🇪🇺european history – 1945 to present review
9.3 Initial challenges and successes of the Common Market
Last Updated on August 9, 2024
The Common Market faced initial challenges and successes as it worked to integrate Western European economies. Agricultural policies led to overproduction, while political crises like the Empty Chair Crisis tested the balance between national sovereignty and integration.
Despite challenges, the Common Market expanded, welcoming new members and promoting trade liberalization. Economic growth surged in the 1960s, but monetary cooperation efforts faced setbacks due to global economic instability in the 1970s.
Agricultural Policy and Challenges
Common Agricultural Policy and Its Impact
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- Common Agricultural Policy (CAP) established in 1962 aimed to ensure food security and fair incomes for farmers
- CAP subsidized agricultural production led to increased food self-sufficiency within the EEC
- Policy resulted in overproduction of certain commodities (butter, milk, grain) creating "butter mountains" and "wine lakes"
- Implemented price support mechanisms guaranteed minimum prices for agricultural products
- CAP consumed a significant portion of the EEC budget reaching up to 70% in some years
- Policy faced criticism for its high costs and market distortions
Political Challenges and Compromises
- "De Gaulle's 'Empty Chair Crisis'" occurred in 1965 when France boycotted EEC institutions
- Crisis stemmed from French opposition to proposed reforms including majority voting in the Council of Ministers
- Boycott lasted for six months disrupting EEC decision-making processes
- Luxembourg Compromise resolved the crisis in January 1966
- Compromise allowed member states to veto decisions affecting their vital national interests
- Agreement preserved national sovereignty but slowed down integration efforts
- Compromise highlighted the tension between supranationalism and intergovernmentalism in the EEC
Expansion and Trade
Enlargement and New Member States
- First enlargement of the EEC occurred in 1973 with the accession of the United Kingdom, Ireland, and Denmark
- UK's entry marked a significant shift in European power dynamics
- Ireland joined to reduce economic dependence on the UK and access broader European markets
- Denmark entered to secure agricultural export opportunities within the Common Market
- Norway negotiated for membership but rejected it in a national referendum
- Enlargement increased the EEC's population by 64 million bringing it to approximately 256 million
Trade Liberalization and Economic Integration
- European Free Trade Association (EFTA) established in 1960 as an alternative to the EEC
- EFTA included countries unwilling or unable to join the EEC (UK, Sweden, Norway, Denmark, Switzerland, Austria, Portugal)
- Association promoted free trade among members without requiring political integration
- EEC pursued trade liberalization through the elimination of internal tariffs and quotas
- Common External Tariff implemented to regulate trade with non-member countries
- Trade agreements negotiated with former colonies (Yaoundé Conventions) to maintain economic ties
- Kennedy Round of GATT negotiations (1964-1967) reduced tariffs globally benefiting EEC exports
Economic Development
Economic Growth and Structural Changes
- EEC experienced rapid economic growth during the 1960s often referred to as the "Golden Age"
- Average annual GDP growth rates exceeded 5% in many member countries
- Industrial production increased significantly particularly in manufacturing and heavy industries
- Agricultural sector modernized leading to higher productivity and rural-urban migration
- Service sector expanded creating new job opportunities in finance, tourism, and retail
- Infrastructure development improved transportation networks (highways, railways) across member states
- Regional development policies implemented to address economic disparities between regions
- European Investment Bank established to finance projects promoting balanced development within the EEC
Monetary Cooperation and Challenges
- Member states recognized the need for greater monetary cooperation to support economic integration
- Werner Plan proposed in 1970 aimed to create a full economic and monetary union by 1980
- Plan faced setbacks due to global economic instability (collapse of Bretton Woods system, oil crisis)
- "Snake in the tunnel" mechanism introduced in 1972 to manage currency fluctuations
- European Monetary Cooperation Fund established in 1973 to support monetary stability
- Economic shocks of the 1970s (stagflation, oil crises) tested the resilience of EEC economies
- Divergent economic policies among member states complicated efforts for deeper monetary integration
Key Terms to Review (19)
European Economic Community: The European Economic Community (EEC) was a regional organization established in 1957 to promote economic integration and cooperation among its member states. It aimed to create a common market, enabling free movement of goods, services, capital, and labor, which would significantly shape the political and economic landscape of Europe in the post-World War II era.
Stagflation: Stagflation refers to an economic condition characterized by stagnant economic growth, high unemployment, and high inflation occurring simultaneously. This term emerged prominently during the 1970s, highlighting a paradox where traditional economic policies failed to address rising prices and falling output, affecting the overall stability of economies, particularly in Western Europe.
Oil crisis: The oil crisis refers to a significant disruption in the supply and price of oil that began in the early 1970s, primarily caused by geopolitical tensions, especially the Arab-Israeli conflict. This crisis highlighted the vulnerabilities of economies heavily reliant on oil imports and led to a re-evaluation of energy policies and economic strategies, impacting the formation and integration of economic communities like the Common Market.
European Monetary Cooperation Fund: The European Monetary Cooperation Fund (EMCF) was established in 1970 to promote monetary cooperation among European countries and provide financial support for countries participating in the European Monetary System (EMS). The fund aimed to stabilize exchange rates and facilitate economic integration, playing a crucial role in the early stages of European monetary cooperation.
