vol. XVII no. 1

				In Dependence continued Likewise, European investments are less attractive to U.S. investors because of the strong euro. As The Wall Street Journal reported in January, ''While a 20% rise in the euro against the dollar last year helped some major European markets outperform the Dow Jones Industrial Average in dollar terms, investors increasingly are becoming concerned that the surging currency is taking a toll or European profits and competitiveness," If the dollar continues to decline, many Europeans will lose manufacturing capability becoming overpriced for the U.S, market, The European Union, however, is fighting back. In a recent example, the EU used the decision of the World Trade Organization to authorize European and Asian countries to charge retaliatory tariffs of $2.2 billion against the United States as a levying point. In December, the VVTO declared tariffs placed on steel imports by the United States to be illegal. The fine was so high that it forced a rare reversal by the Bush administration to drop the steel import tariffs. In a recent interview with Charlie Rose, the U.S, Ambassador to Europe Rockwell Schnabel quoted a colleague, who said: "if we don't watch it, the Europeans in time are going to eat our lunch.'' The steel tariffs are just one demonstration of the growing power of the EU. In the years since its formation in the 1950s, it has grown from six to 15 countries with another 10 slated for addition this year Originally organized to deal with trade and the economy, the Union has expanded to encompass citizens' rights, privacy, security, development and environmental protection. ''I think the growing importance of the European Union over the last 30 years has influenced the United States from a political and economic standpoint in largely a positive way,'' says Michael Shannon (MBA '81), executive vice president of Equifax in London. ''The United States has benefited from the peace and prosperity of the EU. Today, the two Markets are much more closely linked in world trading.'' Mary Ellen Morris-Delaney (MIB '02), a portfolio associate with Prudential Real Estate Investors TMW Property Funds USA, sees Europe as a beneficial market for U.S. business, allowing it to enter a specific country in the FU and simultaneously access the broader European market. She says the European Union is "comparable in size and scope to the United States or China but can offer a choice of languages and cultures that meet the needs of the individual company.'' Europe faces its own uphill challenges in being a competitive player in the global marketplace. Its rigid labor laws make la) almost a taboo, keeping many industries bloated, Generous he care, vacation and retirement benefits are costly for Europe government coffers and prohibitive for efficient businesses. Two of the largest countries of the EU, France and Germany, have deficits for the last three years. In Germany, the unemployment figure stands at 4.3 million. In order to correct some of the problems, governments will require lifestyle changes such as longer operating hours for stores, longer work weeks and shorter vacations that Morris-Delaney who lived in Germany, says will be hard for the people to accept. Fritz Becker (MBA '87), managing director of Mikropul, predicts that Germany will go forward with the reduction of taxes, which currently run around 40 percent of an annual salary, as we the liberalization of labor conditions and reduction of bureaucracy. In the end, he believes ''a stronger economy is good for both sides." The Fog of War Despite long-standing alliances and natural partnerships between the United States and Europe, recent events have strained relationship, beginning with the war in Iraq and postwar act and extending to issues around import tariffs. "The difference of opinion on many issues from air marshals on U.S.-bound flight the trial of Saddam Hussein will continue to challenge U.S./European relationship,'' says Shannon, "Secretary of State Colin Powell recently wrote a full-page editorial published in London Times about improving strained relationships with Europe." Last October, the SCIS held a conference on international coverage of the war on terror, showing without a doubt that the image of the United States has been tarnished abroad. "It is apparent to people who travel that the United States has lost its image as the leader of the free world and is now looked on as an aggressor nation," says White. "Now we're the bad guy. We're, as a risk to peace and stability" That damage, however, has failed to extend to the U.S. economy. "We're still the biggest player in the world,'' White says. ''Other countries can hold their noses to do business with us. Commerce and economics are not necessarily affected because we had bad image." Or, as Becker puts it, "Mature economies differentiate between politics and business.'' Top | Next Page

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