Roland Verdon: EU bureaucracy is threatening the ability of companies to stay competitive – and therefore profitable.

In the world of business, the exchange of technologies, import and export, decentralisation, moving factories abroad and making use of the best locations have become familiar topics. More and more companies, even small ones, source products and commodities from abroad.

But where does Europe stand in today’s highly competitive world market? Europe’s intention is to be the world leader, but it fails to achieve this status, due, in good part, to its enormous bureaucracy.

Procurement professionals long ago started looking for alternatives and turned to Asia and other locations. On a short-term basis, this has been a successful factor in demonstrating the capacity to find the lowest possible cost and thus generate significant savings in purchasing.

While we have been challenging our own EU production costs and turning towards the Far East – which American companies did about five years before Europe – we have pushed our own production capacity to adapt, which is near impossible in terms of manpower costs, or close down.

In five years as the procurement head of marketing material in the tobacco industry, we were challenged to find the best possible sources of supply. A good deal of our sourcing was in Asia. This was due to the fact that many European factories had either transferred to other countries or closed.

The recent rejection of the European constitution by the people of France and Holland is a good example of the impact of bureaucracy on corporations, and thus over people. How could the European authorities put aside the fact that the majority of people in those two big players are tired of this bureaucracy?

Individuals have connections and relations to corporations, big or small, and therefore are very well aware of the issues. Corporations face this reality all year round, and it only needed a few years for the trickle-down effect to work. Some EU countries are not asking their populations to express their view on the constitution, but the result might not be very different.

And what about import quotas – protectionism? The EU will not be able to impose quotas forever in the areas where no other protection can make its own industry survive. We have seen this in the textile area recently. Rather, Europe should ensure that the administration, regulations and overall bureaucratic processes are simple, fast and efficient. It would at least balance somewhat the disadvantage the EU has compared to the labour costs of other countries.

European levels of bureaucracy are such that entrepreneurs must question the profits they can make to keep production in Europe. Other countries offer faster and simpler processes to ensure compliance with regulations. Brussels’ bureaucracy restrains competitiveness.

While European authorities have the time, energy and money to issue regulations for any kind of production, corporations must invest more and more time and money in being compliant with the rules. Europe is going far beyond harmonisation among countries.

In the pharmaceuticals industry, for example, we are obliged to produce thousands of pages and documents to register a new drug, a process which takes years. In Europe, we spend twice as much going through the drug registration as is needed in the US.

This positions European corporations behind the US where the regulations are much lighter and quicker to deal with. Surely, in a competitive market, the rules should be the same for everyone?

European authorities are weakening their own industries. As decisions and new regulations flood out of Brussels, procurement and supply chain professionals are struggling to find new ways to be cost-effective in sourcing.

Let’s hope that the European authorities will revise their strategy in issuing regulations to enable corporations to be much more competitive in today’s world market. Europe is not helping its own industries in this area. It is rather making the work of corporations that much harder.

Europe must play a leading role in today’s world market, but this will be achieved only with less administrative bureaucracy, rules and regulations.

Roland Verdon is procurement director for Serono International in Geneva, Switzerland