NATIONAL "FORTRESSES' IN EUROPE

An expert on the European Community was asked recently if a "Fortress Europe" is looming, a reference to barriers that could face non-European businesses after the single European market is in place. A likelier scenario, he said, is a "Disneyland Europe," a place where non-Europeans could pay a fee to get in and then take the rides for free.

Perhaps this analogy is appropriate as Disneyland's first park outside America opens near Paris. But how much will it cost for business to play in Europe? And are barriers erected by member states to protect their own industries insurmountable?The answers to those questions are mixed. In part, they depend on whether the objective of the non-European party is trade or direct investment. The answer depends, also, on the specific economic sector involved, and the attitudes of individual member states toward that sector.

For non-European companies, the initial barrier to be overcome is the common external tariff. Each time the EC concludes an agreement with another block of nations that reduces the tariffs between them - as has happened with dozens of Third World and European countries - it raises the barrier in a relative sense to Americans.

Also, non-tariff barriers must be considered. They present perhaps the greatest source of trade friction. In some cases, EC policy makes it impossible to do business profitably. American soy producers and aircraft makers, for example, complain that EC subsidies cost them their European market.

Those are potential barriers facing exporters to Europe. Investors, on the other hand, face other issues, mostly having to do with uniformity of rules. For them, a key question is whether the EC has a standard rule for investment in a given sector. If there is no standard rule for the community, then investors must inquire what rules apply in the host country.

For both trade and investment, some harmonization of the rules of member states has occurred. But far more common is mutual recognition, where the standards and rules of one country are accepted by the others.

This principle was given sanction by the European Court, which held that the German beer purity law of 1516 could not be used to prohibit sale of ''less wholesome" products from other EC countries.

To a large extent, the presence or absence of a "fortress" is sector- specific. Some markets are more difficult for outsiders to break into than others. Agriculture is among the hardest.

French farmers have been the most outspoken supporters of the EC's Common Agricultural Policy, fighting a virtual "holy war" against anything that looks like cheap imports. Thus, for example, they forced the French government to oppose imports of Polish meat into the EC at a time when Poland most needed trade support.

Fear of outside competitors is part of the reason for incomplete success in opening other community markets. The banking and electronics industries are just two that have sought protection.

But to claim that these amount to a "Fortress Europe" can be misleading. Many of these industries have been highly protected at the national level before the EC became involved. "National champions" often benefited from restrictive and favorable public procurement policies designed to shelter them

from competition.

Even without public procurement rules, national giants can run amok. British Telecom, with over 90 percent of the British market, announced profits last May of over $5 billion for the year, nearly $100 in profit for every man, woman and child in Britain. In the rigidly segmented airline industry it is not for lack of trying that the EC has been unable to pry open nationally controlled markets.

Fortresses exist at many levels, and the differing approach of member states will continue to be relevant. In Britain, Japanese carmakers have invested liberally, thanks to a friendly attitude. But in Italy, France and Spain, restrictions on imported cars remain, and will at least until the end of the century.

Germany's extensive networking system, where shares in companies are cross- held by other German companies, makes it difficult for investors to engage in hostile takeovers. It is one thing for the EC to pass legislation; it is another for the legislation to be enforced at the national level. That cannot be taken for granted.

On the other hand, there are trends that blunt protectionist sentiment. Outsiders are buying into European companies directly. Producers, consumers and suppliers are increasingly connected by global networks, and it's getting harder to tell whether a company is European, North American or Asian. Some feel that the increasing diversity represented by these "outside" interests will limit the strength of the protectionist camp.

As one observer pointed out, a fortress can be a heavily protected place or a place that, because of its internal strength, is difficult to conquer. In either case, it is likely to be some time before the promise of the Treaty of Rome, "the progressive abolition of restrictions on international trade," is fulfilled.

For the full story: Log In, Register for Free or Subscribe