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Author Frenkel, Karen A.
Source ACM Digital Library
Content type Text
Publisher Association for Computing Machinery (ACM)
File Format PDF
Language English
Subject Keyword Transborder data flow ♦ Regulation ♦ Statistics ♦ Standards
Abstract The world has watched Eastern Europe erupt into such political turmoil that historians are expected to call this period the Revolutions of 1989. Economic evolution was also underway as the Continent progressed toward a single European market. The goal—a market without national borders or barriers to the movement of goods, services, capital and people—was first outlined over 30 years ago by the 12 countries which became members of the Common Market. In the mid 1980s, the effort was renewed when these same countries approved an ambitious plan outlining hundreds of legislative directives and policies that would harmonize and re-regulate those of the member states. The measures are drafted by the European Commission, voted on by the Council of Ministers, amended if necessary, and then assigned budgets by the Parliament. They include competition law, labor law, product regulation and standardization, taxation and subsidies, and quota and tariff guidelines. In 1987, the Single European Act created a timetable for the passage of legislation with a formal deadline for the removal of barriers by December 31, 1992, hence the term Europe '92 (EC '92). But many have described EC '92 as a process that will continue throughout the 1990s. The ouster of communist leaderships throughout Eastern Europe, however, has raised unexpected questions about the participation of the Eastern countries, and this could alter or delay the process.Nevertheless, the changes have begun and are taking place during the Information Revolution. It is therefore natural to ask what impact EC '92 will have on the computer industry. Inevitably, several of the directives and policies relate primarily, and many secondarily, to information technology. Table 2 lists the policies in effect and those being proposed. In the following pages, Communications presents several points of view regarding the impact of EC '92 on the information technology market in Europe.As of July 1988, the European information systems market was estimated at \$90 billion by Datamation magazine and is expected by many to be the fastest growing market this decade. But during the last ten years, European-based computer companies have had difficulty keeping pace with American and Japanese firms. In 1988, European companies managed only a 20 percent market share on their own turf, according to market researcher International Data Corporation. Not much had changed since 1982 when their market share was 21 percent. As reported in the Wall Street Journal last January, European computer companies have been hindered by lack of economies of scale, narrow focus on national markets, and difficulty in keeping pace with Japanese and IJ.S. product innovations. But the occasion for the Journal article was the news that Germany's Siemens AG was merging with the ailing Nixdorf Computer AG. The result would possibly be the largest computer company based in Europe, and the sixth or seventh largest in the world. And in October of 1989, France's Groupe Bull announced the purchase of Zenith Electronics Corporation's personal computer unit. Bull claimed that it would become the sixth largest information service company in the world. Such restructurings have been predicted with the approach of EC '92, as corporate strategies would begin to take into account directives and trade rules regarding the computer and telecommunications industries. Smaller European and American computer companies are anticipating battle with giants like IBM and DEC, which have long-established European divisions or subsidiaries. IBM has been the leader in mainframes, minicomputers, and personal computers, but it is expected that all computer companies, European-based or not, will face greater competition in Europe.The Netherlands' NV Philips, the largest European semiconductor and consumer electronics company, says it has been preparing for EC '92 since the 1970s. And North American Philips Chairman Gerrit Jeelof has claimed company credit for initiating the 1987 European Act. In a speech delivered at a Business Week and Foreign Policy Association Seminar last May, Jeelof said that while American companies had forsaken consumer electronics, Philips and France's Thompson have held their own against the Japanese. But he indicated that American dominance of the European semiconductor market was a major impetus for EC '92. Jeelof said:. . . because of the lack of European strength in the field of computers, the integrated circuits business in Europe is dominated by Americans. Europe consumes about 34 percent of all ICs in the world and only 18 percent are made in Europe by European companies. The rest are made by American companies or are imported. It is not a surprise then that in 1984 we at Philips took the initiative to stimulate a more unified European market. At the time, we called it Europe 1990. Brussels thought that 1990 was a bit too early and made it 1992. But it has been the electronics industry in Europe together with other major companies, that have been pushing for Europe 1992. Why did we want it? We wanted a more homogeneous total market in Europe and, based on that, we wanted to become more competitive. The process is on its way and obviously we see some reactions. If you take action, you get reaction.One reaction has been concern on the part of non-European companies and their governments that the EC is creating a protectionist environment, a “Fortress Europe.” As walls between nations are coming down, some fear that other more impenetrable