The European community and information technology

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Abstract
The world has watched Eastern Europe erupt into such political turmoil that historians are expected to call this period the Revolutions of 1989. Economic evolution was also underway as the Continent progressed toward a single European market. The goal—a market without national borders or barriers to the movement of goods, services, capital and people—was first outlined over 30 years ago by the 12 countries which became members of the Common Market. In the mid 1980s, the effort was renewed when these same countries approved an ambitious plan outlining hundreds of legislative directives and policies that would harmonize and re-regulate those of the member states. The measures are drafted by the European Commission, voted on by the Council of Ministers, amended if necessary, and then assigned budgets by the Parliament. They include competition law, labor law, product regulation and standardization, taxation and subsidies, and quota and tariff guidelines. In 1987, the Single European Act created a timetable for the passage of legislation with a formal deadline for the removal of barriers by December 31, 1992, hence the term Europe '92 (EC '92). But many have described EC '92 as a process that will continue throughout the 1990s. The ouster of communist leaderships throughout Eastern Europe, however, has raised unexpected questions about the participation of the Eastern countries, and this could alter or delay the process. Nevertheless, the changes have begun and are taking place during the Information Revolution. It is therefore natural to ask what impact EC '92 will have on the computer industry. Inevitably, several of the directives and policies relate primarily, and many secondarily, to information technology. Table 2 lists the policies in effect and those being proposed. In the following pages, Communications presents several points of view regarding the impact of EC '92 on the information technology market in Europe. As of July 1988, the European information systems market was estimated at $90 billion by Datamation magazine and is expected by many to be the fastest growing market this decade. But during the last ten years, European-based computer companies have had difficulty keeping pace with American and Japanese firms. In 1988, European companies managed only a 20 percent market share on their own turf, according to market researcher International Data Corporation. Not much had changed since 1982 when their market share was 21 percent. As reported in the Wall Street Journal last January, European computer companies have been hindered by lack of economies of scale, narrow focus on national markets, and difficulty in keeping pace with Japanese and IJ.S. product innovations. But the occasion for the Journal article was the news that Germany's Siemens AG was merging with the ailing Nixdorf Computer AG. The result would possibly be the largest computer company based in Europe, and the sixth or seventh largest in the world. And in October of 1989, France's Groupe Bull announced the purchase of Zenith Electronics Corporation's personal computer unit. Bull claimed that it would become the sixth largest information service company in the world. Such restructurings have been predicted with the approach of EC '92, as corporate strategies would begin to take into account directives and trade rules regarding the computer and telecommunications industries. Smaller European and American computer companies are anticipating battle with giants like IBM and DEC, which have long-established European divisions or subsidiaries. IBM has been the leader in mainframes, minicomputers, and personal computers, but it is expected that all computer companies, European-based or not, will face greater competition in Europe. The Netherlands' NV Philips, the largest European semiconductor and consumer electronics company, says it has been preparing for EC '92 since the 1970s. And North American Philips Chairman Gerrit Jeelof has claimed company credit for initiating the 1987 European Act. In a speech delivered at a Business Week and Foreign Policy Association Seminar last May, Jeelof said that while American companies had forsaken consumer electronics, Philips and France's Thompson have held their own against the Japanese. But he indicated that American dominance of the European semiconductor market was a major impetus for EC '92. Jeelof said: . . . because of the lack of European strength in the field of computers, the integrated circuits business in Europe is dominated by Americans. Europe consumes about 34 percent of all ICs in the world and only 18 percent are made in Europe by European companies. The rest are made by American companies or are imported. It is not a surprise then that in 1984 we at Philips took the initiative to stimulate a more unified European market. At the time, we called it Europe 1990. Brussels thought that 1990 was a bit too early and made it 1992. But it has been the electronics industry in Europe together with other major companies, that have been pushing for Europe 1992. Why did we want it? We wanted a more homogeneous total market in Europe and, based on that, we wanted to become more competitive. The process is on its way and obviously we see some reactions. If you take action, you get reaction. One reaction has been concern on the part of non-European companies and their governments that the EC is creating a protectionist environment, a “Fortress Europe.” As walls between nations are coming down, some fear that other more impenetrable ones are going up on the Continent's edges. Jeelof argues against this perception in another speech, “Europe 1992—Fraternity or Fortress,” reprinted in this issue in its entirety. Communications also presents an analysis of several trade rules relating to semi-conductors in “The Semiconductor Market in the European Community: Implications of Recent Rules and Regulations,” by Roger Chiarodo and...

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