Regional cooperation in International Trade – EEC

The European Economic Community (EEC), also known as European Common Market (ECM), European Community (EC), and European Union (EU), is by far the most successful of the regional economic integration schemes.

The EEC which originally comprised six nations, namely, Belgium, France, Federal Republic of Germany, Italy, Luxembourg and Netherlands was brought into being on 1st January 1958, by the Treaty of Rome, 1957.

The Treaty of Rome required every member country to:

1. eliminate tariffs, quotas and other barriers on intra-community trade;
2. devise a common internal tariff on imports from the rest of the world;
3. allow the free movement of factors of production within the community ;
4. harmonize their taxation and monetary policies and social security policies; and
5. Adopt a common policy on agriculture, transport, and competition in industry.

The EEC was expanded in 1973 with the inclusion of the United Kingdom, Denmark and Ireland. Greece joined the Community in 1981. Spain and Portugal became members on January 1, 1986 raising the number to twelve. With Austria, Finland and Sweden joining the union in the early 1990s, the number rose to 15. With effect from May 1, 2004, the EU has 25 members.

Several more countries are eager to join the EC. To qualify for membership in the EC, a country must be European and democratic.

By July, 1968, a Customs Union had been established among the original six members of the EEC as they abolished tariffs on trade among themselves and imposed a common tariff schedule on imports from other countries. The community members had also taken some noteworthy steps towards approximating their economic policies including adoption of Common Agricultural Policy (CAP) in 1962 and establishment of the European Monetary System in 1979. A detailed program for attaining a single integrated market was set forth by the EC Commission (the EC’s executive body) in June 1985 in a white Paper entitled “Completing the Internal Market”. The EC Council (the EC’s supreme decision making body) promptly committed the EC to carry out White Paper’s program by 1992. This program which envisaged the unification of the economies of the member nations into a single market by removing all border barriers to trade and factor mobility and by unifying the economic policies and regulations came to be described as Europe 1992/EC -1992.

The White Paper listed 300 specific areas (subsequently reduced to 279) for action by 1992. These actions were intended to eliminate the physical, technical and fiscal obstacles to an integrated market to achieve a genuine European Community without internal economic frontiers with freedom of movement for goods, services, persons and capital.

The barriers targeted for removal pertained to the following eight categories:

1. Border control.
2. Limitations on the movements of people and their right of Establishment.
3. Difference in internal taxation regimes.
4. Lack of common legal framework for business.
5. Controls on movement of capital
6. Heavy and differing regulation of services.
7. Divergent product regulations and standards.
8. Protectionist public procurement policies.

With a population much larger than that of USA and a GDP near to that of the US and much higher than that of Japan, the EC is the largest market in the world. It may be noted that a single member of the Community (Germany) emerged as the second largest exporter and importer of the world. The EC accounts for roughly a quarter of the world trade.

There was significant increase in the share of intra-regional trade of the EU members in their total of the EU members in their total trade. However, recently there has not been significant change in this ratio.

The unification of the EC is expected to produce great benefits to the member nations. It would lead to the restructuring of the economy of the EC and would result in efficiency improvement in production, trade creation and increase in consumption. It is estimated that over five to six years, the Community’s GDP would be raised by 4.5%, consumer prices reduced by about 6% and employment increased by 2 million.