ones are going up on the Continent's edges. Jeelof argues against this perception in another speech, “Europe 1992—Fraternity or Fortress,” reprinted in this issue in its entirety.Communications also presents an analysis of several trade rules relating to semi-conductors in “The Semiconductor Market in the European Community: Implications of Recent Rules and Regulations,” by Roger Chiarodo and Judee Mussehl, both analysts in the Department of Commerce Office of Microelectronics and Instruments. The authors outline the consequences of Europe's Rules of Origin, anti-dumping measures that are supposed to prevent companies from using assembly operations in an importing country to circumvent duty on imported products. In the United States, if the difference between the value of parts or components from the dumping country and the value of the final product is small, then duty will be placed on those parts or components used in U.S. assembly operations. By contrast, the EC rule says that if the value of parts or components exceeds 60 percent of the value of all parts and materials, then duty will be placed on those parts and materials upon assembly in Europe. Since 1968, origin was also determined according to “the last substantial process or operation” resulting in the manufacture of a new product. In the case of printed circuit boards, some countries interpreted this as assembly and testing, while others thought it meant diffusion. In 1982, the EC began harmonizing these interpretations, and as of 1989, the last substantial operation was considered diffusion: the selective introduction of chemical dopants on a semiconductor substrate. As a result, American and Japanese semi-conductor manufacturers have spent millions building foundries on European soil. To reveal the Japanese interpretation of such changes, Japanese Commerce Minister Eiichi Ono, with the Japanese Embassy in Washington, DC, expresses his country's impressions of EC '92 in this issue. In his speech, “Japan's View of EC '92,” delivered at an Armed Forces Communications and Electronics Association (AFCEA) conference on Europe '92, Ono states that while the EC's intentions might not be protectionist, they could become so upon implementation. His discussion focuses on semi-conductors and technology transfer issues.Although not a formal directive, in July 1988, the European Council decided to promote an internal information services market (the last “L” document in Table 2). To present the reasoning and objectives behind this initiative, we reprint the Communication from the Commission to the Council of Ministers, “The Establishment at Community Level of a Policy and a Plan of Priority Actions for the Development of an Information Services Market,” and the resulting July 1988 “Council Decision” itself. Funds allocated for 1989 and 1990 are approximately \$36 million, \$23 million of which was slated for a pilot/demonstration program called IMPACT, for Information Market Policy Actions. This may seem a pittance in comparison to the programs of other governments, but this Decision and other EC legislation are the first steps toward an EC industrial policy. Recognizing that Europe's non-profit organizations and the public sector play a very important role in providing database services, in contrast to the U.S. where the private sector is now seeding the production of such database services, IMPACT has prepared guidelines to help the public sector cooperate with the private sector in marketing information. These guidelines would also allow private information providers to use public data and add value to it to create commercial products. IMPACT is providing incentives to accelerate innovative services for users by paying 25 percent of a project's cost. After the first call for proposals, 16 of 167 projects proposed by teams composed of 300 organizations were funded. American-based companies can apply for funds if they are registered in Europe. Unlike the U.S., the EC allows registration regardless of who owns a company's capital. Projects funded are to develop databases that would be accessible to all members of the Community either on CD-ROM or eventually on a digital network, an ISDN for all Europe, as planned by the fifth recommendation listed in Table 2. One project in the works is a library of pharmaceutical patents on CD-ROM that will enable users to locate digitized documents. Users will also have direct access to on-line hosts for all kinds of patents. A tourism information database and a multi-media image bank of atlases are other pilot projects chosen, and another project will provide information on standards. Eventually, audiotext might be used to retrieve data by telephone instead of a computer terminal. When the initial projects have been completed, the Commission will inform the market place about the results of the implementation. Plans for a five-year follow-up program, IMPACT-2 are also under discussion.These projects depend to some extent on the implementation and passage of directives or the success of larger and better funded projects. On-line access to databases depends on the recommendation for an ISDN as well as on the standardization directive for information technology and telecommunications. The certification, quality assurance, and conformity assessment issues involved in that directive are too numerous and important to just touch on here and will be covered in a later issue of Communications. To make these databases accessible not only technically, but also linguistically, the EC has funded two automatic language translation projects called Systran and Eurotra. Systran is also the name of the American company in La Jolla, CA, known for its pioneering work in translation. In conjunction with the EC, Systran Translation Systems, Inc., has