GXS Insights

Select an Insights Edition

• Insights Index
• 1st Edition: Inside SaaS 2.0
• 2nd Edition: Navigating Cross Border Business Boundaries
• 3rd Edition: How to Increase ERP Success with B2B Integration
• 4th Edition: Enhancing Customer-Centric Supply Chains

3. The Opportunities

Given the above, it is obvious that neglecting Europe as a trading bloc does not make great sense in today’s markets. Taking the EU as a single entity, the overall gross domestic product (GDP), at $17t, is top in the world and, at a per capita basis of $33.5k, places the EU as 13th in the world.

In the EU alone, there are over 25 million non-primary private enterprises (i.e. excluding areas such as agriculture and mining), of which 99.8% are termed as being Craft or Small and Medium Enterprises (CSMEs). With many of these providing services to other businesses (such as manufacturing or services such as logistics), the opportunities to utilise this wealth of available resource should be of interest to the majority of European companies that are involved in business-to-business transactions.

Extending the definition to include all the standard European countries, the population moves from 500 million to 712 million. The overall GDP for Europe is $20.3t – placing it at 50% greater than the US ($13.8t), and nearly 5 times that of the third largest world economy, Japan ($4.3t).

Therefore, if we look at a company that decides to trade just within its own geographic boundaries, we can see that, even if that company is placed in Europe’s largest economic country, Germany at $3.3t, it will only be addressing a sixth of the possible wealth of the total European community.

More to the point, Europe is not a single economic environment when it comes to employment rates, or even raw materials costs. Therefore, choosing carefully, base costs can be trimmed by 50% or more through ensuring that manufacturing is carried out in the cheapest possible countries, that supplies are sourced from the most cost-effective geographies and that optimised supply chains, utilising the most cost-effective logistics capabilities, are used.

Many of the trade agreements within Europe are aimed at making this feasible. Members of the EU cannot, for example, place import restrictions or punitive duties on goods from member countries and, as such, the movement of goods and supplies across European boundaries can be pretty smooth. Many borders are now sparsely managed, letting goods pass through without hindrance. Agreements such as the Schengen Treaty enable people to move freely between countries, enabling greater transfer of skills. European bodies such as the Economic and Financial Affairs Council (ECOFIN) have been working on simplifying certain trade regulations, such as by the provision of its Stability and Convergence programmes and work on Economic Policy Convergence (EPC). However, much of this work has been focused solely on providing easier means for the transactions of purely electronic transactions, for example those involving the download of software, music, video and so on.

So, if Pan-European trade is so attractive, why is that less than 3% of European companies actually do trade outside their own geographic boundaries?