Magazine article Personnel

Europe 1992: HR Implications of the European Unification

Magazine article Personnel

Europe 1992: HR Implications of the European Unification

Article excerpt

Europe 1992: HR Implications of The European Unification

With more and more companies "going global," HR managers need to keep an eye on the way Europe's forthcoming economic unification will affect employment practices there.

A major force behind today's push to "go global" lies in the much-touted changes to be wrought in "Europe 1992," as it is called in the United States (Europeans call it the "New Europe"). Both terms refer to the fact that, in 1992, 12 separate countries now divided by frontier controls are being unified into a single European market: the European Community. (See Exhibit 1.) This unification is being designed to set up a common market for goods, services, capital, and even labor. (This last category means that citizens from one EC country may freely move and work in others.)

As HR professionals, you'll be interested in the implications of all this for hiring and other aspects of employment law and practices. We'll look at these implications later on; first, however, let's take a longer look at the overall phenomenon.

What It Will Do--and Not Do

The European Community creates the second-largest economic block in the world (behind the United States) and the second-largest populated market in the free world (behind India). It has 228 of the top 1,000 companies in the world--but it's second in this to the United States, which has 345. Half of these have profits of more than $200 million. Still, it has a technology deficit of $10.6 billion, mostly with Japan and North America--and this deficit was one of the major influences on the governments of the EEC to agree to the formation of the single market. Note that what was the EEC (European Economic Community) becomes the EC (European Community) when the 1992 changes are being considered.

However, the EC after 1992 will not completely harmonize all the markets within its borders. Local differences will remain and will need to be treated differently, despite the advantages of scale and market size. And, though products in general will be held to a common standard, some products and services, as well as brands, will remain local.

For instance, Procter and Gamble calls one detergent Daz in the United Kingdom (UK), and Dash in the rest of Europe. Ford calls one of its popular models Cortina in the UK and Taunus in Germany; and what Americans call a Mercury Sable is called a Ford Granada in the UK. But, of course, McDonald's is McDonald's, and every main street has a Benetton.

Neither will the EC become "Fortress Europe." The European Commission's belief is that strong competition policy is vital to the success of the internal market. (The Commission is the closest thing the EC has to an executive branch of government, and it will wield enormous power.) Another belief: Challenges and opportunities will abound.

In fact, many American companies are often ahead of their European counterparts in considering Europe to be a single market; Europeans tend to see the differences first. In addition, American companies have worked within the Community for decades. Indeed, the likes of IBM, Citibank, and Procter and Gamble have actually provided the training ground for European management. Moreover, the EC can help the United States reduce its trade deficit: A more dynamic, growing economy in Europe will be able to absorb more American products.

The EC will not be an island, either--far from it. Everyone wants close contact: from Turkey and Morocco, which hope to join; to the Scandinavians, who are using the member state of Denmark as a bridge; to U.S. and Japanese businessmen, who are setting up companies with a "qualifying 80% local content." (A "qualifying 80% local content" refers to a legal term stipulating that companies which set up in Europe need to produce 80% of their products in Europe. But this rule is still not well-defined and several companies have been able to bend it without going against the law. …

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