EU Enlargement and Integration
- Businesses that respond to the market change
1. Introduction
Historically, the market "Europe" (the European market) consisted of various countries, races, cultures, languages and rules which made it difficult to find a European strategy that took this diversity into account. Moreover,
having individual strategies for the major countries was sufficient for Japanese businesses.
The European monetary union started in 1999 and we expected an increase in business opportunities in a new 'single' market due to the simplification of trade. However the European market did not show the expected profitability
for Japanese businesses because of the appreciation of the Yen against the Euro and the stagnation of the European economy shortly after the monetary union. Japanese companies continued to focus mainly on the large, advanced
US market and on China as the 'factory of the world' with an enormous consumer market
Two and a half years ago in May 2004, 10 countries, mostly located in the middle and east of Europe, were additionally integrated into the EU. In this article I would like to discuss how the EU,
the main feature of which in the past was 'diversity', has been altered through this enlargement and integration; how Japanese businesses have responded and how they should respond in the future
2. Enlargement of Europe - a huge single market and reconstruction of industrial growth
The EU enlargement to include former communist countries has, not only resulted in a huge single market which is comparable to the U.S.A or China, but has also given the impression of a peaceful and stable Europe,
in direct contrast to Middle East and Korea or the U.S.A, especially after 9/11. Money flowing into Europe increases the political and economic stability resulting in the Euro becoming a strong currency.
The integration of the EU, including the free movement of products, people and service, a single rule of trade, tax and administrative procedures, and the stability of currency and political situation,
makes Europe a much more attractive market for Japanese businesses.
Japanese industries, especially in the labour-intensive areas such as the electric and automotive divisions, moved to middle/eastern Europe prior to the enlargement in 2004. However, they have always lagged
behind the European/American industries that moved their production bases to middle/eastern Europe long ago. Suppliers of parts and components are concentrated around the Czech Republic and Hungary.
On the other hand, the equipment-intensive industries like chemical and pharmaceutical companies have remained in Western Europe, upgrading and expanding their bases. High value-added industries also have continued
to locate their research and development centres as well as their production bases in Western Europe.
Thus Europe has been divided into the 'high-tech' centres and the 'cheap-labour' production bases. Recently, however, some major companies have moved R&D and back-office sections to middle/eastern Europe as well.
The investment bureaux based there emphasises the high quality of the labour, and expect investment by knowledge-intensive businesses.
Regarding the financial organization, western banks expanded quickly by taking over local banks, resulting in a high share of foreign banks in middle/eastern Europe. Oil money that had formerly been invested into
western Europe, which had experienced low economic growth was reinvested into the high-growing economy of middle and eastern Europe. Due to this investment, industries transferring into the private sector were supported
and made profit. This was probably the most critical factor to EU enlargement.
Somewhat belatedly Japanese businesses started closing or reducing their production bases in western Europe and began moving them to middle/eastern Europe. In spite of the low GDP (5%), compared with their population
(20%) these countries are attractive for Japanese industries, because their market growth rate is very high. Again, there is a competitive situation here between existing European/American businesses and Japanese
newcomers. In addition to supplying competitive products, it is essential for Japanese industries to build an efficient and effective network in management, procurement, production, logistics, sales and R&D all over Europe.
We should not forget the economic expansion of Russia, one of the BRICs countries (Brazil, Russia, India and China), which is a close neighbour of the enlarged EU.
38 years ago Shimadzu Corp. set up operations in Europe. One of the most important product lines is of analytical equipment which contributes to the control and compliance of WEEE/RoHS
directives. For Shimadzu, as for other Japanese businesses, the European market is as important as that of the U.S.A and China.
3. Integration of the EU and globalisation of the environmental standards - JBCE supports Japanese industries.
Thus, EU enlargement to middle/eastern Europe is of interest and maybe profitable for Japanese businesses, especially with regard to a possible further enlargement including neighbouring
countries such as Russia. In this section I would like to introduce the JBCE (Japan Business Council in Europe) which supports Japanese businesses in Europe, not only as a source of information but
also by influencing European law.
In 1998 more than a dozen companies got together in Brussels and wrote a position paper to highlight the publication of the first draft of the WEEE Directive. This was the start of the JBCE.
During the following year (1999) the JBCE became an official non-profit organization under Belgian law. Since then the JBCE has been recognized as an organization that sends clear messages
to the EU and participates actively and successfully in processes of law-making. The JBCE consists of seven committees: CSR, Planning, Public Affairs, Consumer Policy, Corporate Policy,
Environment, Information Society, Standards & Conformity, and Trade Policy. The number of member companies has now increased to more than 60. One of the most important policies in the
EU relates to the environment and the European environmental policy ultimately becomes the global environmental policy. Therefore, the JBCE conveys opinions which are based on
scientific/technical data and contribute to the global environmental policy.
4.Conclusion
The integration of the EU leads Japanese businesses to recognize that Europe is a simplified market, and that the European market is as attractive as that of the U. S. A. The Czech Republic draws
attention as a logistics centre because of its geographical advantage and skilled labour force. Poland is a production centre for Japanese flat-panel digital televisions.
In spite of the delay in the EU constitution and disagreement regarding further enlargement and integration of the EU, Japanese businesses will be more active in future by capitalizing on the
further enlargement to include neighbouring countries such as Russia.
In the not so distant future, I hope, Japanese companies will be able to overcome some of the disadvantages within Europe, and 'the EU' will be a comfortable partner (for them).
Presidents Message PDF Version
Mr.
Yasunori Tokumasu
President of the JBCE,
President,
Shimadzu Europa GmbH.
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