Snake in the Tunnel: The term 'snake in the tunnel' refers to a metaphor used to describe the unexpected obstacles and challenges faced by the European Economic Community, particularly during its initial phase of integration. This metaphor highlights the complexities and difficulties that arose as member states attempted to navigate economic cooperation while dealing with national interests and political tensions.
Golden Age: A golden age refers to a period of great prosperity, cultural flourishing, and significant achievements in various fields, often marked by stability and progress. In the context of the Common Market, this term encapsulates the era during which European integration led to remarkable economic growth and cooperation among member states, fostering an environment ripe for innovation and development.
Werner Plan: The Werner Plan was a proposal put forth in 1970 by Luxembourg Prime Minister Pierre Werner that aimed to create an Economic and Monetary Union (EMU) within the European Community. This plan envisioned the introduction of a single currency and a common monetary policy, intending to enhance economic cooperation and integration among member states. The Werner Plan set the groundwork for future developments in European monetary cooperation, ultimately leading to the establishment of the euro.
Monetary Cooperation: Monetary cooperation refers to the collaborative efforts among countries to manage their currencies and financial systems in a way that promotes economic stability and growth. This concept played a crucial role in the initial establishment of economic integration within Europe, particularly during the formation of the Common Market, where countries sought to reduce trade barriers and harmonize monetary policies to facilitate easier cross-border trade and investment.
Yaoundé Conventions: The Yaoundé Conventions were agreements established between the European Economic Community (EEC) and 18 African, Caribbean, and Pacific (ACP) countries in the 1960s. These conventions aimed to promote economic cooperation and development, highlighting the EEC's commitment to fostering relations with developing nations while also addressing trade preferences and aid support for these regions.
European Free Trade Association: The European Free Trade Association (EFTA) is an intergovernmental organization established in 1960 to promote free trade and economic integration among its member states, which initially included Austria, Denmark, Norway, Portugal, Sweden, and Switzerland. It aimed to provide a counterbalance to the European Economic Community (EEC) by facilitating trade among non-EEC members and fostering economic cooperation. EFTA's establishment marked a significant step in post-war European economic collaboration, paving the way for future trade agreements and economic alliances.
Kennedy Round: The Kennedy Round was a series of trade negotiations that took place from 1964 to 1967 under the General Agreement on Tariffs and Trade (GATT), aimed at reducing tariffs and expanding global trade. Named after U.S. President John F. Kennedy, this round represented an important effort to address the challenges of international trade during a time when the Common Market was experiencing initial growth and consolidation.
Enlargement: Enlargement refers to the process of expanding the membership of the European Union (EU) by incorporating new member states. This term is significant as it reflects the EU's ambition to promote stability, democracy, and economic cooperation across Europe, particularly in regions that were previously under communist control. Enlargement is crucial for understanding how the EU sought to extend its influence and create a more integrated European market in the wake of initial challenges and successes following its formation.
Luxembourg Compromise: The Luxembourg Compromise was a pivotal agreement reached in 1966 that aimed to resolve disputes within the European Economic Community (EEC) regarding the decision-making process. This compromise established the principle that no member state could be forced to accept a decision against its national interests, allowing for consensus rather than majority voting on sensitive issues. By doing so, it helped to maintain stability and cooperation among member states amidst initial challenges faced by the Common Market.
Common external tariff: A common external tariff (CET) is a unified tariff rate imposed by a group of countries on imports from non-member states. This system aims to create a level playing field for trade among member countries by ensuring that all external goods face the same tariff, preventing competitive disadvantages and encouraging trade within the group. The CET plays a crucial role in economic integration and is a key feature of trade agreements such as the European Economic Community, which sought to promote cooperation and reduce trade barriers among member states.
Empty Chair Crisis: The Empty Chair Crisis refers to a significant political event that took place in the European Economic Community (EEC) in 1965, where France withdrew its representatives from EEC meetings in protest against proposals for majority voting and other integration measures. This crisis highlighted the tensions within the EEC regarding national sovereignty versus deeper integration and ultimately led to a compromise that reshaped decision-making processes in the organization.
Common Agricultural Policy: The Common Agricultural Policy (CAP) is a framework established by the European Union aimed at supporting farmers, ensuring food security, and promoting sustainable agriculture across member states. CAP plays a crucial role in regulating agricultural markets, providing financial assistance, and setting agricultural standards, which are vital for addressing initial challenges faced by the Common Market and shaping the policies of the European Union's institutions.
European Investment Bank: The European Investment Bank (EIB) is the lending arm of the European Union, established to finance projects that contribute to EU policy objectives and promote economic development. It plays a vital role in providing funding for infrastructure, innovation, and environmental projects across Europe, reinforcing the goals of the European Economic Community and the Common Market.
Trade liberalization: Trade liberalization is the process of reducing barriers to trade, such as tariffs, quotas, and regulations, allowing for a freer exchange of goods and services between countries. This concept is essential in understanding the dynamics of economic growth and cooperation among nations, particularly in Western Europe post-World War II and the establishment of the Common Market. As countries began to open their markets, they experienced significant economic benefits, leading to increased competition, innovation, and consumer choices.
Economic Growth: Economic growth refers to the increase in the production of goods and services in an economy over a specific period, typically measured by the rise in Gross Domestic Product (GDP). This growth is vital for improving living standards, reducing poverty, and fostering overall prosperity, especially in the context of post-war recovery initiatives. Economic growth is often linked to government policies, international aid programs, and regional cooperation that aim to rebuild and strengthen economies after periods of hardship.