A ‘Common Market’?

March 11, 1957

With a great flourish of trumpets, the leaders of six European nations—France, West Germany, Italy, Belgium, the Netherlands, and Luxembourg—announced on Feb. 20 that they had agreed on the creation of a European “common market” which would also include their overseas territories. The plan is to introduce gradually a single or common market among the six nations, without tariffs or other barriers.

Is this step really, as one newspaper called it, perhaps “the greatest step so far toward the economic and, eventually, the political union of Europe?” There are strong reasons to doubt it.

1—The proposed lowering of tariffs among the participating nations will take place only over a period estimated at from twelve to seventeen years. The caution is understandable; but it recalls previous planned “transitional periods” (such as that envisaged by the International Monetary Fund) which somehow never seem to come to an end.

2—If the proposed common market were ever to become a reality, it would of course have the internal advantages of a customs union (like the German Zollverein of 1833). But it must remain meaningless until the six nations either adopt a gold standard, or abolish exchange controls and import quotas and make their currencies freely convertible into each other in any amount. This cannot happen as long as the currencies of the six countries remain on a paper basis, and have only a limited and controlled convertibility into each other at purely arbitrary valuations. As long as the currency of any one of the six nations is undervalued or overvalued at its “official” price, and as long as exchange controls and import quotas are continued, the so-called “common market” will be a sham, a hollow rhetorical phrase. The same criticism will apply, of course, as long as agricultural commodities are excluded from the “common market.”

3—This European “integration” is something that the dispensers of American foreign aid, most notably Paul G. Hoffman, have been urging for several years. But it is a little hard to understand just what advantage it will be to the Italian and French motor industries, for example, to continue to be able to keep out American competition but to be forced to accept full German competition—to be able to keep out the Ford say, but not the Volkswagen.

4—One of the mysteries of the whole episode is the paternalistic pressure which our government has applied to bring about the proposed European “common market.” If the United States were urging an all-round reduction of tariffs, or were itself planning to become a member of a free Western world common market, our government’s attitude could be understood as an acceptance of the general advantages of free trade—of cheaper imports for our consumers and wider foreign markets for our exporters. But we advocate this as a medicine good for Europeans but not for ourselves. We intend to maintain our own tariffs against the products of the six nations. We give our blessing to a “common market” from which we are to be deliberately excluded. And we will probably be called upon to finance the scheme, directly or indirectly, just as we put up the $350 million kitty for the misconceived European Payments Union.

5—If such a common market would be good for the six nations involved, why wouldn’t it be good for all nations—or at least for all nations under free governments?

A PROSAIC SUGGESTION

The idea of universalizing the common market helps to bring out the main flaw in the plan as it stands. If each nation, simply acting individually, were to put its currency on a sound basis, abolish exchange control and quotas, and start reducing its own tariffs, all the real benefits of the proposed common market, without its drawbacks, could be universally achieved—and without the necessity of elaborate intergovernmental agreements or supranational statist controls.

But the suggestion that each nation put its own house in order is doubtless too prosaic. It would merely enable the world to catch up with the currency stability and the relative freedom of international trade which was accepted as a matter of course, say, back in 1913.