completed a translation system for 24 language pairs (English—French, French—English, for example, are two language pairs) for the translation of IMPACT- funded databases. The system resides on an EC mainframe; there will be on-line access by subscription; and it will also be available on IBM PS/2s modified to run VMS DOS. It is already on France's widespread Minitel videotext network.As this practical, market-oriented approach to technology implementation is beginning, Europe's cooperative research effort, ESPRIT, is also starting to transfer its results. Last year, the second phase, ESPRIT II, set up a special office for technology transfer. Its mission is to ensure the exploitation, for the benefit of European industry, of the fruits of the \$1.5 billion ESPRIT I program that began in 1984, as well as the current \$3.2 billion program (funding through 1992). The EC contributes half of the total cost, which is matched by consortia comprised of university and industry researchers from more than one country. About 40 percent of ESPRIT II's funds will be devoted to computer related-technologies.Every November, ESPRIT holds a week-long conference. Last year for the first time it devoted a day to technology transfer. Several successful technology transfers have occurred either from one member of the program to another or out of the program to a member of industry that had not participated in the research. An electronic scanner that detects and eradicates faults on chips, for example, was developed by a consortium and the patents licensed by a small company. This automatic design validation scanner was co-developed by CSELT, Italy, British Telecom, CNET, another telecom company in France, IMAG, France, and Trinity College, Dublin. The company that will bring it to market is ICT, Gmbh, a relatively small German company. It seems that in Europe, as in the United States, small companies and spin-offs like those found in the Silicon Valley here, are better at running quickly with innovative ideas, says an EC administrator.Another technology transfer success is the Supernode computer. This hardware and software parallel processing project resulted in an unexpected product from transputer research. The Royal Signal Radar Establishment, Inmos, Telmat, and Thorn EMI, all of the UK, APTOR of France, and South Hampton University and the University of Grenoble, all participated in the research and now Inmos has put the product on the market.Three companies and two universities participated in developing the Dragon Project (for Distribution and Reusability of ADA Real-time Applications through Graceful On-line Operations). This was an effort to provide effective support for software reuse in real-time for distributed and dynamically reconfigurable systems. The researchers say they have resolved the problems of distribution in real-time performance and are developing a library and classification scheme now. One of the companies, TXT, in Milan, will bring it to market.Several other software projects are also ready for market. One is Meteor, which is aimed at integrating a formal approach to industrial software development, particularly in telecommunications. The participants have defined several languages, called ASF, COLD, ERAE, PLUSS, and PSF for requirements engineering and algebraic methods. Another project is QUICK, the design and experimentation of a knowledge-based system development tool kit for real-time process control applications. The tool kit consists of a general system architecture, a set of building modules, support tools for construction, and knowledge-based system analysis of design methodology. The tool kit will also contain a rule-based component based on fuzzy logic. During the next two years, more attention and funds will be indirectly devoted to technology transfer, and the intention to transfer is also likely to be one of the guides in evaluating project proposals.Some industry experts maintain that high technology and the flow of information made the upheaval in Eastern Europe inevitable. Leonard R. Sussman, author of Power, the Press, and the Technology of Freedom: The Coming Age of ISDN (Freedom House, 1990), predicted that technology and globally linked networks would result in the breakdown of censorious and suppressive political systems. He says the massive underground information flow due to books, copiers, software, hardware, and fax machines, in Poland for example, indicates that technology can mobilize society. Knowing that computers are essential to an industrial society, he says, Gorbachev faced a dilemma as decentralized computers loosened the government's control over the people running them. Glasnost evolved out of that dilemma, says Sussman.Last fall, a general draft trade and economic cooperation accord was signed by the European Commission and the Soviet Union. And both American and Western European business interests are calling for the Coordinating Committee on Multilateral Export Controls (COCOM) to relax high technology export rules to the Eastern Bloc and the Soviet Union. The passage of that proposal could allow huge computer and telecommunications markets to open up. And perhaps the Revolutions of 1989 will reveal themselves to have been revolutions in communication and the flow of information due in part to high technology and the hunger for it.
Description Affiliation: ACM Headquarter, New York, NY (Frenkel, Karen A.)
Age Range 18 to 22 years ♦ above 22 year
Educational Use Research
Education Level UG and PG
Learning Resource Type Article
Publisher Date 2005-08-01
Publisher Place New York
Journal Communications of the ACM (CACM)
Volume Number 33
Issue Number 4
Page Count 7
Starting Page 404
Ending Page 410


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Source: ACM Digital Library