U.S. companies should plan on having uniform prices for their products throughout the European Monetary Union (EMU) once a single currency is adopted, Charles Ludoph, an official of the U.S. Commerce Department said in Atlanta Oct. 16.
Speaking at the Hyatt Regency Atlanta during a seminar of the Southern Center for International Studies (SCIS), Mr. Ludoph, the Commerce Department’s acting deputy director for Europe, warned that those companies without uniform prices would anger customers.
He also said they should start preparing for the euro now. The euro is not to be used in retail transactions until 2002, but European multinationals such as Daimler-Benz, BMW and Siemens will convert their operations into euros in 1999, he said.
Mr. Ludoph added that large investors will head toward the more predictable and stable investment environment of the EMU member countries, making it more difficult for the U.K. and other European countries to attract these funds if they remain outside.
“The fact that some countries will be inside a single currency union and others will not, will start to influence investment,” he said. “You will want to be where the most intense aspects of unification occur.”
Companies, which have benefited from disguising price discrepancies in different markets through value added taxes, distribution costs and exchange rate differentials, will have to adopt uniform prices or lose their customers, he forecasted.
But many companies operating in the EMU will benefit, he added, due to reduced printing costs for different price lists, and the reduction of exchange rate risks and the hedging of contracts in different currencies.
He added that the savings for European companies have been estimated as high as $30 billion annually.