The U.S. Versus The E.U.

In 2004, 24% of EU-25 exports went to the US whereas 14% of all EU-25 imports originated in the U.S.
U.S. foreign direct investment in China ($4.2 billion) was about one third of that in the Netherlands ($12.5 billion) and less than one fifth of that in the United Kingdom ($22.9 billion).

The European American Business Organization, Inc. (EABO) offers small to mid-sized companies, government agencies, and non-profit entities a network of resources to serve as a "one-stop shop" for transatlantic business development.

EABO is a consulting firm specializing in transatlantic business development and international tax services and it offers a multitude of services such as early stage venture funding, market expansion strategies, international trade show planning, public relations strategies, and legal assistance. 
EABO helps firms get to and across the bridge of transatlantic business.
Sven C. Oehme, Founder, President & CEO of EABO answered TurkofAmerica’s questions about the EU and U.S. relations.

You have the same knowledge about the U.S. market as you have about the European market.  As this market is very big, covering 50 states, what do you suggest people should do when they want to open businesses in U.S. markets?
The U.S. market is not like 50 markets – it’s more homogenous than the EU market. There are a few differences – you have to deal with two languages and in Europe you have to deal with over 25 languages and ways of doing things and cultural differences.  In the U.S., people eat the same thing for breakfast and McDonald’s are everywhere – but in Europe there are many more differences, so from that perspective, the U.S. market is easier; however, when a company comes here – our suggestion is that they focus on a certain geographical area first because it’s such a big country.

What is your first recommendation to companies that want to open in the U.S. market?  What is your first recommendation to a U.S. company who wants to open in the EU market?
The first piece of advice must  be to go there and take a look and see the marketplace – we can help with that and then you’ll see how things are done – where the customers buy the products and how they buy the products. I think that’s always important that you get a feel for the open market.

What makes the American market different from the European one?
We’re a consulting firm that really focuses on Europe – usually it’s with countries that our consultants focus on and I think from an American perspective, frequently people look at Europe as such, at least initially, and from an outsider’s point of view. That is also the right approach because many of the business conditions today are determined by European laws, so a lot of times, issues that deal with the product that you might have, are actually handled by European law. And the next step, then you may look at a specific country but as far as the rules for doing business, they’re usually European laws with two major exceptions: taxation and labor loans.

Why do American companies need help from you?
The EU market is different from the U.S. market because it’s not a homogenous market – it’s a single market but you still have customers in different countries. You have cultural differences and different ways of using products and these consumer products. So, there are still many differences and there are also labor and tax issues that are different from country to country. There may be differences in the way you incorporate – that varies from country to country.

How large are your clients’ companies? Are they corporate, medium or small business?
One company we’re working with right now has annual revenues of less than two million dollars, and they have a very specific product that could also be of interest in the European market. So, it really depends on the product, it’s not just the size of the company. Usually, you would assume that it’s a company that has revenues that are a bit higher than 2 million dollars but when it’s a very specific application – a very specific product – then I guess it can be less if there’s a market for the product.

What sectors are the companies that work with you usually in?
Medical applications, medical instruments.  We had a small car manufacturer that we assisted, so it can be very different.

In order to work with you, does the company have to be located in any EU countries, or have to be a member of the EU?
No, I mean anybody who wants to do business with us or needs our services can come and contact us. We’re doing some business for a Brazilian company at the moment too. So, that doesn’t really matter, where the company is located.

You were founded six years ago, before September 11th. What are the differences between conditions before September 11th and after September 11th? Do you have any difficulties doing business?
Well, I guess after September 11th, or the immediate couple of months after Sept. 11th – things were perhaps slower, as far as new companies were concerned that wanted to come here. But overall, and perhaps it was more so in the U.S., American companies were more careful about going abroad – I mean those who hadn’t done it yet. So, they thought it was more dangerous if they did that. So, they kind of stayed here and waited for some time until they thought that the situation was better.

When a small American company wants to go to a country in Europe – do you suggest a country for them or do they usually ask about a specific country?
Sometimes they say OK, I want to go to a specific country. Sometimes you also have to tell them because of the product they have, they should probably go to where the people are and where the markets are. So, a location in the center of Europe is probably better than one in a remote part of Europe where it’s much more difficult to transport things, and where you have higher transportation costs.

So, a lot of times, it probably makes more sense to really focus on where my customers are and where my potential customers are, and really be close to the market. It depends on whether it’s just production or distribution that you’re going to be doing so – there are a lot of circumstances and sometimes you find people who say, “My ancestors came from France or whatever and that’s why I want to go to France.”

In the last 20 years, American companies have moved to China to produce their products. Is China a rival for Europe?
That’s not true because if you look at the investments in Europe, and if you compare them with China, it’s still very small. There’s just a lot of talk about China. What comes from China into the U.S. is very significant, because China is very large, but as far as U.S. investments in Europe compared to investments in China, there’s no comparison. U.S. foreign direct investment in China is $4.2 billion. It is about one third of that in the Netherlands ($12.5 billion)

The EU is expanding its borders and there are more countries becoming members. Are there new opportunities for investors when you think about new members such as Romania, Bulgaria, Slovenia and other small countries?
I think these opportunities are perhaps somewhat questionable because these countries don’t have  large populations. There are probably interesting opportunities but it depends on what you do. And many American companies are really in the markets because they’re doing it through subsidiaries in Western Europe. So, like Proctor & Gamble – a lot of times they just provide the market with products for Western Europe.  

