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

4. Issues

Unfortunately, Europe cannot be regarded as anywhere near a single effective market of federated states, even if we just concentrate on the EU. Even within the EU, we still have 13 different currencies. There are 23 official languages – and this is actually growing as member states support the official usage of localised languages and distinct regional dialects.

Even at the legal framework level, there has been little true harmonisation of trade laws. For example, each country still retains its own tax raising capabilities, and this has a knock-on effect to value added tax (VAT) laws. Indeed, with little centralised control other than targets being set, inflation across the EU cannot be measured at an EU level, but remains an issue for individual countries. Therefore, today’s cheapest supplier of goods may be tomorrow’s expensive provider. Data privacy and financial reporting laws may also conflict with each other across international boundaries. For example the laws governing an employer’s right to access staff email communications vary and conflict between European countries.

The EU is working on attempting to address many of the issues found in cross-border trading within the EU. The Information Technology for Adoption and Intelligent Design for eGovernment (ITAIDE) project is looking to move many government paper-based, cross-border processes to being electronic, based on an agreed format. This then opens up the possibilities for organisations to provide their documents in an electronic format that will be acceptable to the new government processes.

ECOFIN continues to look at how inter-country electronic transactions can be more effectively enacted. However, the largest amount of action is really taking place in the emergence of new EDI standards, based around the use of the eXtensibleMarkup Language (XML) content standard. Although this shows great promise for the future, it also runs the risk of being an additional burden to the average organisation, inasmuch as such new standards will rarely completely replace what has gone before, but will be additive. Therefore, companies wishing to adopt harmonised B2B XML-based EDI standards will have to mandate these – and many of their suppliers and customers will decide not to participate due to the cost of introducing such capabilities.

For many, the submission of electronic documents to the authorities will be mandated, and this will drive the need for an organisation to support multiple EDI standards – one (hopefully) harmonised EDI standard for government documents, and other EDI standards for the organisation’s suppliers and customers.

One of the major issues still facing legislators is the need to ensure that opening up borders for trade does not threaten overall security – either at basic informational and goods level (i.e. basic theft), but also at a terrorist and criminal level such as arms, drugs and people trafficking. Treading the thin line between fully open borders and the safety of individual countries cannot be taken lightly. Indeed, as the EU has expanded and the boundaries have moved from the historically “solid” boundaries of the Iron Curtain to the more fragile European/Asian boundaries, the possible impact of not only terrorist threats, but also of greater intellectual property impact through massive counterfeiting have to be taken in to account.

Also, the breaking down of the Iron Curtain has not just led to the opening up of trade between ex-Soviet and communist states and other EU countries, but has led to further problems. For example, many of the countries involved have struggled to move from a very strict centralised control environment to a more democratic approach, and criminal elements have taken the opportunity to create pseudo legal fronts for money laundering of assets gained through drug and people trafficking. Although the majority of the countries involved are working hard to crack down on such practices, it is unlikely that any short-term solutions will be forthcoming – and this leaves organisations looking for legal transactions open to many issues.

Indeed, many government and financial institutions have grave reservations as to the probity of many of the EU and other European countries. The US Special 301 Report identifies Hungary, Italy, Romania, Poland and Lithuania as having insufficient controls in place to ensure that intellectual property rights are secured. Should an organisation then outsource the supply of patented parts or assemblies to organisations based in these countries?

Transparency International has identified that Romania, Bulgaria and Poland have levels of corruption at both commercial and government levels that are similar to Ghana and Namibia. With many countries now having laws prohibiting the payment of bribes or kick-backs to a supplier or customer, avoiding such issues is of paramount concern.

Stop Child Trafficking identifies Romania, Poland and Bulgaria as major sources for child trafficking, and much of this is carried out through logistics companies based in these countries.

Therefore, although major savings can be made in sourcing supplies across Europe, there are many issues that make it difficult for all but the largest companies to manage at an effective level.

Although the majority of organisations have chosen not to trade outside of their own geography due to not being aware of the opportunities, many that have investigated the possibilities have decided that the problems outweigh the opportunities, and have made the choice to remain trading in a single country.

Is it possible to move to a Pan-European model in an effective manner?