Doing Business In Europe

Introduction

If you’re doing business internationally, Europe is too large to ignore. Together, the U.S. and Europe share more than 40 percent of the global economy and transact more than $1.5 trillion per year in trade and investment. Most large U.S. corporations have operations in Europe, and Europe is the largest source of foreign direct investment in the United States.

But the European market isn’t open only to large companies; small- and medium-sized enterprises do significant business with Europe as well. Europe is often among the first export markets for U.S. companies. When businesses look to Europe, they are looking to an opportunity unparalleled in any other region.

What is Europe?

When asked, “What is Europe?” many businesses may point to the 27-member European Union. But Europe’s opportunities are much broader. For example, the European Economic Area and the European Free Trade Association countries have harmonized many of their regulations with the European Union. The EFTA countries (Norway, Iceland, Liechtenstein and Switzerland), though small in population, are among the wealthiest in the world on a per capita basis.

Bulgaria and Romania joined the EU on January 1, 2007 raising the EU's population to 500 million. These two countries will undergo an extensive process of harmonizing their laws with existing EU regulations; simplifying the requirements for market entry while expanding market potential. In addition to these two countries, there are other candidate countries including Croatia and Turkey.

Increasingly Integrated Market

The introduction in many EU Member States of a common currency, the euro, and mutual recognition of standards have made the European market both more competitive and more open. While the European market for U.S. goods and services is truly a single market for some items, it is still fragmented along country, language, cultural, or regional lines for others. With the ongoing consolidation of distribution channels and retailers, marketing for many goods can now be done with a pan-European perspective. But for other items – particularly specialty products – the retail outlets, distributors and end-users are still local, and the best coverage for such markets will likely be on a regional basis that might even divide Europe’s larger countries into more than one market. In many respects, the European market can be viewed as having several layers.

Economy

The economy of Europe comprises more than 710 million people in 48 different states. Like other continents, the wealth of Europe's states varies, although the poorest are well above the poorest states of other continents in terms of GDP and living standards. The difference in wealth across Europe can be seen in a rough East-West divide. Whilst Western European states all have high GDPs and living standards, many of Eastern Europe's economies are emerging from the collapse of the USSR and former Yugoslavia. Throughout this article "Europe" and derivatives of the word are taken to include selected states that are geographically in Asia, bordering Europe - such as Azerbaijan and Cyprus.

As a continent, Europe has the largest economy in the world. Europe's largest national economy is that of Germany, which ranks third globally in nominal GDP, and fifth in purchasing power parity (PPP) GDP; and its second is that of the United Kingdom, which ranks fifth globally in nominal GDP and sixth in PPP GDP. The European Union is the world's largest (as determined by the IMF and the World Bank - 2005) or second largest economy (CIA World Factbook - 2006) if counted as a single unit.

European Union

The European Union (EU) is a supranational and intergovernmental union of twenty-seven states in a category of its own. It was established in 1992 by the Treaty on European Union (The Maastricht Treaty), and is the de facto successor to the six-member European Economic Community founded in 1957. Since then new accessions have raised its number of member states, and competences have expanded.

The EU is one of the largest economic and political entities in the world, with 494 million people and a combined nominal gross domestic product (GDP) of €11.6 (US$14.5) trillion in 2006.  The Union is a single market with a common trade policy, a Common Agricultural/Fisheries Policy, and a Regional policy to assist underdeveloped regions.  It introduced a single currency, the euro, adopted by 13 member states. The EU initiated a limited Common Foreign and Security Policy, and a limited Police and Judicial Co-operation in Criminal Matters.

A prominent policy goal of the European Union is the development and maintenance of an effective single market.  Significant efforts have been made to create harmonised standards claimed by their proponents to bring economic benefits through creating larger, more efficient markets. Since the Treaty of Rome, policies have implemented free trade of goods and services among member states, and continue to do so.  This policy goal was further extended to three of the four EFTA states by the European Economic Area, EEA.  Common EU competition law restricts anti-competitive activities of companies (through antitrust law and merger control) and member states (through the State Aids regime). The EU promotes free movement of capital between member states (and other EEA states). The members have a common system of indirect taxation, the VAT, as well as common customs duties and excises on various products.