Opportunity Knocks for U.S. Business

AMERICAN industry should find it -L. an opportunity rather than a danger. Do not be afraid of it." Thus did Washington Lawyer and Economist George Ball, an expert on investment abroad, exhort U.S. businessmen to take on a new challenge: the European Common Market. The common market, a vast trading zone of six European countries, will remove trade barriers among participating nations, allow free movement of goods, labor and capital. What worries many a U.S. businessman is that it will also be protected by tariffs that discriminate against outsiders, make it harder for U.S. firms to compete in Europe, the biggest market for U.S. exports. The way to compete is to establish plants in the common market area. Says Vice President William H. Mathers of Yale & Towne, which is planning to expand operations in the common market area: "When, the tariff provisions get into full swing, you aren't going to see anything from this country over there."

The common market will get under way Jan. i when the member countries--France, West Germany, Italy, Belgium, Luxembourg and The Netherlands--cut their duties to each other by 10%, the first step toward eventually removing all duties within the area. Hundreds of U.S. firms are already preparing for market opportunities. Ford International opened a special office in Brussels to guide its European operations into the common market. H. J. Heinz bought a Dutch plant to produce its 57 varieties for Europe, and Du Pont is hunting for plants in Holland and Belgium. Other branches or new factories have been set up by Argus Chemical in Brussels, Consolidated Electrodynamics in Frankfurt, International Harvester in Heidelberg. Coty International, with branches in three European countries, in February formed an 80%-owned subsidiary in West Germany. Says Coty President Philip Cortney: "As manufacturers, we have everything to gain and nothing to lose by the common market."

While the common market's threat to U.S. business is plain, so are its enormous advantages. Says Dr. Lajos Schmidt, an international attorney who has helped many firms to go abroad: "The common market represents the first time that American industry can compete on an American basis in Europe." It will have close to 170 million people with high living standards--almost as large as the U.S. market. Many U.S. firms that could not afford to set up plants for any one of the six nations alone can well afford to do it for the whole market, have discovered that U.S. methods of mass production and efficiency give them a big advantage. Sprague Electric bought a majority interest in an Italian capacitor firm in 1956, doubled sales by indoctrinating the workers with U.S. methods.

U.S. firms will be able to gain equal access to all common market countries by establishing themselves in any one. While wages and other production costs now vary among common market countries, European economists expect them eventually to level out--as they have already started to in the European coal and steel nations. In view of this, smart companies are already picking plant sites on the basis of the best, not the cheapest, labor. Chicago's Outboard Marine, for example, decided to establish a plant in Bruges, Belgium, where wages are now relatively high, because it found that Belgians work better and produce more than workers in other areas it considered.

Though a firm can get its foot in the common market simply by licensing a European firm to manufacture a U.S. product, most U.S. companies, especially those already established in market countries, prefer to set up new branches or subsidiaries instead. They have found it best to buy existing plants, since building a new plant in Europe often means building housing for workers as well. -

Many U.S. firms have discovered that the best and safest method is to buy a partnership in a European firm. Faced with much stiffer competition in the common market, European manufacturers are eager to get U.S. cash and technical know-how to help them meet it. A U.S. firm, on the other hand, can profit from its European partner's intimate knowledge of his market and area.

Economists hope that the common market will later be joined by a proposed European free-trade area, consisting of the United Kingdom and five other countries outside the common market, to form a community of more than 240 million potential customers. Many U.S. firms are holding back to see if this will happen; they would prefer to get into England under lower tariffs, thus gain access to the Commonwealth trading area as well as the common market. But foreign traders contend that now is the best time for U.S. firms to enter the market area. Says Lawyer Ball: "There are dangers in waiting. Once producers in other countries are established, it may be extremely difficult to establish a competitive source of production."

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