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The European Common Market Proposal

Published online by Cambridge University Press:  22 May 2009

Raymond Bertrand
Raymond Bertrand
Affiliation:
Professor of Economics and formerly Chief of the Western European Division of the International Monetary Fund, is presently Economic Counsellor for the Organization for European Economic Cooperation. Mr. Bertrand is greatly indebted to Mr. E. Parsons for valuable comments and editorial help.
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Extract

In the short span of a year, from the Messina Conference held on June 1 and 2, 1955, by the foreign ministers of Belgium, France, Germany, Italy, Luxembourg and the Netherlands, to the series of meetings begun in Brussels on June 26, 1956, among the same governments, the idea of economic unification of these six countries has made a striking advance toward its realization. The heads of the delegations to the Intergovernmental Committee established by the Messina Conference produced a report in which they jointly and unanimously proposed to start drafting a treaty (or two treaties) to establish a “common market” and an atomic community (Euratom) along the lines of their report. The governments are not yet formally committed to accept all the recommendations of this report; but they agreed at the Venice Conference on May 29, 1956, to take it as a basis for the negotiation of the treaty. This document is therefore to be regarded as much more than another expert opinion on the desirability or the feasibility of economic integration. It outlines the detailed objectives to be reached and contains a relatively precise timetable hammered out through months of arduous discussions which took the better part of the summer and of the fall of 1955 in the Belgian capital. Euratom and the “common market” are of course closely interrelated political issues. Technically, however, they are quite distinct and only the common market is examined in this paper.

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Articles
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International Organization , Volume 10 , Issue 4 , November 1956, pp. 559 - 574
Copyright
Copyright © The IO Foundation 1956

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References

1 Short chronology of the European Common Market discussions:

January–March 1954: Intergovernmental conference in Paris on the European Political Community

June 1–2, 1955: Messina Conference

June–October 1955: Meetings at Brussels of the Intergovernmental Committee established by the Messina Conference

April 21, 1956: Publication of the Report to the Foreign Ministers of the Heads of Delegations to the Intergovernmental Committee

May 29, 1956: Venice Conference of Foreign Ministers

Since June 1956: Meetings at Brussels of the committee entrusted with drafting the treaty

2 Hereafter referred to as the Spaak report.

3 As, for example, the report on “European Economic Integration” prepared for the Council of Europe, Strasbourg, 1955.

4 Hereafter referred to as the Brussels Conference.

5 British observers participated in the discussions of experts at the Brussels Conference. The United Kingdom government was not represented at the policy-setting conferences of Messina and Venice. The study of a free-trade area for the whole of OEEC. and its relation to the common market, was requested at the last OEEC ministerial meeting.

6 For some countries, of course, movement towards the common tariff would involve raising some existing tariffs.

7 The European Commission is the proposed executive body of the common market.

8 Spaak report, p. 73 and 74.

9 As advocated by Meade, J. E., The Theory of Customs Unions, p. 116–118.Google Scholar

10 Le Monde, July 3, 1956.

11 The best source of facts so far available is the so-called Ohlin report commissioned by the International Labor Organization and released at Geneva on June 1, 1956, and entitled “Social Aspects of European Economic Cooperation” (132d Session — — Document G.B 132/3/3).

One of the main findings of this report is that labor-cost differentials among European countries, while large, are less than is commonly believed, Thus, taking average hourly labor costs in Switzerland equal to 100, the relative levels in the manufacturing industries of the six common market countries were as follows in 1954:

It is true that France comes out at the top, but it also has one of the highest tariffs, On the other hand Belgian labor costs appear to be 42 percent above Dutch costs, in spite of which the customs union between the two countries seems to be functioning smoothly enough. This paradox of the Benelux customs union where large labor-cost differentials exist, side by side with freedom of movements of goods and of factors of production within the area, raises a number of questions as to the functioning of international markets, It would prima facie suggest that the conclusions which are sometimes drawn under assumptions of perfect competition about the effects of tariff changes on relative prices and uses of factors of production are not necessarily realized in practice.

12 The main arguments run as follows:

(a) Freer trade and freer labor and capital movements will bring about some equalization of factor costs among the partner countries.

(b) Government action on laws and regulations affecting costs should be limited to so-called “specific distortions”—those which affect the comparative costs of a single industry relative to the national average costs, provided that the same distortions do not exist in all countries.

(c) Finally, it is delicately hinted that certain “general distortions” may affect costs and prices rather uniformly throughout a whole national economy, but that these should be taken care of by an appropriate exchange rate.

This is all sound doctrine, but it will have to be developed and repeated many times before it begins to make its mark among the unbelievers.

13 See the “Note sur le rapport des Chefs de Délégation du Comité intergouvernemental créé par la Conférence de Messine” issued by the Confédération internationale des Syndicats Chrétiens, Brussels, May 18, 1956.

14 This is perhaps not surprising in view of the previous failure of the so-called “Green Pool” conference to reach agreement. Following this conference, efforts are being made to disentangle the web of government intervention in the agricultural field, through the continuous examination of national agricultural policies in the OEEC.

15 Journal Officiel, July 11 1956.

16 July 11–13. 1956.