Roundtable at the Institute for Agriculture and Trade Policy: Meeting Notes

Summary

Minnesota-based businessmen, academics and international consultants aired difficulties doing business in Europe and ideas for improving the transatlantic economic relationship on October 29 with Assistant Secretary of State for Economic and Business Affairs Anthony E. Wayne in a session hosted by the Institute for Agriculture and Trade Policy. The Minnesota executives described problems encountered with uneven application of EU regulatory directives, selective enforcement of customs procedures, limited access to capital in new and prospective EU member states, reclamation of value-added tax, complicated labor laws for registration of U.S. resident managers, and foreign language requirements for product descriptions. The Minnesotans expressed interest in a free trade agreement with Europe, not out of concern over high tariffs, but in the hope of developing a mechanism to address regulatory differences.

Meeting Notes

The Institute for Agricultural Trade Policy (IATP) in Minneapolis, Minnesota hosted Assistant Secretary of State for Economic and Business Affairs E. Anthony Wayne on October 29 for a listening session on enhancing the transatlantic economic relationship. About 20 Minnesota-based businessmen, academics, international consultants, and U.S. and Minnesota trade officials offered their views on problems encountered doing business with Europe. Europe is Minnesota’s largest market for manufactured goods. Exports to EU member states totaled $3.8 billion in 2003, an increase of 27 percent from 2002.

European Union Directives

A Minnesota-based international consultant described problems U.S. manufacturers of medical devices are encountering with uneven application of European Union directives. The consultant cited apparent French customs discrimination against U.S. exports even with CE markings. The consultant reported that customs officials request additional documentation beyond the requirements of EU directives and use intimidating tactics by threatening local distributors carrying American products. The consultant suggested that the products are being selected for tougher scrutiny by French officials because they represent competition to French firms. These costly delays can hit small- and medium-sized manufacturers particularly hard while the firms sort out differing practices in EU states. The consultant reported imports through the Netherlands encountered no such problems, and her firm has begun to advise its clients to avoid French ports. Assistant Secretary Wayne noted that the U.S. brought a case to the WTO in September 2004 over the issue of lack of uniformity in EU customs enforcement.

Access to Capital

A Minnesota-based executive who has worked on emergency medical training programs in Hungary reported that he had recently traveled extensively in the Czech Republic with fellow medical professionals interested in improving emergency room facilities and treatment. He said he believed there are excellent export opportunities for U.S. medical products and expertise in the new EU member states, but he is having difficulty finding the capital or local investors able to participate in a project. He also expressed frustration with delays in obtaining U.S. visas for potential Czech partners who wish to visit U.S. facilities.

Another Minnesota firm identified large potential markets for waste water treatment facilities, particularly in Turkey, but financing arrangements are particularly difficult for small- and medium-sized firms. U.S. firms are interested in access to EU development assistance funds, especially for environmental projects in Central Europe. A representative from the U.S. Department of Commerce noted that the U.S. Export-Import Bank would be introducing a new product soon to facilitate financing of capital equipment leasing which might help these firms.

The executive also noted that Turkey could serve as a springboard for exports to the large Central Asian market. He noted there are a growing number of firms manufacturing products such as shoes and carpets in Turkey for export to the Caucus, but American firms seem to be missing from the scene. He noted a great need for environmental spending in Iran and suggested that environmental clean up technology be exempted from sanctions, as is food and medicine.

Labor Laws

A Minneapolis lawyer with experience working in Brussels reported longstanding frustration by American firms seeking to register their U.S. employees as resident managers in Europe. He cited French labor laws as particularly difficult for such resident registration.

Language Requirements

The international consultant also recommended that the U.S. encourage the EU to accept English as common language for use in product brochures and required company information. The EU’s multiple language requirements add significantly to translation costs that also could hinder small- and medium-sized enterprises interested in exporting to Europe.

VAT Refunds

A representative from the Minnesota Department of Employment and Economic Development noted that many Minnesota companies are encountering problems with reimbursement of value-added taxes, which represent a significant cost of doing business. Some 97 precent of U.S. firms neglect to apply for refunds that would allow them to recoup up to 25 percent of VAT costs. The Minnesota agency is holding a conference in December to guide firms in VAT reclamation.

Free Trade Agreement with Europe?

Assistant Secretary Wayne asked if those present would favor some type of free trade arrangement with the European Union. The businessmen indicated that such an arrangement would be worth pursuing. A representative of the Minnesota Employment and Economic Development agency noted that neighboring state of Wisconsin had been particularly successful in increasing exports to Mexico under NAFTA after it opened a trade promotion office there. A representative of the Minneapolis Federal Reserve said there would be clear economic gains from an FTA. Others noted that EU tariffs on U.S. products are not the primary concern of exporters. Rather, they would see the major benefit of a trade agreement in establishing a mechanism to handle disputes over other regulatory issues and variations in application of EU directives.