Business roundtable; 11 Of 26

The following program is made possible through a grant from nation's business. This is a business roundtable a program of current comments from leading members of America's business community. Today. Hendrix's Orenstein Department of Business Law and office administration and Mordecai crane Department of Economics at Michigan State University who will explore the topic. The European Common Market with series host Alfred L. C. Lee Dean of the Graduate School of Business Administration at Michigan State University. This session of the Business Roundtable will examine the origins development current status and potential future of the European Common Market. The recent decision by France's Charles de Gaulle a member of the group to block Great Britain's

request for admission. Brings the subject to the European Common Market again into the center of the stage of discussion of world political and economic leaders. Dr. Crane. Well I we would regard to the Common Market. What country countries compose the European Common Market and where has it been and where is it today. My name Sunita UAP uncommon market. He's an economic union between six countries big ones Germany France and Italy and fleece smaller ones Belgium Netherlands and Luxemburg which had already to fleece more Once days foamed customs union before the Common Market. The Common Market was established in 1957 by the Treaty of form. And it had both economic and political objectives. One might say that in the back of the plane it was the political objectives were foremost in mind and economic

objectives were more vehicle to attain the political objectives although To date only it is only an economic union and very file form from any economic unity. There were some for one else to eating you up such as the Benelux customs union and the European call in steel community where the same six countries have set up a common market in court and now what do you mean when you use this term a common market and call them stale. Well. Perhaps we should apply that to the general common market in its most immediate application the Common Market is a customs union. Well by two or more countries get together abolish all trade restrictions among themselves and set up a common and uniform tariff against known member countries. As such it said discriminatorily arrangement that is known member countries have to pay tariffs whereas member countries do not know if there are

no tariffs within the six countries you're talking about there is another similar arrangement incidentally which we might come too late later it's called a free trade area we might mention the difference between the two. In a free trade area you again do not have any tariffs within the area. However there is no common and uniform tariff against outside of every country applies its own tariff plates against outsiders which incidentally makes it rather difficult to administer because if tariffs against outside else vary then an outside export say of bicycle would send those bicycles to a high tariff country within their area for a low tariff countries. And thereby would be subject to a lower tariffs later that would be the case otherwise in a customs union that does that possibility doesn't exist simply because there is a common and uniform tariff against outside of it. And both the customs unions and the Free Trade Area exceptions to nondiscriminatory all were in the

general agreements of tariffs and flaked. But we might emphasize right away that the common market is much more than just the customs unions. It's got many more who rules and applications and it isn't really any economic unions at least in its objectives. In other words doctors Orenstein the Common Market. And as Dr. Crane and has described it is is it basically an attempt to abolish all trade restrictions between these six countries. In view of enlarging their markets. Well I think it goes way beyond that. I think being sad so often you always have this entity lation between the economic the political and the legal spheres. So even the common market and when you look just at the legal aspects of it you will find that there is. That's quite extensive. A group of articles dealing with such

aspects as unfair competition. Which is in itself quite interesting because to a great extent the rules pertaining to unfair competition have been patterned. After the American antitrust legislation as fired as the Common Market are concerned at the same time. The various countries within the common market have their own antitrust laws and the two do not always coincide. In other words the laws of the Common Market don't regard to end a trust or competition supersede the individual country's laws. This was a great question when you had one of the export tax free generators from Germany who had an exclusivity arrangement the. Retail outlet in the Netherlands and their generators. Ran a competitor of this Dutch outlet went into Germany to buy a refrigerator which he subsequently sold in the Netherlands market. He claimed he

could do it on the basis of the common market regulations. On the other hand prior to the Common Market articles. The exclusivity arrangement between the German manufacturer and the Dutch retailer was perfectly legitimate to question then was indeed submitted via the national courts. To the Court of Justice in Luxembourg. The Common Market part of justice of the European community whether or not the common market would supercede. Their preceding arrangements legal under the various national legislations and the Court of Justice has said that this is unquestionably sell in other words this was a precedent case that really established the laws of the Common Market as basically superseding the laws of the country with regard to some of the trade regulations and practices. This is correct. We might mention that from an economic general philosophical point of view there is a need for such rules of competition because if the objective of the Common Market is to provide a large enough market so large efficient firms will be able to

