Sputnik Escalates the Cold War
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European Economic Community

The European Economic Community (EEC) was created in 1958 and comprised France, the Federal Republic of Germany (FRG, West Germany), Luxembourg, Belgium, the Netherlands, and Italy. These six countries came together to establish a customs union and a common external tariff. The EEC, commonly known as the Common Market, was formed during the height of Cold War tensions. In the 1960s, many Europeans wanted to distance themselves from the United States, resulting in even closer economic integration through a common agricultural policy for the member countries of the EEC.

While the EEC did not result in political cooperation as some had hoped it would, it was certainly the most successful of the three European communities formed during the early days of the Cold War. As a result, the six member countries merged the other two European communities—the European Coal and Steel Community (ECSC) and the European Atomic Energy Community (EURATOM)—into a single European Community in 1967. The emphasis on inter-governmentalism became the model for further economic integration, such as the December 1991 formation of the European Union.

The foundation of the EEC was laid in the late 1940s and early 1950s, a time of profound Cold War tension between the United States and the Soviet Union. Wanting Europe to become responsible at least partially for its own defense, the United States proposed the creation of a West German army. This led the six countries of the ECSC (France, the FRG, Italy, Belgium, the Netherlands, and Luxembourg) to consider forming a community for defending Western Europe from advances of the Soviet Union. France was particularly alarmed about the prospects of German rearmament, and it vetoed the European Defense Community (EDC). One motivation for the subsequent EEC was the desire to integrate the West German economy into that of Western Europe, lengthening the odds of Germany going to war again on its own.

Following defeat of the EDC, ECSC members began discussing a common market during 1956–1957. EEC negotiations occurred in the midst of the Suez crisis. At the same time that British Prime Minister Anthony Eden telephoned French Premier Guy Mollet in Paris to notify him that the British had agreed to a cease-fire, Mollet and FRG Chancellor Konrad Adenauer were meeting to discuss the formation of a common market. Four months later, in March 1957, France, the FRG, the Netherlands, Luxembourg, Belgium, and Italy signed the Treaty of Rome, creating a new economic bloc in Europe.

The 1957 Treaty of Rome, the founding document of the EEC, created four new institutions designed to govern relations among the FRG, France, Italy, Luxembourg, the Netherlands, and Belgium. The four institutions were the Commission, the Council of Ministers, the Assembly, and the European Court of Justice. Although the Council of Ministers contained national representatives and was designed to act as the main coordinating body among the six EEC states, it was the Commission that quickly emerged as the most dynamic branch of the EEC structure. It could initiate new policy and also had the responsibility of ensuring that agreed-upon treaties were enforced. The nine commissioners were not representatives of their states and indeed took an oath of loyalty to the EEC. Under the leadership of its first president, Walter Hallstein, the Commission became an active force in European politics.

In January 1959, the EEC took the first step toward implementing a common tariff by reducing intracommunity tariffs by 10 percent and increasing quotas by 20 percent. However, the first true test of the Common Market involved negotiations over a European free trade area. The British launched this idea in an effort to lure the FRG and the Netherlands away from the EEC, which London opposed. In early 1959 the British invited the six non-EEC states of Austria, Denmark, Norway, Portugal, Sweden, and Switzerland to begin negotiations to establish a rival trade bloc, the European Free Trade Association.

The United States strongly supported the EEC. Washington hoped that it would anchor the FRG in Western Europe, strengthen Western Europe's ability to withstand communist subversion and Soviet pressure, and bring the EEC to stand with the United States in a strong transatlantic community.

In the 1957 Treaty of Rome, the EEC countries agreed to develop common approaches to such areas as commerce, transportation, fair competition in trade, monetary policy, and the coordination of macroeconomic policy. Although the Rome Treaty did not mention a common agricultural policy, this was the most successful area of cooperation among the EEC states. French President Charles de Gaulle was the strongest proponent of a Common Agricultural Policy (CAP), because France produced more food than it consumed. De Gaulle could not afford to offend the powerful French agricultural lobby by reducing subsidies to farmers. France sought to export its agricultural surplus; however, its subsidized products were not competitive internationally. France therefore needed either export markets with guaranteed high prices or generous export subsidies to bridge the gap between higher French prices and lower international prices. France could get both through the CAP: an EEC-wide market with guaranteed high prices and subsidies for exports outside the EEC. Thus, de Gaulle pursued the formation of a CAP even though the Treaty of Rome did not provide for such a policy.

The CAP ultimately set France on a collision course with the FRG and the United States. Not self-sufficient in agricultural production, the FRG therefore sought to import significant amounts of agricultural products at the lowest possible price. France wanted to sell its agricultural products to the FRG but was stymied by cheaper imports from other countries including the United States, which did not wish to be excluded from EEC markets.

The West German government finally acquiesced to a common agricultural policy even though it did not make economic sense for them to do so. The West Germans wanted further economic integration because of their policy of West-politik, linking their policies to the alliance with the United States. The West Germans also subordinated their economic interests to the larger geopolitical interests of further European economic integration.

Cold War politics again impinged on EEC development when Britain applied for membership in August 1961. Britain sought easy access to West European markets and could get it only by entering the EEC. Britain's application happened to coincide with U.S. President John F. Kennedy's Grand Design for transatlantic relations. This plan sought to mollify Europeans' resentment of America's preponderant power while strengthening the Western alliance's political cohesion. Thus, the United States wanted a strong EEC to emerge as part of a stronger Western Europe, which in turn would strengthen the Atlantic Alliance.

