EC affiliation introduces problems for U.S. firms - Spain

EC Affiliation Introduces Problems for U.S. Firms Because of Spain's entry into the European Community Jan. 1, U.S. exports to Spain may decline by year-end. American suppliers are facing increased competition from EC-10 firms, and must deal with Spain's new six-year import authorization/quota regime for non-EC suppliers.

These negative factors, however, may be neutralized somewhat by the dollar's decline against the peseta--now at its lowest rate since mid-1983--and by renewed Spanish demand for equipment that will improve product quality or enhance manufacturing productivity.

During the first six months of this year, U.S. exports to Spain totaled $1.3 billion, an increase of 7 percent over the same period of 1985. Nonetheless, in March, exports of corn and soybean virtually ceased. At the same time, several manufactured products became subject to the new import regime and immediately ran into delays in gaining access to the Spanish market. The U.S. government is pursuing this issue in negotiations with the EC under the auspices of GATT.

The Spanish public returned the socialist government of Felipe Gonzales to power in June, strongly endorsing his economic policies. Buoyed by falling oil prices and the expectation that private investment will jump 7.7 percent and consumer spending will advance 3 percent throughout 1986, Spanish officials now expect GDP growth of 3 percent, up nearly a full point from last year and the best annual growth rate in nearly a decade. This projection takes into account an anticipated decline in industrial output caused by rising imports from European Community firms.

Still, Spain is making little progress in its struggle to reduce unemployment, now at 22 percent. Much success is being experienced in fostering new investments, especially in high-technology industries. Real job expansion, though, will probably require more success in making less rigid the labor laws that virtually guarantee lifetime employment to many employees.

The remainder of Spain's economic house is in good order. Consumer prices will probably not exceed 8 percent for the year, matching last year's reduced level, even though Spain established a value-added tax systems with a 12 percent standard rate on Jan. 1. Spain generated a $2.8 billion surplus in its balance of payments last year and this year may enjoy as much as a $5 billion surplus. Government spending jumped to 6 percent of GDP last year, but may decline to 5 percent this year.

Spanish importsof American computer equipment and telecommunications products advanced 18 percent to $63 million in the first four months of 1986, the result of Spanish efforts to improve competitivenes in the face of increased pressure from EC firms. It is here and to Spain's industrial development plans for electronics, pharmaceuticals and robotics that U.S. firms should look for sales opportunities.

In October, the Commerce Department will sponsor a medical instruments catalog show. An electronic components/electronics, production and test equipment trade mission will visit Madrid and Barcelona in January 1987, followed in February by a water resource equipment trade fair in Zaragoza.

COPYRIGHT 1986 U.S. Government Printing Office
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