Articles
The New European Union: A Land of Opportunity
May 1, 2007
During my recent travels in Europe, I discovered the incredible opportunities that international trade offers to North Carolina companies. Nowhere else is foreign trade more accessible than in Europe. While Europe has historically proven to be a strong market for trade with the United States, it is just beginning to realize the advantages of the recent creation of the European Union (EU). Overcoming the previously fragmented and compartmentalized economies of these countries, the EU provides a unified market and standardized currency that has generated a robust, interdependent European economy. While language and cultural differences naturally remain between European nations, and political ideologies are not likely to converge, EU members are working together successfully in unprecedented ways.
For American business, the developments in Europe have served to open wider the doors of opportunity. The establishment of the Euro provides a transactional currency that is more easily traded and valued. English appears to be emerging as the front-runner to become a standard language for EU relations and communications. EU member countries are also eager to trade with the world. The EU represents a significant player in a global economy, and its member nations therefore provide a growing and exciting market to any business with a global strategy.
Trading internationally does brings issues into play on both sides of the Atlantic. As always, customs, tariffs and trade laws can be challenging and expensive to navigate. However, EU member countries may also have unique issues that greatly affect their ability to trade. One experience of mine in Slovakia, a fairly new member of the EU, illustrates this point well.
While in Slovakia, I had the opportunity to visit Mrva and Stanko, a prominent Slovakian winery, and spoke with its owner, who had arranged a tour of the winery and a tasting. It seemed obvious to me that the winery would be very successful if it traded internationally. Unfortunately, under Slovakian law it was not yet possible to export their wine from the country - I couldn't even take a bottle with me to Germany. At first I was baffled. Why would Slovakia not allow such a fine product to bring in foreign revenue and investment? The answer, I learned, is that enormous subsidies are available to the winery, but only if it does not export its product. Slovakia's restrictions are intended to allow its wine industry to mature without foreign involvement. Slovakia wishes to carefully regulate its wine production and protect its quality. The owner of the winery explained that years of communism caused a mechanical production of poor quality of simple red and white wine. During this period the Slovakian wine masters, including the Mrva and Stanko families, guarded their secrets from the Soviet regime, only secretly and sparingly making or trading the best wine. The wine masters and their secrets weathered the storm of communism until the collapse of the Soviet system in 1991. Now, the great secret of Slovakian wine is being enjoyed and refined in a protected and highly regulated market. Slovakia is determined that when and if it does begin to export its wine, it will be second to none.
In addition to national laws, EU member countries may be subject to rules and laws that have been promulgated by the EU to centrally regulate certain aspects of trade. For instance, the EU is currently reviewing legislation regarding tobacco labeling that would be applicable to cigarettes sold in its member nations. The proposed labeling contains requirements for warnings which are much more graphic and aggressive than the labels required in the United States. It would be no surprise to see the EU also become heavily involved in wine labeling and warnings.
After navigating the challenges of national laws, tariffs, and EU requirements, it then becomes necessary to consider establishing the business terms that would be applicable to any contract. If trading in goods, such as wine, The International Convention on the Sale of Goods (ICSG) has set basic standards of contract that apply between two foreign entities. The United States and most of the countries with which it trades are parties to the treaty. The ICSG is essentially a relaxed version of our Uniform Commercial Code, but there are important differences. For instance, the requirements for formulating a valid contract under the ICSG are minimal, and the ICSG requires that disputes be settled via international arbitration. Virtually any dealing might be argued to form a valid contract under the ICSG, including oral communications. Unless it is expressly excluded by written contract, the ICSG is deemed to apply to any contract for the sale of goods between a buyer and seller whose countries are signatories to the treaty. Therefore, it is essential that American businesses that are trading goods internationally be aware of and address the application of ICSG to their transactions.
Initially, international trade can seem daunting. A business seeking to conduct business with Mrva and Stanko, for example, might easily become discouraged by the red tape. However, the European market is hungry for American trade, investment, and employment. Technology is eliminating the barriers at a rapid pace, and those American businesses that engage in international trade should experience their reward soon. To develop an effective strategy to overcome the remaining obstacles, enlist the services of a lawyer who is prepared to navigate the waters of international trade.
Aaron Bailey, a partner at Smith Debnam, concentrates his practice in state and federal commercial litigation. In 2006, Mr. Bailey traveled to Belgium, Germany, Greece, and Slovakia as a Marshall Memorial Fellow of the German Marshall Fund of the United States, a nonpartisan American public policy and grant-making institution dedicated to promoting greater cooperation and understanding between the United States and Europe.
