Europe's Subsidy War

"European governments are obviously being ripped off by multinationals," claims Roger Lyons, national officer of the Association of Scientific, Technical and Managerial Staffs, a major British trade union. Lyons' harsh words put him at odds with European public officials who consider foreign investment a potential cure for the economic woes now plaguing several of the region's countries. Faced with economic stagnation and rising unemployment, European governments are scrambling frantically to attract foreign capital.

Europe's courtship of the world's leading multinationals has increasingly assumed the form of sizable cash grants and tax breaks to any foreign investor planning to establish job-creating plants in the region. Many have tagged the inter-country battle an "incentives war." The nine European Economic Community (EEC) nations last year shelled out an estimated $8.4 billion in assorted incentives, a nearly three-fold increase over the 1977 figure.

Consider the remarkable case of a $270 million Dow Corning silicone plant in south Wales. Early last year, Britain's Labor government agreed to provide $69 million in grants for the project, well within limits set by the EEC anti-trust division. What really raised eyebrows, however, was the negligible number of new jobs-125-created by the plant, which placed the cost to British taxpayers at an extraordinary $550,000 per job.

Labor unions and EEC officials are voicing grave reservations about the escalation of the incentives war, and many are calling for unilateral disarmament. Trade unionist Lyons cites a common criticism: "These grants are supposed to create jobs. However, many multinationals who receive them are in sectors which do not generate a lot of employment, like chemicals, pharmaceuticals and petrochemicals." The EEC anti-trust division agrees. In the next few weeks, the commission is expected to reject applications from member countries for subsidies 7 to 14 companies, including Exxon, the Netherlands electronics multinational Philips and Imperial Chemical Industries. ,

Many critics consider the grants less a governmental policy to attract foreign capital than an indication of the ability of corporations to extract concessions from economically-troubled nations. "We know multinationals play off countries in the Third World. It also goes on in Europe," says Bryan Bolton of Britain's Transport and General Workers Union (TGWU). Lyons charges that multinationals often abuse the grants, building facilities designed to last only as long as incentive packages do. For example, Lyons claims U.S. multinationals including Timex and National Cash Register moved into Scotland after receiving major incentives, and closed down factories after the concessions expired. "Dundee was going to be the new electronics center of Northern Europe," he explains. "Now there are only a handful of people left there."

- Joseph Contreras in London