operate and still be enough of them to compete. Then it makes absolutely no sense to permit these firms to engage in cartels weans ments which would prevent competition. And it is for that reason that an integral part of the Common Market as viewed by its plane else I might say that not all of these things have been implemented well. But as viewed by the planet an integral part of it was indeed these walls of competition. In order to enforce the competitive spirit which was one of their aims and there was or wasn't a true The prior to the Common Market the anti-trust legislation such as we have in the United States was relatively unknown in Europe. Yes I searched certainly for one reason that with the very same concept we have in the United States the freedom of contract. In the United States without ever in fact before 1890 that

freedom. Can only perpetuate. When you limit it. And therefore you don't affect competition. Whereas. With the same idea of freedom in Europe they felt you could go that far. If necessary to make the kind of arrangement that under this concept the freedom you would should be permitted to make even if it would end competition. Now ever since the depression 30 various countries in Europe have come to see that this was not in itself a very desirable situation. And they have started in that period with legislation pertaining to in fact competition which however after World War 2 got them much greater impetus particularly in Germany where the occupying authority at that time the Allied. Nations. Imposed a kind of. That approach. Which was patterned after the American well we might as well we might say that these were very weak in Europe. But isn't it true professionals once time that the common market also

has institutions. And permanent organizations that are somewhat supernational in nature. Oh yes. If you begin with the European coal and steel community by the higher authority this was definitely seen as a supranational institution from their feud and switching to the Common Market. You have the Council of. Ministers. Consisting of the various ministers of the various Six Nations. This would be supranational when you have the commission itself of the Common Market. But again to channel the various problems conflicts whatever you want to call them that may come up. With a nation set up the court of justice. Which again with the seven justices will decide on the various issues pertaining to the community. In other words each of these countries didn't have to give up some aspects of their

national sovereignty should they have not already shown it in the Council of Ministers. This is a rather difficult thing for any country to do is not. Well you see the best example in the European assembly which is supposed to to start working in the European parliament the European Parliament. Where. Three major parties so to speak would convene no longer on the basis of nationality but primarily on the basis of the political appellation. So that the socialists from Belgium would sit next to a socialist partner from Italy or Germany or France or the Netherlands and. That way but. It cannot be said they have achieved very much. Well now when you are an official of the Netherlands government. Back before the formation. Of the Common Market was there a feeling in the Netherlands and some of the other countries at that time that some form

of economic integration would be for the mutual benefit of these countries. Oh unquestionably so. In fact the Netherlands is one of the few countries that has WAY OF far back its 1932 signed treaty of Oshie which was at that time already envisaged as creating a form of integration. At that time between Belgium Luxembourg the Netherlands and the Scandinavian countries it's going to Navan countries backed out because of their strong ties to Great Britain. But this is how far back it went and it was very clearly seen that the only way for Europe. To survive. As a unit and have a growing complex world. That's the only way of doing it. Well Dr. Green and one of bin of the advantages of the. Common Market countries have they achieved some of the objectives they hoped for and suddenly they have some of their objectives.

As Dr Swan Stein suggested these go beyond the customs unions outside of the walls of competition we might mention that they have attained common agricultural policies which have continued continuously being a stumbling block in their movement towards integration. They have achieved some measure of believability of capital and labor some measure I say but some of it was achieved. They have achieved some minor measure of monetary and fiscal integration integration of those policies or coordination would be a better a better world. But certainly they did accomplish one thing they do have one large market. Which makes it possible for large firms to operate competitively. And the American example is always held out to them. As an example of a huge economy which has made it possible to attain a very high standard on average the United States in a sense because of its nature of its size is a common market of its own Absolutely and and it is always looked upon

U.S. Air's a an example. In fact it goes beyond that. That about. Seven years ago. One of the. New professors of commercial law at the Nablus School of Economics proposed in his inaugural address. To come to the creation of a European cooperation similar to the way corporations are formed here in the United States are in Canada. Well if this is achieved many at least of the economic objectives. I would assume then that the firms have grown like grown larger and has improved the entire. Economic status of the majority of the people and there's no question that the into postwar period the goal fully of the European Common Market has been monumental. It i would pay State of the United States. Absolutely no question about it we're starting from a lower base said it's clear like we also don't know to what extent we can attribute that to the Common Market.

