One 'economic area' expected to lower business costs


October 24, 1991|By Steven Greenhouse | Steven Greenhouse,New York Times News Service

PARIS -- American executives, in a series of interviews yesterday, applauded the agreement between the 12-nation European Community countries and the seven-nation European Free Trade Association to create a barrier-free market of 380 million people in Western Europe, saying it would reduce the cost of doing business in Europe and spur the continent's economic growth.

For Becton Dickinson, a medical supplies company that has three divisions in Maryland, the accord means that new products it introduces in Europe would have to satisfy one harmonized set of standards, rather than many sets.

For Morgan Guaranty Trust Co., the new pact means that having a license to do banking in one Western European country would enable it to open branches in all 19 countries.

And for Eastman Kodak Co., the agreement means it would be able to use identical packaging in 19 European countries, and not have to meet different packaging standards for the two blocs.

The U.S. executives said that Europe might become more of a magnet for foreign investment as a result of Tuesday's accord between the European Community and the European Free Trade Association, which is made up of Austria, Finland, Iceland, Liechtenstein, Norway, Sweden and Switzerland.

The treaty, which is subject to ratification by all 19 national parliaments, would create what is called a European Economic Area.

One result of the agreement is that the benefits resulting from the European Community's plan to create a barrier-free single market by the end of 1992 -- less red tape at customs posts, for example -- will be expanded by removing trade barriers with seven more countries.

But Paul Horne, chief European economist for Smith Barney, said the boon might not be quite the boon that many executives predict.

He said that after January 1993, when the European Community's single market and the new European Economic Area are supposed to come into being, "the situation will be much more competitive" for all companies doing business in Europe.

"I am expecting a period of consolidation and some deterioration in corporate earnings," Mr. Horne said.

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