Foreign Affairs

 

"It was the best of times, it was the worst of times, " Charles Dickens wrote about the period of the French Revolution, and a number of U.S. companies considering moves to England, France, Ireland, or other Common Market countries are echoing that thought today. All of the economic indicators herald the worst of times -- the United States is struggling with a recession, few plants are operating at capacity -- but the radio and newspaper ads by foreign development agencies argue differently.

The truth is, it is both: For a company with a decent-size and secure European market and with a management up to the rigourous demands, it is an "excellent" time to set up overseas. A company can bolster lethargic domestic sales, capitalize on its European presence, and enjoy profit margins higher than those "made in U.S.A." For other companies, however, such a move might represent a multimillion-dollar mistake.

For the past 18 months, foreign industrial development agencies and their public relations firms and advertising people have been frantically extolling various Common Market countries for U.S. companies. Armed with brochures and background reports on the target company, and proffering tax incentives, capital grants, research assistance, and a host of other inducements, they have set businesspeople salivating, from New York to San Francisco. But the mouth-watering packages are symptomatic of economic distress: Western Europe has languished since the mid-1970s, unemployment has climbed to 11.7 million, and U.S. investment has fallen.

From 1978 to 1980,the amount of U.S. dollars invested abroad rose by an average of 15.1% a year, but in 1981 the increase was less than half that size -- 5.5% -- and 1982 seemed equally bleak. "Countries are doing whatever they can to alleviate the situation," says Jeffrey Lins, deputy director of the Office of Trade and Investment Analysis of the U.S. Department of Commerce, "and getting foreign investment seems the most popular solution." Small, fast-growth companies, with their promise of more employment opportunities, are the logical target.

"The competition is heating up -- there's no doubt," says Bonnie Whyte, public affairs director of the International Trade Administration at Commerce, noting that the Republic of Ireland, France, West Germany, and the United Kingdom are among those stoking the coals.

"You've got people struggling to get a larger share of a diminishing pie," admits David O'Sullivan, director of public relations for the Industrial Development Authority of Ireland (IDA Ireland), "and the classic response to that sort of dilemma is to put more dollars into your marketing effort, which means that we're all in the ring fighting it out."

Generally, he says, the agencies are competing for smaller companies that have demonstrated strong growth despite the economic downturn (No one is hustling U.S. Steel, for example.). "We're constantly talking to INC. 100 companies," notes O'Sullivan.

The result is what one site-location consultant calls a "buyer's market" for companies considering a move into the European Economic Community (EEC). "If they know that's what they want to do, then this is an excellent time," he explains. "They can nearly name their own price." The head of one high-tech company reports that he was courted by three countries simultaneously, while another chief executive officer remarks that IDA Ireland seemed to know more about his business than he did. And, on occasion, heads-on bidding contests develop. It is not a situation that agencies encourage.

"We know what the competition is offering. " says O'Sullivan succinctly.

Each country has its own objectives and style. Ireland has pursued a diversified but essentially high-tech base, with a professional approach that owes much, nonetheless, to the country's charm and blarney. It courts electronics, engineering (automotive and aerospace), and health care, in that order, touting its commitment to industrial development, political stability, and people. "What we're really selling is a country," says O'Sullivan.

Scotland envisions itself as the EEC's future high-tech center, and it has committed itself to a long-range program of technological training to court research and development and manufacturing facilities. It boasts eight universities and 67 technical colleges. The targets: microelectronics, computer-aided engineering, factory automation, and biotechnology.

France, laboring under the impact of the Mitterrand government's nationalization of several industries (the more notable victims include Honeywell and ITT) and a reputation as a tough place to do business, is nevertheless charming aerospace and telecommunications businesses. "We were told it was impossible to do business with the French government," says one supporter, Sheldon Weinig, president of Materials Research Corp., who put a plant in Toulouse in the late '70s. "I must say that we found it only almost impossible."

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