Foreign Correspondent: Rethinking the EEC

Copenhagen. Few North Americans (indeed, not even that many Europeans) know very much about the EEC—the European Economic Community, otherwise known as the Common Market. Far from being strictly a mechanism for reducing trade barriers, the EEC is a political organization that may profoundly affect the political future of Europe.

The EEC was established in 1958 by the six original member countries: Belgium, the Netherlands, Luxembourg, the Federal Republic of Germany, France, and Italy. In 1973 three more members were accepted, namely Ireland, the United Kingdom, and Denmark. The total population of the present EEC is about 250 million, but quite a few Western European countries are still not members and the assumption that EEC stands for all of Western Europe is therefore incorrect.

It is difficult to define precisely what the EEC is, except that it is an international organization whose member states have agreed to collaborate in achieving certain aims as set forth in the Treaty of Rome (the so-called constitution of the EEC). The difficulty arises partly from the fact that the EEC still is in a process of development and partly from the vague terms in which the Treaty expresses the goals: "The purpose of the Community is, by means of establishing a common market and a gradual approximation of the economic policy of the Member States, to promote harmonious development of the economic activity of the Community as a whole, continuous and balanced expansion, increased stability, accelerated improvement of the standard of living and closer connection between the Member States which it unites." [unauthorized translation]

This, of course, can be construed to mean almost anything, and the question still remains whether the EEC primarily is an instrument of political and economic integration or whether it is merely a common market and customs union. Present political opinion differs widely and although the EEC's founding fathers intended political integration to be obtained through the process of economic integration, no United States of Europe has yet been established. The member countries still maintain national sovereignty but have agreed to cooperate in certain areas, mainly (but not exclusively) trade and agriculture. Just how much sovereignty they will maintain within the next decade depends on two rather unpredictable factors, namely how much national sovereignty the member countries are prepared to give up and how much they will give up in bits and pieces as economic integration proceeds.

The EEC is administered by the EEC Commission, which consists of 13 members appointed for four years by the Council of Ministers and which is independent of national interests. The Commission has the very important function of taking the initiative on any proposal for legislation and may even in some areas implement legislation. Furthermore, it has the responsibility of ensuring that the Treaty and the Community legislation are observed by the member countries. The Commission resides in Brussels and has a staff of 8,000.

The Council of Ministers consists of a representative of the national government from each member country (different ministers according to the subject under discussion). Its main responsibility is to ensure that the aims of the Treaty are fulfilled but the ministers also, of course, represent national interests. The Council decides, on proposals from the Commission, the important legislation of the EEC and in general the decisions must be unanimous.

The European Parliament has 198 members appointed by the various national parliaments and functions mainly in an advisory and to a certain extent controlling capacity towards the Commission. By a majority vote of two-thirds it can dismiss the Commission. It has no legislative power but is consulted on proposed legislative measures. The European Court of Justice is the judiciary in proceedings concerning EEC legislation.

Of these institutions, the Commission, which represents the interests of the Community, and the Council, which represents the national interests, are clearly the most important. And the procedure for making legislation (the Commission proposes, the Council disposes) shows why the opposition of one member country (in particular if it is one of the major ones) to further integration can stop its progression, something which has already happened a number of times.

So far, a common market for industrial goods (i.e., abolition of tariffs and quantitative restrictions between the member countries) has been attained and the same applies to a free market for labor and investments. Common tariffs on goods from outside countries have also been introduced. The basic philosophy has been that of free trade and the arrangement has worked well. According to the Treaty of Rome the common market should also cover agricultural products, but this has created difficulties.

In most member countries, agriculture has always been regarded as a special problem which cannot be solved by free market economics and the EEC is no exception. In order to obtain a common market for agricultural products the Treaty, therefore, requires that national policies on agriculture be replaced by a common agricultural policy with the following objectives: to increase the productivity of agriculture, to secure a fair standard of living for the agricultural population, to stabilize the market, to secure the supplies of food, and to assure reasonable prices at retail.

This common agricultural policy now covers most agricultural products and is regarded as the "backbone" of the EEC as it represents the only real joint policy which goes beyond free circulation of goods and a customs union.

It functions basically by means of minimum prices for agricultural products which are fixed every year and generally at a high level which means that they are higher than the prices of the world market. These prices are the same in all the member states, nominally speaking, because they are expressed in a unit of account which refers to a certain amount of gold(!), namely the amount that corresponds to the US dollar in 1962 (hence the nickname "green dollar").

This system necessitates high tariff barriers for imports, compensatory payments for exports, buying up and storing large quantities of goods when the market price falls below the fixed minimum, and a method of leveling the price differences which arise between member countries due to individual currency fluctuations in relation to the unit of account.

The consequence, of course, is imbalance between supply and demand. Nonprofitable agriculture is encouraged, surpluses are generated, and retail prices are high so that at least some of the most important objectives of the common agricultural policy cannot be said to have been met. This is generally recognized and is perhaps best expressed in the title of a section of an official report on the situation "Surpluses and food prices: realities more complex than thought." But no satisfactory solution seems to be at hand.

To be sure, the above is a very simplified description of the EEC and its functions. A number of further activities are taking place with the aim of establishing closer collaboration, e.g. in the fields of trade relations with other countries, social policy, energy policy, environmental protection, and consumer protection. But although none of these activities have been developed to a significant degree, they might well add up to considerable integration if and when a major political step such as the establishment of a monetary union were taken.

Whether a united Europe will more easily accept libertarian ideas than a number of individual countries, I am not in a position to evaluate, but I can at least point to one aspect of the EEC where this is not the case. While the abolition of tariff barriers and quantitative restrictions may please a libertarian heart, other less obvious obstacles to the free trade exist, namely the different national regulations and specifications for various types of goods. According to the Treaty these so-called technical obstacles to trade must be eliminated which is interpreted to mean that common regulations must be introduced. This work of harmonization almost invariably results in EEC legislation which retains the strictest provisions of any member country. Thus, a trade barrier is established towards other countries and more stringent requirements than found necessary in any single member country are introduced and will prove very difficult to get rid of.