EC membership will bring many changes - European Community - Spain-Portugal

EC Membership Will Bring Many Changes

Sales of highly regarded American business and capital equipment may rise significantly in 1986 as Spanish and Portuguese firms struggle to reach parity with their new partners in the European Community (EC).

Spain and Portugal's entry into the EC last Jan. 1 will result in a general lowering of the barriers to trade that were employed by both countries. Within seven years, each country essentially will be in full compliance with EC-wide trade regulations. This will mean zero duties on goods originating within the Community, while duties on manufactured products originating in the United States will decline from an average of 15-17 percent to 5-7 percent by 1993. Duties on American agricultural products, however, could rise sharply.

U.S. firms should benefit over the long term in both countries by their progressive dismantling of cumbersome trade, investment, and exchange restrictions as required by EC entry. Likewise, it is hoped that the trade creation effects of lowered tariffs will result in increased demand for U.S. exports.

Spain

The Spanish government hopes for 2.5 percent real GNP growth in 1986, resulting from a 6 percent increase in gross capital formation and a 5 percent growth in exports. Domestic private consumption, long dormant, is expected to show a 1.6 percent increase.

U.S. exports 1985--$2,524 million

U.S. imports 1985--$2,774 million

The Spanish business community, however, is concerned about the short-run effects of joining the EC. Many executives worry about possible displacement of domestic products by EC imports. There may be only a modest expansion of gross capital formation if Spanish firms delay initiation of long-range investment plans until initial effects of EC entry settle. Inflation is also a concern. The 1985 consumer price rise was held to 8 percent, but some fear it could reach 12 percent in 1986 because of the new value-added tax related to EC entry.

U.S. firms should look to Spain's industrial development programs for leads to business opportunities in 1986. Such programs have already produced impressive results in the electronics industry. A new effort was announced in late 1985 for pharmaceuticals, and plans are underway for efforts in robotics.

Spanish imports of American-made computers, peripherals, telecommunications products, and electronics test equipment advanced 30 percent to $174 million during 1985, and should do equally well this year. Opportunities also exist for food processing and packaging equipment, process control instruments, and for insurance services. For more information call (202) 377-4509.

Portugal

Portugal's new government has moved quickly to reinvigorate the domestic economy, to stimulate the private sector, and to increase real incomes. With an economic recovery underway and Portugal's entry into the EC now accomplished, the Portuguese government's economic targets in 1986 call for real GNP growth of 4 percent and for a 14 percent average inflation rate.

U.S. exports 1985--$695 million

U.S. imports 1985--$598 million

Under the terms of EC entry, selective Portuguese economic sectors, including textiles, fishing, banking, transportation, travel and tourism, will be opened up to greater competition with the elimination of government monopolistic practices. Reducing government involvement in business should create new opportunities. Portugal, as an EC member, should generally become a more attractive location for foreign investment.

The elimination of nearly all nontariff barriers and the lowering of most tariff rates will expose many sectors of Portuguese industry to serious competition for the first time and will place them under strong pressure to modernize. This factor should create export opportunities for U.S. manufacturers. Best prospects for U.S. exports include: computers, office machinery, industrial controls, communications equipment, medical, surgical, and hospital equipment and supplies, and printing and graphic arts equipment. For information, contact the Portugal desk officer at (202) 377-3945.

COPYRIGHT 1986 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group