The European Union

EU European Union 15 Countries –AustriaEuro –BelgiumEuro –DenmarkAbstain –FinlandEuro –FranceEuro –GermanyEuro –GreeceNot Qualified for Euro –IrelandEuro –ItalyEuro –LuxembourgEuro –NetherlandsEuro –PortugalEuro –SpainEuro –SwedenAbstain –United KingdomAbstain

Scope of the European Union …Creating an Economic Giant 11 Euro countries make up world’s second largest economy –Share of World GDP Euro zone24% U.S.26% Japan16% Others34%

European Union Objectives Single market Free flow of capital Single currency Uniform regulations Single telecommunications market Single insurance market Possible extension into Eastern Europe

Evolution of European Union 1951 – Belgium, France, West Germany, Italy, Luxembourg and Netherlands signed Treaty of Paris creating European Coal and Steel Community 1957 – Six ECSC nations signed Treaty of Rome, establishing the European Economic Community & broadening concept of common market – First wide-ranging cuts in customs duties between EEC members took effect 1968 – To establish a common labor market, freedom of movement was guaranteed to all workers within the EEC 1972 – EEC was enlarged to include Denmark, Ireland & U.K European Monetary System started to operate 1981 – Greece joined EEC 1986 – Spain and Portugal joined EEC

Evolution of European Union 1993 – Introduction of single market under accord signed in – Maastricht Treaty took effect paving the way for economic and monetary union 1995 – Austria, Finland, and Sweden joined European Union as the bloc became known 1995 – Schengen Agreement took effect eliminating border checks 1995 – Euro was chosen as name for European currency Introduction of the Euro

EU Implications for Ordinary Citizens Can live and work in country of their choice Barriers to inter country travel removed Accessibility to wider range of products European + national citizenship –Nationals of one country living in another can vote in local + European elections

Obstacles to Unifications Numerous organizations set standards Inconsistent & differing interpretations of standards Over 300 directives & technical requirements Inconsistency in testing procedures Cultural distinctions - e.g. perception of quality

What exactly is the euro? A single currency to replace the franc of France, the mark of Germany and the currencies of nine other members of the European union? Euro bills and coins began circulating Jan

Front Reverse – changes by country

Single EU Currency Conditions –Deficit limited to 3% GDP –Debt limited to 60% GDP –Inflation no more than 1.5% higher than average of 3 lowest countries –Long term interest rates no more than 2% higher than average in 3 lowest countries

What’s in a Euro? Value 1/1/99 –1.167 U.S. Dollars – Japanese Yen –.705 British pounds –7.449 Danish kroner – Greek drachmas Permanent fixed value vs. 11 national currencies: –1.956 German marks – Belgian francs – Luxembourg francs – Spanish pesetas –6.560 French francs –.788 Irish punts –1, Italian lire –2.204 Dutch Guilders – Austrian schillings – Portuguese escudos –5.946 Finnish mark

French Euro Coins

Objectives of Single Currency Eliminates costs & headaches of converting money Reduces risk of variation in exchange rates Promotes European cohesion Allow Europe to negotiate trade & monetary issues on equal footing with U.S. & Japan

European Organizations Setting Standards More than 100 European organizations influence, direct or set standards for European products –European Association o Manufacturers of Water Meters, European Liaison Committee for Sewing Machine Industries, European Fishing Tackle Trade Association Goal of EU is to standardize product standards between European wide & individual country

Complying with Europe’s Product Standards is becoming easier, even as enforcement becomes more strict… Export Today, March 1998 EU Medical Device Directive (June, 1998) –Process appears to be getting easier & directives less confusing –Monopolies on testing enjoyed by European laboratories less restrictive –Enforcement becoming more strict E.g Swedish authorities checked compliance of 3000 machines in random survey

Medical Device Directives E.g. Dental floss generally regarded as a medical device in Class I category- meaning a manufacturer does not have to use a Notified Body for certification. If dental floss is marketed as “sterile” then it does.

MDD E.G. Cold packs if intended to be used to reduce swelling considered active therapeutic device; if intended to cool beer then not.

Europe’s Metric Labeling Requirement Metric Only Directive (Scheduled to go into effect 2000) all products sold in EU will have to list only one system of measurement on the labels, I.e. the metric system –U.S. exporters must develop two separate packages, warehousing and inventory systems