This Report represents the official views of the Department of State.
While it has been discussed fully with other agencies at the working
level and incorporates suggestions made by them it has not been
officially cleared by them.
Enclosure
REPORT TO THE COUNCIL ON FOREIGN ECONOMIC POLICY REGARDING THE
EUROPEAN COMMON MARKET
Statement of Problem:
To determine whether the European Common Market Treaty is in accord
with United States policy objectives and merits United States
support.
Facts Bearing on Problem:
It has been the policy of the United States to support Western
European efforts towards closer economic and political integration
within the framework of the Atlantic Alliance. This policy was
expressed by the CFEP in its review
of the common market proposal. At the same time it also expressed
special interest in the arrangements that would be developed for
agriculture, balance-of-payments controls, tariffs, restrictive
business practices and the freedom of movement of labor and capital.
The CFEP in its decision of
November 20, 1956 indicated a desire to undertake a further review
when the proposals for the European Common Market had matured.
President Eisenhower on
January 5, 1957 in his State of the Union message and on February
28, 1957 in a joint statement with the French Premier reaffirmed the
United States support of the Western European economic integration
endeavors. In the February 28 statement the President also indicated
his full accord with the historic importance of the objectives of
the Six to associate the overseas territories with the common
market.
The European Common Market Treaty was signed by the Six governments
on March 25, 1957.
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The Intersessional Committee of the Contracting Parties to the
General Agreement on Tariffs and Trade is meeting in Geneva on April
24, 1957 to determine when definitive GATT action on the Common Market Treaty will take
place. At that time the United States Delegation must be in a
position to indicate United States views on the Common Market
Treaty.
Discussion:
Outline of the Treaty
An essential feature of the “European Economic Community” will be the
establishment of a customs union. The member states over a period of
12–15 years will progressively eliminate tariffs and quantitative
restrictions on trade among themselves and will establish a common
tariff and commercial policy toward non-member countries.
The Treaty also contains provisions for:
- 1.
- The elimination of restrictions on the movement of labor
and capital among the member states;
- 2.
- The progressive harmonization of labor and other social
legislation affecting competition among the members;
- 3.
- The elimination of restrictive business practices;
- 4.
- The establishment of a common agricultural policy
involving, during the transitional period, a system of
minimum prices and long-term purchase contracts;
- 5.
- The establishment of an escape clause for
balance-of-payments difficulties;
- 6.
- The establishment of a readaptation fund to facilitate
adjustments by labor to the removal of restrictions on trade
among the member states;
- 7.
- The establishment of an Investment Bank responsible for
financing public and private investment projects in the six
countries which fulfill criteria set forth in the
Treaty;
- 8.
- The economic development of the dependent overseas
territories of the member states through a special fund, and
the association of the territories with the Community under
special conditions; and
- 9.
- The establishment of common institutions designed to
assure attainment of the objectives of the Treaty.
Action by the United States
While the United States did not participate in the negotiation of the
Treaty establishing the “European Economic Community”, the Treaty
was examined by the United States at various stages of its
negotiation. During the negotiations the United States made several
approaches to the Messina countries to influence the development of
certain key provisions along the lines of the CFEP policy statement of November 20,
1956. While it is impossible to state precisely the effect on the
negotiations of these representations, the treaty was modified
during the negotiations and as a result came somewhat
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nearer to the United
States view with respect to such provisions. A broad recognition of
the interests of third countries is contained in the provision that
the Treaty does not affect obligations under other international
agreements (such as the GATT and
the IMF Agreement).
While this and other recognitions of the interests of non-member
countries are included in the Treaty, some major difficult problems
remain in the areas with which the CFEP was concerned in its policy statement of November
1956. Among these are the following:
- 1.
- The Treaty provisions relating to agriculture, and in
particular those regarding the conclusion of long-term
contracts among the members of the Community to promote
trade among them in agricultural products and those with
respect to minimum prices for such products;
- 2.
- The provisions of the Common Market Treaty and the
intentions of the common market countries regarding the
conditions under which restrictions would be imposed or
relaxed on imports from non-member countries for
balance-of-payments reasons;
- 3.
- The establishment of new tariff preferences favoring the
Community members as a result of the arrangements affecting
the overseas territories; and
- 4.
- The height of the external tariff of the Community which
the United States will wish to study carefully, particularly
with respect to agricultural products.
The question remains as to what further steps might be taken by the
United States to obtain reasonable assurances that the establishment
of the common market will not adversely affect the interests of
third countries, including the United States. It is impracticable at
this stage to obtain changes in the Common Market Treaty without
jeopardizing the chances of the establishment of the Community.
Extensive formal consideration of the Treaty by the Contracting
Parties to the GATT prior to
ratification could seriously interfere with favorable parliamentary
action. Moreover, a more meaningful decision on the matters to be
resolved would be possible in the better negotiating atmosphere that
would exist after ratification of the Treaty. For these reasons, the
United States has been proceeding on the assumption that the best
time to have definitive consideration of the Treaty would be after
its ratification. At the same time, the Six governments have been
urged to avoid making commitments which would prejudice GATT consideration.
The best means of proceeding would be to have the Treaty considered
by the Contracting Parties to the GATT in accordance with the provisions of the General
Agreement which are designed to assure that a customs union will
adequately take into account the trade interests of other
Contracting Parties. It may well be that the
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provisions relating to agriculture and to the
dependent overseas territories will require a GATT waiver.
Conclusions:
- 1.
- The European Common Market Treaty is on balance in accord
with the United States policy objectives in Western Europe
and merits United States support.
- 2.
- However, certain important problems of a commercial policy
nature particularly with respect to agriculture are posed by
the Common Market Treaty and should be the subject of
negotiations with the Messina countries within the framework
of the GATT for the purpose
of establishing safeguards for the commercial interests of
third countries.
Recommendations:
That the United States position should be:
- 1.
- The European Common Market Treaty is on balance in accord
with the United States policy objectives in Western Europe
and merits United States support.
- 2.
The important problems posed by the Common Market
Treaty particularly with respect to agriculture should
be the subject of the negotiations within the framework
of the GATT.2
