No One Ever Said It Would Be Easy

By MARGOT HORNBLOWER PARIS

In the town of Irun, on the Spanish-French frontier, Jan. 1 marked the end of Juan Manuel Retegui's career. Until then, 1,500 trucks a day would pass through the border's vast customs complex, with its long rows of loading bays and warehouses. Retegui and his 1,275 fellow agents, inspectors and clerks thrived on the red tape generated by $1 billion worth of trade a year. "Lines of trucks would stretch up the road," said Retegui. "Shops and bars were packed with people."

But on New Year's Day -- poof! The European Community's single market took effect, freeing the movement of goods among all 12 countries. Across Western Europe, an estimated 63,000 customs workers found themselves looking for new jobs. As Retegui walked glumly through Irun's deserted halls, only a single clerk was at work, clearing a salmon shipment from Sweden, a non-E.C. country. In the distance, tractor trailers thundered down the highway, barely slowing as they approached the crossing. "Who could believe we would be working flat out through December," said union official Ricardo Urtizberea, "and then suddenly find ourselves without a job?"

Since the 12 Community nations agreed in 1986 to form a more perfect union, governments have swept away thousands of protectionist laws and regulations. Anticipating cross-border competition, industries initiated a frenzy of mergers and reorganizations, investing billions of dollars and creating an estimated 1.5 million new jobs. Fearful of being left out, U.S. and Japanese companies scrambled to set up European subsidiaries before the deadline. The prize: an integrated market of 360 million consumers in an area with a combined gross national product of $6.5 trillion -- the world's largest single trading bloc.

If an integrated Community, unfettered by internal barriers, will be able to compete better against overseas rivals, that is far from its only purpose. After the wreckage of two world wars, European statesmen reasoned that only by interlocking their economies could they make war among themselves unthinkable.

So why, now that the day has finally arrived, is the mood so morose? Europe's failure to deal with the Yugoslav crisis has exposed its impotence in foreign policy. Its prosperity is undermined by global recession. Turmoil in the money markets has reinforced doubts about the E.C.'s ability to achieve a single currency and greater political union. In a climate of growing unemployment, a spate of factory closings is leading to bitter rivalry: France is seeking to stop Hoover Europe from moving 600 manufacturing jobs from Dijon to Glasgow. Glasgow is protesting Nestle's subsidiary Rowntree's plans to shut a chocolate factory, transferring operations outside Scotland. "European unity might be good for business," says customs clerk Retegui, reflecting widespread popular unease. "But what does it do for the man in the street?"

The answer: Plenty. Although many are only vaguely aware of the extent of the revolution, the single market has already touched the lives of Eurocitizens in ways great and small. The free movement of goods, people, capital and services required a standardization of financial, technical, health, labor and environmental rules. The job was undertaken by a multinational force of 13,400 bureaucrats in Brussels -- the embryo of an emerging federal government. Farmers were brought under a common agricultural policy that slashes subsidies and translates into lower food prices. New cars feature catalytic converters so that Italian manufacturers cannot undercut German companies by saving on pollution equipment. Toys from Portugal must meet the same safety guidelines as those made in Denmark.

If some are losing jobs, others are profiting from the new market. The duty on alcohol and tobacco, for example, was lifted for individual travelers. "We enjoy drinking wine, but we cannot afford it at British prices," said Barbara Green, the wife of a taxi driver from the British port of Ramsgate whose family went on a cross-Channel shopping spree. Charging down the aisles of a Calais supermarket, the Greens scooped up five crates of beer, five bottles of whiskey and 38 bottles of wine. "These are for our wedding anniversary," she said. With Barbara's mother stocking up on brandy and champagne, the family spent $434, probably less than a third of what the goods cost in Britain.

All the English families that are buying their liquor in French stores will < eventually see a drop in British prices as the single market forces member countries to harmonize their tax rates. France has already chopped its 33% value-added tax on automobiles, which kept French drivers from speeding across the border to buy lower-taxed German models. Lufthansa, Iberia and Air France have slashed airfares, signaling the opening of Europe's first air price war. Consumers are benefiting. But Bernard Attali, chairman of the board of Air France, warned that the "suicidal" consequences of cut-throat competition will be massive layoffs and fewer flights to small cities.

Europeans are waking to the fact that hardly any aspect of daily life is unaffected. The single market touches their wallets: Britain's Barclays Bank charged into the Spanish market with interest-bearing accounts, forcing local banks to follow suit. The single market influences food prices (bananas in Germany will be one-third more expensive thanks to new E.C.-imposed tariffs on South American imports), health (no cigarettes with more than 15 mg of tar can be sold in the Community, forcing France to lighten up its legendary Gauloises), and even noise (all lawn mowers must adhere to the same decibel regulations).

But Brussels' bureaucrats have not dared tell the British to drive on the right. Nor have the Twelve been able to agree on uniform electric plugs or phone jacks. In theory, professional barriers have dropped, so a Greek dentist can practice in Aberdeen, Scotland and an Italian lawyer can hang up his shingle in Hamburg, Germany. In actuality, the rules governing professional practice in each country remain decisive. On Jan. 1, internal passport controls were to vanish, but Britain, Ireland and Denmark balked. In the other nine countries, airport controls for internal E.C. passengers will disappear next year, after arrival gates have been reconfigured.

Some businessmen have found the changes welcome. "Everything is much speedier," said Mario Sivieri, who runs a horse-transport business from Milan. Twelve hours has been shaved off the time it takes to ship a breeding mare from Italy to Ireland and back, saving $700 on the round trip. A dozen export-import forms were eliminated, and veterinary checks now take place only at the destination. As for Sivieri trucker Carlo Boldrini, who used to spend nights in the horse trailer when frontier posts closed for the day, "stress is reduced 90%."

For others, the single market seems a sham. "German veterinary rules say poultry cannot be imported with heads, feet, hair or innards," said George Kastner, the country's leading food distributor. "But the French would not think of buying it any other way." A unified market has not changed the German rules, but now inspections take place on Kastner's premises. He had to spend $62,000 for new software to calculate value-added tax, which is now done in-house. "The single market has merely pushed the border inland," he said. "Brussels bureaucrats want to know how many kilos of this, how many crates of that. Before, I needed half an hour to do paperwork for one truck picking up produce in Paris. Today a specialist needs a full hour for each truck."

Many fear that the single market will prompt more short-term unemployment, as companies shut down scattered operations and consolidate. Unless rules are equally enforced by member countries, industries could demand a return to protectionism. Protests have erupted over the fear that lower wages and benefits in some countries will draw industry away from such socially liberal nations as France and Germany. Many also fear that broadening the E.C. by admitting East European nations will weaken it economically. But, says European Commission president Jacques Delors, "building Europe has not been a long, calm process." Forced to cope with the realities of a single market, the Reteguis, the Greens, the Sivieris and the Kastners would not disagree with Delors's sentiment.

With reporting by Helen Gibson/Calais, Rhea Schoenthal/Bonn and Jane Walker/Madrid