An Enterprising Community: The Common Market as Locomotive for Integration

AN ENTERPRISING COMMUNITY:. THE COMMON MARKET AS LOCOMOTIVE FOR INTEGRATION Jacques Pelkmans little noticed, yet remarkable revival is taking place in Europe as the European Community (EC), now composed of twelve countries, regains dynamism and vision. A new common market orientation and a reemphasis on initiative, innovation, and growth through flexibility replaces talk of "Euro-sclerosis" and decline. From where do these new inspirations stem, and what will be their internal and international implications ? What are the difficulties the European integration movement will encounter, and what are the prospects of a stronger European Community in the 1990s?1 The European Economic Community (EEC), based on the 1957 Treaty of Rome, was created to establish a "common market" as the major means to foster unity among the peoples of Europe. In its initial form this meant internal free trade in primarily agricultural and industrial goods, and an external tariff. The European Community of today may be characterized as a customs union, with several additions reminiscent of a common market and an array of other cooperative activities that facilitate economic intercourse and strengthen the bonds among the 1 . The European Community, an organization with "supranational" powers, consists of twelve member countries. These include the original six members: Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany, Denmark, Ireland, and the United Kingdom became members in 1973. More recently, Greece, Portugal and Spain were also admitted to the EC. The legal identity of the EC consists of three parts, the most active of which is the European Economic Community established by the Treaty of Rome in 1957. Also included under the EC is the European Atomic Energy Community and the European Coal and Steel Community, established by the Treaty of Paris in 1951 to create a common market in coal and steel. Jacques Pelkmans is a professor of economics at the European Institute of Public Administration in Maastricht, the Netherlands. He was a visiting professor at The Johns Hopkins SAIS Bologna Center, Italy, 1982-83. 137 138 SAIS REVIEW member states. There are no quotas or tariffs inside the EC and relatively few nontariff barriers in comparison with trade among countries within the Organization for Economic Cooperation and Development. During the last fifteen years other forms of cooperation have developed in or outside the framework of the Rome treaty, for instance, a prudent and gradual intensification of cooperation in foreign policy. An alignment of economic policies also is foreseen. The fundamental nature of the EC is still, however, very much economic. Defense issues fall outside its scope, citizenship is not common, and political systems are still overwhelmingly national (although the European Parliament, though its powers are limited, is directly elected). Though the EC budget is controversial, the political quarrels and their attendant press coverage focus on spending controversies over what amounts to perhaps 1/30 of all the members' national budgets combined. The European Monetary System (EMS) has successfully stabilized fluctuations of seven EC member currencies and normally has to be extended to cover all eleven currencies (Luxembourg and Belgium have a common currency, and four EEC countries do not participate in stabilizing exchange rates). The EMS has also indirectly stimulated macroeconomic policy convergence in Europe. The EC has a common, fairly strict, antitrust policy, and its common industrial trade policy is virtually complete. The common agricultural policy is complete but at very high internal and international costs. The major remaining area of integration is in services and factor movements, where the community has achieved no effective market integration despite considerable efforts. From Crisis to Revival During the decade following the first oil crisis the common market no longer served as an engine for European growth and change, as it had in the 1960s. The grave disappointment that resulted, however, ultimately has led to revived interest in the core of the community. By the early 1980s the EC was experiencing the bleakest period in its history. Unemployment was soaring, inflation was high, growth was at zero or in the negative range, the oil bill was rising, and confidence was at an all-time low. Bickering about the small EC budget poisoned relationships among member states. Because Greece, Portugal, and Spain were negotiating to...