will find an adversarial or legalistic style compared with the collaborative and informal style that has characterised regulation in Britain until the 1990s.

The overall success of 1992, or even the degree to which a truly common market has been created, cannot be assessed until the late 1990s. At present there is much speculation but little hard evidence about the degree to which the growth of Community power will reduce the power of business to assert its ‘privileged position’ by moving to nations that treat it best compared with the degree to which a truly common market will increase the ability of businesses to more to nations with `the best business climate’. Only time will tell. It is beyond doubt, however, that before the moves towards ‘1992’ but even more because of them, the European Community had emerged as a major locus of decision making on policies affecting business. By the late 1990s it will be necessary for books on business and politics to pay as much attention to Brussels as to decision making in national capitals.

We may therefore conclude by saying that business executives in different countries and at different times face challenges from different sources. A full treatment of the role of business in any particular country requires consideration of these challenges.