Economic Policy for the European Community: The Way Forward PDF
Preview Economic Policy for the European Community: The Way Forward
ECONOMIC POLICY FOR THE EUROPEAN COMMUNITY ECONOMIC POLICY FOR THE EUROPEAN COMMUNITY The Way Forward Sir ALEC CAIRNCROSS, HERBERT GIERSCH, ALEXANDRE LAMFALUSSY, GIUSEPPE PETRILLI and PIERRE URI M Palgrave Macmillan © Institut fur Weltwirtschaft an der Universitat Kiel 1974 Softcover reprint of the hardcover 1st edition 1974 978-0-333-17419-7 All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, without permission. First published 1974 by THE MACMILLAN PRESS LTD London and Basingstoke Associated companies in New York Dublin Melbourne Johannesburg and Madras ISBN 978-1-349-02409-4 ISBN 978-1-349-02407-0 (eBook) DOI 10.1007/978-1-349-02407-0 Typeset by COLD COMPOSITION LTD Southborough, Tunbridge Wells Contents List of Tables and Illustrations lX Preface Xl Foreword Xlll Biographical Notes xvn Abbreviations XXI Chapter 1 European Integration in a Global Perspective 1 Developments in European Integration 2 Favourable Conditions for Early Integration 6 Pragmatic Approach to Integration 8 Changes since the 1950s 11 Inflation and Economic Integration 14 Implications of the Oil Crisis 17 Responsibility for International Order 19 Inter-relationship of Economic Policies 22 Notes and References 23 Chapter 2 Monetary and Fiscal Integration 29 MONETARY INTEGRATION 29 Dangers of Premature Monetary Union 31 Strategies for Monetary Unification 35 Immediate Shift to a European Currency 35 Exchange-rate Unification 35 Coordination of Monetary Policies 38 Need to Remove Capital Controls 40 An Exchange-equalization Account 43 Means of Settlement of Accounts: the Europa 46 v VI Contents FISCAL INTEGRATION 49 Harmonization of Tax Measures 55 Disparity in Tax Collection 55 Development of a Common Budget 56 CONCLUSIONS AND RECOMMENDATIONS 58 Notes and References 62 Chapter 3 Community Role in Regional Policy 64 Reasons for Regional Policies 64 Effectiveness of Regional Measures 71 Community State of Play 73 FUNCTION OF THE COMMUNITY 75 Strategies for Regional Development 77 Reducing Obstacles to Regional Balance 77 Incentives to Decentralize 79 Direct Intervention 80 Inter-relationship with Other Policies 81 Need for Decentralization 84 CONCLUSIONS AND RECOMMENDATIONS 87 Notes and References 89 Chapter 4 Reform of the Common Agricultural Policy 91 Adjustment Problems in European Agriculture 91 Common Agricultural Policy 94 Criticism of the System 96 Collapse of the Common Policy 99 Short-term Relief of World Prices 100 Opportunity for Fundamental Reforms 102 Essentials of a Reformed System 104 CONCLUSIONS AND RECOMMENDATIONS 107 Notes and References 112 Contents Vll Chapter 5 Industrial Development and Competition 116 INDUSTRIAL POLICY 118 Conformity with Conditions of Free Trade 119 Non-tariff Interventions 120 Adjustment Assistance to Declining Industries 121 Promotion of High Technology 123 Technological Gap and Other Differnces 124 Discouraging Experience at Community Level 126 New Direction for Technology 128 Opportunity of the Energy Crisis 130 Promotion of European Companies 130 COMPETITION POLICY 134 Multinational Enterprises 134 Criticisms in Perspective 135 Real Sources of Tension 138 Allocation of Markets 138 Transfer Prices 138 Differences in Taxation 139 International Code of Conduct 141 Safeguarding the Benefits of Free Trade 141 Frustrations at Community Level 144 Reinforcement of Competition Policy 146 Further Proposals on Competition Policy 148 CONCLUSIONS AND RECOMMENDATIONS 150 Notes and References 154 Chapter 6 Social Environment for Change 159 ENVIRONMENTAL PROTECTION 160 Pollution Control 161 Areas for Community Action 164 Possible Solutions to Problems 164 SOCIAL PROGRESS 168 Helots of Western Europe 169 Other Neglected Commitments 173 Contents Vlll A Field for Experimentation 175 Facing up to Inequalities 176 Uses and Abuses of the Employment Objective 178 CONCLUSIONS AND RECOMMENDATIONS 179 Notes and References 183 Chapter 7 International Economic Policy 185 EXTERNAL COMMERCIAL RELATIONS 185 Industrial Tariffs and Economic Order 186 Social Benefits of Tariff Reductions 186 Impact of the Energy Crisis 189 Undermining Influence of Preferences 190 Optional Negotiating Techniques 192 Item-by-Item Bargaining 193 Tariff Harmonization 193 Sector-by-Sector Negotiations 195 Linear Reductions 195 Trade with Developing Countries 196 Exclusions from Preferential Scheme 196 Limits and Insecurity of Preferential Access 197 Trade in Agricultural Products 198 Strategy for Negotiations 200 Non-tariff Interferences 203 Improved 'Safeguards' on Imports 205 New 'Safeguards' on Exports 207 East-West Trade 208 INTERNATIONAL CAPITAL FLOWS 209 Financial Assistance to Developing Countries 210 Reform of the World Monetary System 214 CONCLUSIONS AND RECOMMENDATIONS 218 Notes and References 226 Chapter 8 Concluding Remarks 233 Institut fur Weltwirtschaft 241 Index 243 List of Tables and Illustrations Table 1 Size of the European Community compared with other major countries, 1971 20 Figure 1 Relation between regional product per head and the distance of regions from the high-income centre of the European Community of Six, 1968 65 Table 2 An economic ranking of the regions of the European Community of Nine 67 Table 3 Direct investments, cooperation agreements and mergers in the European Community, 1961-69 131 Table 4 Tariff averages of all industrial products, 19 7 2 187 Table 5 Frequency distribution of most-favoured-nation imports of industrial products according to the level of duty 194 IX Preface In the summer of 1970 a former German cabinet minister wrote a newspaper article in which he expressed his hope that European im~gration might receive a new impulse if in dependent persons sufficiently well-known in their countries could be brought together to prepare a report on the economic future of the European Community. The idea was taken up by the lnstitut fur Weltwirtschaft, at the University of Kiel, and developed in several discussions. Funds were made available through the Deutsche Gesellschaft fur Auswartige Politik so that a start could be made on the project. First contacts on an international level were made with Giuseppe Petrilli in Rome and with Alexandre Lamfalussy in Brussels. These led to a preliminary meeting in Rome, where it was decided to approach Pierre Uri in Paris and - with Britain's imminent entry into the Community - Sir Alec Caimcross in Oxford. None of us had to be asked twice to take part. Over the ensuing two years many weekends were spent in discussions. Thanks to Professor Petrilli the group was able to meet in Rome where the European Community's founding treaty was signed, and thus we provisionally called ourselves the Group of Rome, not yet aware that this name might be confused with that of a club studying some problems of less moderate dimensions. We soon found that there was suf ficient agreement among us to warrant a report containing more than commonplace proposals, a report which would stimulate political discussion by showing what a genuine European union would involve in terms of advantages and burdens. Manfred Streit, of the University of Mannheim, acting as Xl
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