You can reverse the causal relationship and say that the Common Market succeeded because the gold point was so fast so that countries didn't have to give up too much by way of economic cost. But on the whole one would have to say that a common market has been passed by success from an economic point and I would assume that. When you've got a common market of six countries like there's that certain country or countries might have an advantage. Well let's use nose Gration let's say and steal over another country or in producing wheat over another country. Now has this meant that some countries have had to give up their steel because it was high cost or their coal or some other items of this type and I would have thought this would have caused a lot of political over a vibration. So that's quite an interesting point I think there's no question that some declining industries in some countries would have to be almost done away with. But empirical studies very

recent ones indicate that there has been a twin towards what we call into our industry specialization more than into industry specialisation. So you didn't see the elimination of an in power industry. Well I know what you saw is existing planes in one industry specializing in each country's in fab items. All over the place. This indeed is a very predominant nature of international trade among developed advanced industrial countries. It is trade in very specialized items. We don't have all the advantage and costs we trade big cars for little cars. Round cars full full slate cotton. It is that type of specialization that has appeared much more than the elimination of complete industries and that's quite an interesting point. Yes that is why Dr. Orenstein and why I'm When the Common Market was formed with the six members that are still members. If this was a good idea and it was a thinking along the lines

of this in Europe why they were not all of the European countries brought into it. Well. In the first place you cannot just bring a country and that the country has to. Want it. And there's no question but that at the time. For instance Great Britain. Was not only confederate but asked to join and the common effort at that time Britain had its own well that was 1957 already before that before the sharply after the European coal and steel community had started its working. Churchill was one of the great supporters of this idea at the same time Great Britain had its own interests within the Commonwealth and he wanted on one side to join the common market. It could preserve its preferential died within the Commonwealth which the other has

proved everyone ties you mean trade ties with the Commonwealth countries that would comprise the British and not only trade. It's also the tariff side. It's also absolutely a political commitment whether you be long between is symptomatic. But where do you belong politically there is another thing we might mention the British has had very strong doubts as to whether the Common Market will ever succeed considering the longstanding animosity between the French and the Germans. But you couldn't but expect the British to hold out as to whether they will succeed and therefore they didn't want to join something which they consider would probably be a failure. I see in other words I think it went before. Beyond that still I think on the other hand that Breton was willing to join to a certain extent. If. Great Britain could set the terms. That the Europeans at that time the continental Europeans were not about to let occurred so they said. Finally joy. But on equal terms I think this is

not always has not always been understood from the negotiating I think that story and others who were invited to join at an interesting point didn't back at the beginning of the formation of the ground market the British were invited declined. Were any other countries invited to join or Scandinavian countries. Any you opinion country was welcome let's put it this way. I think that will Eason why they didn't join. Well first of all there are some countries that were neutral in nature. Austria for example Switzerland and they wouldn't join because of their political neutrality. The Scandinavian countries where they had economic ties with Britain and they always wanted to cast their lot with the British if the British didn't join they wouldn't join. And we might mention another thing Finland couldn't join and Norway and Sweden did not want to sort of speak let Finland be alone you see and they were again a mystery particle particles also got to England. Correct but you see what the British did after the after effect so

to speak. They wanted to have their cake and eat it too. So they went to the Common Market and proposed an all your peon free trade area in which they would join as a unit. The common market itself would be a unit and each other country would be a unit. So that within that area there will be northward restriction. But every unit within the area would be able to maintain its own tariffs against outsiders. That would make it possible for the British to maintain to retain their tariff by fences within the Commonwealth and at the same time have access to the European market. Well the French didn't want that. Partly the reason why they didn't want it had to do with that toxin of American capital. Today we hear a lot about the friend saying we don't want American capital that was not the case then you know to go and we don't want American capital I mean American capital invested in your countries in the right time we're talking about investment in Europe. Well the French at the time thought well if they joined they would constitute

a far bigger collection to American investments because such an investment gives them access to your PM market. And to the vast Commonwealth markets so that they would ever an attraction as compared say to the French. This was one reason why they the French vetoed that idea of an all your peon free trade area. There were a lot of reasons but it was one economically. Let's we're going to another aspect of this problem. It's very interesting that you bring out the point that many other European countries could have joined at the time but for various reasons didn't. What's the outlook today with regard to the other European countries in relation to the Common Market. Is this benefitted them or are not there how do they look at the situation out of the Scandinavian countries and perhaps Portugal Spain. Look Oh we we might first mention that there has been a split in Europe because big when when their British idea was Topi toad they went ahead and formed a free

trade area of their own which is known as the out of seven. Or the European Free Trade Area. These are all of the other European countries Ireland out of seven are those are the Scandinavian countries Austria Switzerland and possible as well as the United Kingdom. And so that you have two rival groups now one is a free trade area which is essentially a trade organization the other is a European Common Market which goes somewhat beyond being just a trade organization. There are rival groups the British would like to join. However they have to make some arrangements for the other seven of which Denmark is already very definitely expressed in its desire to join and probably doubt US can I leave yet until I see a social membership. Yeah I think she got it already. But the girl Now keep still Peter leading the British to join her. What what in your opinion doctors Orenstein is the reason behind the Gauls refusal to admit the British to the Common Market

