No Longer Quiet On The Western Front

Common Market countries are launching a promising initiative to help small business growth. Small businesspeople in the United States should carefully monitor its progress.

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Whether or not you do business with any of the 10 Common Market countries, you should be aware of a recent development on that front. The European Community (EC) -- which includes the European Economic Community (EEC), now the Common Market's official name -- designated 1983 the "European Year of Small and Medium-Sized Enterprises" (EYSME). The success or failure of EYSME will eventually affect almost every entrepreneur and small business in the United States.

From a business point of view, Western Europe matters to us. Its 270 million people make up a vast market to which this country has always been linked. Western Europe also matters ideologically. It is a major battleground in the fight for the enterprise system. And it is important to our national security. But how, specifically, will the success of EYSME help our nation's small companies?

The U.S. small business sector is the world's largest. But its share of national foreign sales (16%) is less than half its share of gross national product (about 40%). More than 80% of our exports of manufactured goods are made by 1% of our manufacturers; more than 90% of our manufacturers do not export at all.

Because our trade deficit is so high (more than $35 billion a year for the last three years), the United States must export more. If small companies don't do it, large ones -- even the government -- will. Ever since World War II, foreign trade and economic policy have been left to big business and big government. But if we had 100,000 to 500,000 additional small companies engaged in foreign trade, we would have a multinational small business sector to balance the giants.

This is where EYSME comes in. A larger small-business sector in Europe may mean increased competition for our own small companies. But it will also provide them with customers, partners, suppliers, and joint venturers. The larger the European small business sector, the better the outlook for American small business.

Most of us have paid little attention to any EC actions in recent years; the organization seemed to have run out of steam in the long, hard effort to create "some kind of United States of Europe," the goal Winston Churchill set for it a quarter century ago. And there is no doubt that the Western European 10 -- the United Kingdom, Ireland, France, West Germany, Denmark, Italy, the Netherlands, Belgium, Greece, and Luxembourg -- have plenty of unresolved headaches.

Why then are they now taking the time and trouble to move small business to the front burner? The largest of their headaches is the fact that they are in the fourth year of a severe recession. In each of the 10 countries, the same cry has gone up for jobs and industrial innovation. That means small business growth. body has also spurred it on. In 1979, for the first time, citizens of the EC nations directly elected Members of the European Parliament (MEPs). Previously, members had been named by the countries' legislatures. As direct representatives of the people, the MEPs have new power and prestige. And since their first reelection is in 1984, they are hungry for real achievements. They want to impress the voters and strengthen the Parliament's future position in the slowly emerging government of Western Europe. That is why they insisted on a budget of about $750,000 for EYSME to which the EC's 14-member executive branch, the commission, reluctantly agreed. In February 1982, the MEPS passed the EYSME resolution. Added support from the EC's Economic and Social Committee, whose 156 members represent such interest groups as business, labor, agriculture, and consumers came in May. In a formal opinion, the committee strongly recommended that the commission and the Parliament cooperate with it in convening a conference to launch EYSME. The wording of the opinion was itself strong support for small business:

The Council is asked to acknowledge the key role of [small and medium-sized enterprises] in overcoming the present economic crisis. . . . In the interests of economic development, effective competition, and optimum job opportunities, it is necessary to have as many, and as wide a variety as possible of, efficient small-and medium-sized enterprises. SMEs make a major, indeed even crucial, contribution to safeguarding freedom and equality of opportunity. They have also time and time again proved to be a major stabilizing and job-creating force, particularly in times of crisis.

It is not enough to take isolated steps to help smalland medium-sized enterprises. The aim must be to give SMEs more scope, by improving the general economic environment in which they operate. The EEC must also. . . reverse the trend towards state control of the economy, promoting instead a return to free market forces.

On January 21, 1983, the conference proposed by the Economic and Social Committee's opinion took place in Brussels. Three hundred people attended what one participant called a "very promising and serious launch." An agenda was adopted, which will be the basis for the climactic EYSME event: a December meeting in Strasbourg to draft a European charter for SMEs. After that step, there is only one hurdle ahead, admittedly not an insignificant one: the adoption by the Council of Ministers of a resolution giving the charter or any other recommendation the force of law.

American small businesspeople need to understand that the people involved in EYSME are dead serious about their mission. Still, EYSME may be effective within some or even all of the participating nations and still be a bust at the EC level The participating nations are subject to EC authority about as much as the new American states were subject to the Articles of Confederation in the 1780s.

Many factors make agreement difficult. The EC does business in seven official languages. There is no common currency, no genuinely independent taxing power, and no strong chief executive.

The EC also has trouble enforcing its regulations quickly and effectively -- the sure sign of a weak governmental system. As an example, Timex Corp. and Nimslo International Ltd., under common ownership, have moved production of the Nimslo 3-D camera from Dundee, Scotland, where it had been since 1981, to Japan and France. Dundee faces the loss of 1,500 to 1,900 jobs. At about the time of the EYSME launch, word of this move got out. A rumor surfaced that a whopping "incentive" grant from Francois Mitterrand's French Socialist government triggered the move. Since this kind of enticement isn't allowed by EC regulations, the MEP for Dundee, John Provan, announced that he would ask for an EC inquiry. But five years might pass before the inquiry is completed. And by then the damage will have been done.

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