Brussels Letter

Europe and the computer

Gerald Segal

On the table of the EEC Council of Ministers there now lies the Commission's proposals for the European computer industry. It would be all too easy to dismiss them as misconceived and to hazard the guess that even if the Council does manage to discuss and conceivably even adopt them by the end of the year nothing much will come of them. But that would be to miss the point. The fact is that the very limitations of the document both in its conceptual framework and in its detailed proposals amount almost to a clarion call to the Community to think again about the entire nature of its technological and industrial philosophy, and above all its future relationship to the industry and technology of the United States.

The Commission's basic thesis as set out in the communication to the Council of November 21 is that "there is a need to achieve a strong European-based industry with an industrial structure capable of competing with the dominant producer /the American multinational IBM — G.S./ in the supply of a range of computers." It is also asserted that the European-based industry must be viable, competitive and "capable of achieving a genuine European and indeed world wide dimension."

Nowhere in the communication is the concept "European based company" defined.

On the face of it the American multinationals

such as IBM. Univac. and certainly Honeywell, which has absorbe,1 the French company

Machines Bull, may legitimately argue that they are based in Europe and, through their vast highly efficient production plants and offices, are infusing empooyment and the latest techniques into the European economy.

But this argument will not be acceptable to the Commission. For them a ' European based industry' means a European owned and controlled industry' and the tone of the document and of the press conference at which it was introduced made it quite clear that the fact that "about 90 per cent of the computers installed in Europe are based upon American technology" was resented.

In any case it is likely to prove a risky and costly business to seek to orientate European computer policy in the direction of European-owned industry. Highly sensitive issues are involved. For example: the dangers of an American counter-discriminatory cam paign; the contributions of the American companies, registered under the laws of the member states, to the national economies; the fact that, to a certain extent, European-owned industry is still turning out computers under American licence; the need Europe still has for American computers as testified to by the recent EEC purchase of IBM computers for Euratom's work at Ispra and for the Commission's own administration services.

And if the attempt were made to form a European industrial structure capable of competing with IBM, could it possibly be successful? On the Commission's own evidence it seems unlikely. The document states clearly that such a structure must be based upon a merger between Britain's ICL (International Computers Ltd) and the recently formed UNIDATA — which comprises CII (France), Philips (Holland) and Siemens (Germany) — and then goes on to admit the merger is unlikely in the near future.

It is also worth noting that such is the attitude of the Commission to European affairs

that it welcomes the UNIDATA agreement although admitting at the 'same time that it doesn't know its terms: such too is the Commission's prestige that the companies concerned did not think it worthwhile to consult It.

Undeterred, the Commission proposes certain measure aimed at bringing ICL and UNIDATA closer together in the short term with a view to merger in the long, These include industrial development contracts to be awarded by the Community to the two or other European companies to develop, for example, new models of terminal devices, jointly. The difficulty is that the member states have been unable to agree on the form, economic and legal, of such contracts; and in any case they could have only a marginal effect.

Another possibility is that member states should co-ordinate their public procurement policies and not simply support, as at present, their own national industries. But this presupposes a degree of European unity nowhere to be found. There are also proposals for co-operation in software developments but much of this, so far as I can check, involves developing in Europe something already available from the American companies..

Nevertheless, even if the Council agrees to the Commission's proposals, the final result will still not be a viable European computer industry. At the present time ICL and UNIDATA each hold about 7.5 per cent of the European market whilst IBM holds 60 per cent, Honeywell 10 per cent and the other American companies such as Univac, Burroughs, and CDC about 4 per cent each. In a market which in Europe is expanding at the rate of 20 per cent per annum, ICL and UNIDATA would be required not only to effect some kind of trans-national merger which would be difficult even if the Commission's proposals were accepted, but would also have to research, develop and manufacture a new .common range of computers and then to market them at a rate faster than the current enormous market growth. The Commission does not suggest what that rate should be. The position is even more difficult in the world market where ICL and UNIDATA together enjoy a 6 per cent share. To achieve, in the Commission's phrase, a truly European and world dimension (this phrase is misleading because both ICL and UNIDATA already sell computers throughout the world including non-EEC Europe, Asia, Africa, the communist bloc and Latin America) can only mean that the proposed future merged European company must aim for a sales rate far above the market growth rate in areas Where it has no political leverage.

What that sales rate should be — Europe is ,due to expand at 20 per cent, Japan at 30 per cent and the US at 15 per cent — and over what period of time, in order that the current 6 per cent share should become competitive with IBM's 65 per cent, the Commission understandably does not even hint at. Indeed the task has only to be stated to be seen to be absurd. The irony is that the Commission seems to recognise this because it envisages as the final scenario a merger between the merged European company (ICL and UNIDATA) and an American multinational other than IBM — in order to produce a world competitor for IBM. But the merger of mergers will, according to the Commission which is here reaching out into the bewildering mists of future time, have to be done in such a way that the European company is not absorbed by the American under cover of the merger. The document offers no hint of pos sible partners or shareholdings. In effect the final act of the Commission's scenario is pure comedy. The question is: is European industry and technology the appropriate theatre for its enactment?