The Single European Market Initiative: A Perspective from Canadian Companies

Historically, Europe and North America have forged strong trade and investment linkages. With the increasing ‘regionalisation’ of these areas, ensuing from the Single European Act 1986 (the so-called ‘1992’ initiative) and the establishment of the North American Free Trade Agreement (1989), the future of these transatlantic flows has been called into question. The dominance of regional concerns and issues in both governmental and corporate decisionmaking has raised the spectre of ‘inwardness’, protectionism and the sidelining of GATT. This article looks at Canadian companies’ views and responses to the Single European Market initiative. Unlike national governments, which tend to view trade and investment issues in a somewhat parochial manner, multinational companies (MNCs) formulate their foreign market-servicing strategies on a broader scale, using cross-border exporting, strategic alliances (joint ventures etc.) and1 overseas investment to reduce costs and enhance their marketing effectiveness. From their perspective, the formation of regional blocs may cause some temporary ‘inconveniences’ (the need to adjust to revised product specifications, technical standards, environmental protection measures and overt discrimination against ‘outsiders’ in the form, for example, of local content rules), but they also create greater opportunities for business expansion through their trade-creation effects. Moreover, the flexibility accorded to the multinational company through its ability to select a market-servicing mode most appropriate to the new circumstances can be used to minimise or remove strategic disadvantages (for example, in the face of discrimination against imports, MNCs may replace exporting by investing in a local manufacturing plant).