|
October-November 2001
Vol. 2, No. 9
Print this article
The European Connection
Larry S. Davidson
Professor of Business Economics & Public Policy,
Kelley School of Business, Indiana University
I spent three weeks this May with my colleague
Charles Bonser and 20 IU graduate students (from the School of Public
& Environmental Affairs, the Law School and the Kelley School of Business)
learning about the European Union (E.U.) in Paris, Brussels and Germany.
Over the past several years, the tense trade
relations between the United States and the European Union have been a
hot topic. To read the newspapers, it seems that we share little in common
and stand on the verge of trade and regulation war. They give money to
Airbus; we subsidize Boeing too much. They keep our bananas from reaching
their stores; we ban their meat. They don't like the way we use microbiology
in agriculture; we don't like the way they subsidize their farmers. They
think our foreign sales corporations are illegal; we don't like the export
subsidies they give to companies seeking new locations in Europe. They
ban the union of GE and Honeywell after we similarly halted Deutsche Telekom's
acquisition of VoiceStream.
The European Union
While we can enumerate many areas of disagreement, we shouldn't exaggerate
their importance for the ongoing business of trade. After all, we have
contentious issues with most of our major trading partners: Japan (autos),
China (human rights), Canada (lumber, beer), and Mexico (immigration,
environment), for example. The truth is that strategic trading partners
are also often engaged in fierce competition - if not for goods, then
for entertainment, culture, workers or capital. Most of us do not understand
the complexity of these issues nor the strategies for resolution. At times,
the appropriate approach may be toughness and show of strength. Other
times call for cooler heads and compromise.
Both sides have much to risk in the U.S./E.U. relationship. We depend
heavily on each other for goods, services, real capital, finance and defense.
Hoosiers should bet on more cooperation and more competition as we move
ahead into the future. Our relationship with the European Union won't
always be nice and cordial, nor smooth and linear, but it should move
in the general direction of more integration.
The European Union is an important destination for Indiana exports. Hoosiers
count on E.U. countries buying their products. Slow growth in Europe and
a depreciating euro have not helped Indiana exports during the last two
years. Nevertheless, Indiana exports to the 15 E.U. nations have increased
(though not equally with all goods and all countries). What follows is
a summary of the E.U./Indiana export connection.
Indiana exported $2.99 billion in goods and services to the 15 E.U. nations
in 2000. That amounted to 19.4% of all Indiana exports to the world that
year. Canada and Mexico together accounted for about three times that
much, leaving only another 21% for the rest of the world. Thus, after
Canada and Mexico, the E.U. countries are the next most important destinations
for Hoosier products. The United States exported $164.8 billion to the
E.U. countries in 2000 - about 21% of its exports to the world. Indiana's
$2.99 billion equaled about 1.8% of the nation's exports to the European
Union.
Minnesota leads the Midwest in its dependence on the European Union for
export sales; 30% of Minnesota's exports go to the E.U. countries. Kentucky
sends 28% of its goods to the European Union. Ohio and Michigan have the
least reliance on the E.U., 17% and 14% respectively. Indiana, Illinois,
Wisconsin and Tennessee devote from 19% to 21% of their exports to Europe.
As Table 1 shows, the United Kingdom is the largest purchaser of Indiana
exports, followed by the Netherlands, France and Germany. Comparing Indiana
exports over the two-year period from 1998 to 2000 shows that the Netherlands
is the fastest-growing E.U. destination, with exports more than doubling
over that time period. In fact, the Netherlands and France are the only
two E.U. countries with significant increases in purchases of Indiana
goods. Indiana has seen significant declines in sales to Belgium, Ireland
and Austria. The downward pull exerted by these destinations is important:
While Indiana exports to the world increased by 25% over the past two
years, exports to the European Union rose by only 8%.
What does Indiana sell to the E.U. countries?
Mostly machinery. Combining machinery and electrical machinery, the European
Union purchased $903 million in 2000. That was up from $669 million in
1998, amounting to a 35% increase over those two years. The main machinery
items sold were gas turbines (mostly sold to the United Kingdom, France,
Switzerland, Italy and Portugal), parts for machine engines (United Kingdom
and Germany), and insulated wire and cable (the Netherlands). Organic
chemicals and pharmaceuticals were the next-largest exports to the European
Union, together accounting for $673 million and an increase of $145 million
between 1998 and 2000. Steroid hormones, glycosides, antibiotics and other
medications dominated the sales, mostly to France and Germany.
Machinery, chemicals and pharmaceuticals exported
to the richest places in Europe explain the Hoosier connection to the
European Union. As the euro increases in value; as the E.U. economy gathers
strength; and as the European Union itself becomes a more open, integrated
and dynamic marketplace; Hoosiers should find new and better opportunities
for doing business. Tiffs among Europeans and with the U.S. government
will continue as they always have, but the probabilities suggest that
the European Union is not a location to be avoided or ignored.
Continue with...
Region Two: North Central Indiana
|