De Gaulle, however, had a radically different understanding of the European union and the transatlantic partnership. He envisioned a Europe based on intergovernmentalism rather than supranationalism, a Europe of the states rather than a federal Europe, and a Europe genuinely equal with the United States in NATO rather than militarily subservient to Washington. The British government agreed with de Gaulle's antipathy toward supranationalism, but it shared Washington's vision of the transatlantic relationship. Yet the United States viewed Britain's absence from the EEC as politically awkward. The Americans were thus pleased when the British government signaled in early 1961 its intention to apply for EEC membership.

In December 1962, Kennedy and British Prime Minister Harold Macmillan struck a deal that would provide U.S. missiles for Britain's supposedly independent nuclear force. De Gaulle saw this as further evidence of British subservience to the United States. At the time the missile program was announced, negotiations over British admission to the EEC were at a critical stage. The British had made many concessions but were unwilling to accept the principle of supranationalism or a CAP. In January 1963, de Gaulle abruptly announced at a press conference that France would veto the British application.

The political consequences of de Gaulle's action were profound. A week after the press conference, de Gaulle and Adenauer signed a treaty on Franco-German cooperation. The United States saw this as a rejection by de Gaulle of its Grand Design and of the Atlantic Alliance. De Gaulle's vision of France and Europe placed him on a collision course with Washington. Despite the difficulties between Paris and Washington, the customs union remained intact, and European integration remained on course.

The CAP provoked another crisis that was even more significant to further European integration. The so-called Empty-Chair Crisis began over EEC Commission proposals for a new financial arrangement for the CAP for the period after July 1965, when the existing system of national contributions would expire. In 1970, following completion of the third stage of the transition to the customs unions, the EEC was supposed to acquire its "own resources," consisting of duties from agricultural and industrial imports, from which the CAP would be permanently funded. The Commission proposed moving the budgetary authority up to 1965. As this would result in the transfer of power from national parliaments to the Commission, de Gaulle opposed the Commission's proposal. Because the negotiations for the added budget authority for the Commission went past the deadline of 30 June 1965, de Gaulle's foreign minister, Maurice Couve de Murville, abruptly ended the meeting in the early hours of 1 July.

France then withdrew its representation from the Council of Ministers but pointedly continued to participate in routine Community business. In a September 1965 press conference, de Gaulle declared his refusal to accept policies that were to come into force in January 1966. He had two objections: on principle, he refused to countenance qualified-majority voting, which smacked of supranationalism; in practice, he feared the impact of qualified-majority voting on French agricultural and trade interests (under qualified-majority voting, a coalition of liberal member states could alter the CAP and thwart French efforts to protect agriculture in the General Agreement on Tariffs and Trade, or GATT). De Gaulle threatened to continue the boycott until member states agreed on a new financial regulation for the CAP, the Commission curbed its "political ambitions," and provisions for qualified-majority voting were dropped from the Treaty of Rome. The EEC Council of Ministers agreed to a member state's right to veto legislative proposals, which became known as the Luxembourg Compromise. With that, France agreed to take its seat again in the Council of Ministers.

Resolution of this crisis cleared the way for negotiations of a new financial arrangement for the CAP. As part of the deal, France agreed to a West German request that all remaining intra-EEC tariffs on industrial goods be abolished by July 1968, when the common external tariff would take effect. Thus, the customs union would come into being eighteen months ahead of schedule. In 1967, the institutions of the other two European Communities were folded into the EEC.

After 1967, these institutions were known as the European Community (EC). The combination of supranationalism and intergovernmentalism embodied in these institutions became the basis of the EC. So successful was the EC that Denmark, Ireland, and the United Kingdom decided to join it. This first enlargement, from six to nine members, took place in 1973. At the same time, the EC took on new tasks and introduced new social, regional, and environmental policies. In the early 1970s, EC leaders realized that they had to bring their economies into line with one another and that, in the end, what was needed was monetary union. In 1979, the member states of the EC introduced the European Monetary System to help stabilize exchange rates and encouraged the member states to implement strict monetary policies.

Further enlargement of the EC occurred throughout the 1980s. In 1981 Greece joined, followed by Spain and Portugal in 1986. This enlargement placed further pressure for structural reform on the EC. Meanwhile, the political shape of Europe was changing with the fall of the Berlin Wall in 1989, the reunification of Germany in 1990, and the coming of democracy to the countries of Central and Eastern Europe. The countries of the EC signed a new treaty at Maastricht in December 1991. This treaty came into force on 1 November 1993. It added areas of intergovernmental cooperation to the existing EC system, creating the European Union (EU).

The EU expanded in 1995 to include three more countries: Austria, Finland, and Sweden. In 2004, the EU welcomed ten additional countries: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. This enlargement ended the traditional split separating the free world from the communist world. It also brought pressure on the EC to consider the application of Turkey, the first non-European country that might join. This raised questions about how large the EC could become as well as where to draw the boundaries of the EU.

Current members of the EC are Austria, Belgium, Cyprus (Greek part), the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.

Michael McGregor

Further Reading
Hitchcock, William I. The Struggle for Europe: The Turbulent History of a Divided Continent, 1945 to the Present. New York: Anchor, 2003.; Stirk, Peter M. R. A History of European Integration since 1914. New York: Pinter, 1996.; Urwin, Derek W. The Community of Europe: A History of European Integration since 1945. 2nd ed. London: Longman, 1995.

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