The British obviously have now changed their minds from the days when they were invited to come in the now and did not. Now they have badly want to come in and have applied twice and been turned down twice with a vote by France. Of course it's hard to say as if I know this is a matter of opinion. I would not be surprised. If a great part of the golf. Attitude today twat Great Britain. It's much more emotional than rational based on certain feelings are animosity she had feels to the English speaking people which would not be strictly limited to Great Britain would also include the United States. And sometimes when people get to the age of the girl they make not obvious rational decisions. I was talking to someone about his personal history not growing What what does Great Britain see as the advantages of membership Now why is it they want to be in.

Well I'd better tell you what I think their advantages would be rather than what they think their interest would be in my personal view and that might be a unique view. Britain is large enough a country and wealthy enough apparently to have all the advantages of most of them of a large market with competition their own. However. Because of the political setup the strength of the labor unions and other such political and economic sectors the economic situation in Great Britain has almost been 4000 to a point where they need an outside shock a huge stimulus to get them to kind of move ahead. I believe that stimulus can come from joining the common market namely that joining the common market would force them to take steps which they could take on their own had they had the political ability and the political will to do so.

This at least is my personal view of what they have to gain I'm not sure I want those open up but for the most and large markets on the continent with no tariffs with the quality of the term. So that's why you have a bigger area to sell or good. Yeah absolutely it'll open markets today him and in exchange they would open up their market. Well what I am maintaining is only got to be competitive and where the hell I want to handle and that will be the shot countries and that would be the shop and what I maintain is that probably the main advantage is opening up their own market although they would claim that their main advantage is the markets that would be opened up to them if you have to wait they're being poked. But if you have to weigh one against the other. Well let's see what's the relation of the United States now to the Common Market. The United States originally and apparently to date has been very much in favor of the formation of the common morally supported it has been in favor of Great Britain joining in. An economic and political view. Has this been advantageous. Doctors

warn Stern. I think so too the United States. I think the United States if you again look that economics and politics that enter relate it. If you just quantified by saying that the European computer market. Is about three fourths American that the telecommunications equipment in France is for about one half American affiliated. That I would find a capacity in Germany is about one third American affiliated. Now it so happens that this is all in the area. The most important American industries. Center too. So they do get the working. They enter a relationship that well not only an investment viewpoint but consequently also from political interests. This has become a quite vital aspect of American foreign policy.

Well I think that we have to say that American interest in the European Common Market has been political rather than economic mainly. We supported the European Common Market as an instrument in and in the cold and cold war politics. The economic effect on industrial exports we've suffered a little discrimination but not much. We have suffered in agriculture and will continue to suffer. We have some interest in the European Common Market not discriminating too much against Latin America in favor of Africa. There has also been an effect on Foreign Investments that is the European Common Market did constitute a huge toxin to American foreign investments. However we do have to emphasize that in the formation of American foreign economic policy political rather than economic factors play a predominant role isn't it true though that we do have a vital speak in an economic viable you are European So that is our own national interest ought to be absent in favor of anything that's going to raise the productivity of Europe and therefore the

economic well-being arms of their institutions and people. Well Dr. Crane and doctors warn Stein better most instant discussion on the European Common Market. I thank you both very much for being on the Business Roundtable. Participating in today's business roundtable where Hendrick's Borenstein Department of Business Law and office administration. And Mordecai crane and Department of Economics at Michigan State University almost for the program was Alfred L. C. Lee Dean of the Graduate School of Business Administration at Michigan State University. The topic for next week's Business Roundtable is the devaluation of the British pound. Guests on the program will be Howard J Stoddard chairman of the board Michigan National Bank and Roland I Robinson Graduate School of Business Administration at Michigan State University.

This program was produced by the Graduate School of Business Administration and the Broadcasting Services of Michigan State University under a grant from the nation's business a publication of the Chamber of Commerce of the United States. Business Roundtable is distributed through the facilities of national educational radio. This is an easy art. The national educational radio network.