In terms of your experience, what do you think Turkey’s ability to achieve foreign investments is? What kind of difficulties do you see for American companies when they want to go to Turkey?
Well, I guess obviously because it is a more foreign environment than Europe that they may not be so familiar or so in tune with that environment – that could play a role. I guess it’s different whether they are in Istanbul or to the East or so – that will also be a consideration. But, in principle, I think people in the U.S. have a more favorable view of Turkey. Some people do not know where it is so you have to show it to them, where the country is located.

Nowadays there are two big economic powers in the world – one is the U.S. and the other the European Union. Do they create a synergy instead of competing with one another?
Well competition is good in principle – it keeps you on your toes. It will improve your products and the question really is – to what extent is it really possible to improve trade relations with the European Union and the U.S. – in the areas where there are still issues.

And that is primarily in the agricultural field, where on both sides there are subsidies and on both sides the governments have a tough time giving up any subsidies or reducing subsidies. So, that’s one major issue but that’s a very important issue because a lot of money goes into the subsidies on both sides.
There’s the issue of hormone-fed beef in the U.S. that the Europeans don’t want, and there is the constant issue of conflict regarding the airline industry - there are other areas obviously, but those are the main issues.

Do most of the companies you help go to Europe or come to the U.S.?
At the moment, it’s probably still more companies from Europe coming here. We’d like to have it equal – 50% from Europe and 50% from the U.S.

What is the reason European companies come to the U.S.? Is the crisis in the European economy the main reason?
No. I think it’s for very it’s for very different reasons. If you look at Germany, it’s because they have always been very export-oriented. Exporting is something that’s natural to them. If you look at a country like Spain, for instance, they’ve been very successful over the last couple of years – they’ve made good money, they’ve pretty much established themselves in the European Union countries, so now they’re looking at other markets.

And, when they look for other markets, they obviously see that there is the U.S. market – which is another big market. To some extent, it’s comparable to Europe because you also have a lot of consumers, you have people who have high, disposable incomes who are willing to spend  -- so – it is part of a stable environment and I guess that’s why a lot of companies tend to sign.

Specifically for Spanish companies, there’s the thought also that they could use this perhaps to then go from the U.S. to Latin America – first to Mexico and then on to other countries.

If the people don’t know the market, they are usually afraid of it, because of uncertainties. What do U.S. companies think if they don’t know anything about a market in the EU? What is their first concern?

I think there are different concerns they might have, but I think when they’ve made the decision that they want to take their product abroad and they think they have the right product and they’ve done the research I think they may be concerned with taxes, and that would imply that they’ve looked at it more closely. So, I think the major concern for many is probably where their customers are and how they can reach  their customers, and other issues like taxes, labor law and wage structure.

What do you think about the future relationship between the U.S. and the EU?
I think that’s going to grow. The U.S. and Europe represent 12% of the world’s population. Together we account for 60% of world GDP, so it’s pretty clear that as far as the economic activity is concerned that those are the two players.

What about new players such as China and India?
Just because everyone talks about China all the time does not make them a big player. They will become a big player and they have the opportunity of becoming a really big player because of their internal market. If you have more than one billion people in your country, and they all become consumers like American consumers, then of course, that’s a huge market. But that’s not something that’s going to happen overnight. 40% of all exports in the world are generated by the U.S. and by Europe. And Germany is the country exporting the most.  The U.S. is in second place, and I’m not sure now who is the next – and China is of course getting there, but China’s products usually come in large quantities, but at a cheap price.

WHO IS SVEN C. OEHME?  
Sven Oehme is a recognized expert on European-American affairs. Until 1998, he served as Managing Director of the European-American Chamber of Commerce, Inc.  (EACC) with special responsibilities for the chamber's legal department. Before joining the EACC in 1991, Oehme held numerous executive positions for subsidiaries of Gruner+Jahr, the magazine and newspaper publishing division of the German media company Bertelsmann.

He studied law and economics at the University of Hamburg, Germany and was admitted to the bar in Hamburg. Mr. Oehme's earned a Master of Laws degree in International Business and Trade Law with a focus on European law from Fordham University, Graduate School of Law, New York.

GENERAL EU-US STATISTICS
Population (2004)    
US                                                    294 million    
EU 25                                              456.8 million
10 Accession Countries              74.1 million    
GDP (2004)
World                                               $43.1 billion
US                                                    $12.4 billion
EU 25                                              $13.4 billion     
Sources: Eurostat, US Bureau of the Census

TRADE IN GOODS (2005) TRADE IN SERVICES (2004)    FDI STOCKS (2004)
U.S. to EU 25:         $214.6           $135.8                $1.057.6 trillion
EU 25 to US:           $329.8           $147.3                $925.9
Total:                        $544.4            $283.1                $1.983.5 trillion

THE FACTS
-    The economic relationship between the EU and the U.S. is by far the largest between any two continents in history.
-    In 2004, 24% of EU-25 exports went to the U.S., whereas 14% of all EU-25 imports originated in the U.S.
-    EU trade in goods and services with the U.S. (2004 imports and exports $826.9) equaled trade with the following three most important countries: Switzerland, China and Russia, taken together.
-    China is the second biggest EU – trade partner (2004 merchandise exports and imports together) after the U.S. and followed by Russia, Switzerland and Japan.
-    In 2002, total two-way investment stocks in the EU and the U.S. amounted over $1.9 trillion.

(January 2007, 23rd Issue)