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The Problems of the European Economic Community

October 1, 1985 -

At least two problems are plaguing the European Economic Community. First, instead of real co-operation and a unified open market in which goods and people can move freely, the EEC is really a collection of protected markets. Second, these protected markets have led to overproduction, wrong allocation of funds, and dumping.


Of the first problem, Dr. W. Dekker, President of Philips Electronics, writes that a continental scale market is urgently needed by European industry in order to compete successfully with American and Japanese companies on the world market. He also points out, however, that European industry has been shackled by restraints largely of its own making, i.e., "the fragmentation of the Common Market and the nationalistic policies of the member states of the Community."

Although internal tariff barriers have been abolished, European market integration has been hindered by such protectionist measures as differing technical standards and nationalistic procurement policies. The high technology industry has been particularly hard hit, because it needs a large home market in order to keep unit costs low enough to compete on the world market. Dekker also believes that Western Europe's economic and social decline was made worse by its tendency to pay too much attention to the distribution, rather than the creation, of income.

Nevertheless, Dekker does see signs of changing attitudes in Industry and government and is hopeful that the future will bring a homogeneous and prosperous European common market. (W. Dekker, "European Industry's Uphill Struggle", Europe, September-October, 1985).

Not a Community, But a Racket

The EEC's agricultural policies are incredibly wasteful, and their rule "pay for everything produced" has created an enormous surplus of food. This surplus, writes Edward Pearce, a staff writer for the London Daily Telegraph, is either stored at huge expense by the EEC governments or "dumped" at bargain prices on the Soviet Union and its satellites. Pearce calls this "a stupendous fraud against the taxpayer and an imposition upon the consumer who lives with food prices as far cantilevered above those of the free market as the tariff at the Soviet Union's special counter is sunk below it." Furthermore, he points out, dumping surplus food on the world market punishes efficient producers in poorer countries, e.g., South American beef; West Indian sugar and New Zealand lamb. Asked about the cost of destroying and storing surplus food, a minister in Britain's government answered that although the final figures for 1984 expenditures were not yet available, "the budgetary provisions for storing and disposing of stocks and commodities which are in structural surplus (cereals, sugar, wine, milk, and beef) was £7,188 million, or about £20 million a day." Pearce concludes:

There we have it, $25 million a day in institutionalized graft for an obese minority of farmers, financial institutions buying into farming, and politicians on their knees before a lobby. The poor world is injured by tariffs, the industrial world is taxed, trade war between allies is made more likely . . . We do not have a Community, we have a Racket. ("Buying the Farm with the EEC," National Review, October 18, 1985) 

Frozen Structures

In a recent column of London's Financial Times, Guy de Jonquieres questioned Europe's ability to catch up in the global business race. His diagnosis: Europe is suffering from a lack of entrepreneurial initiative, of daring industrial innovation, and from the presence of large bureaucratic state organizations, such as telecommunications. De Jonquieres summarized:

Industrial structures have been frozen in place by nationalistic procurement, trade protection, and subsidies that distort or eliminate competition. In most countries the pace of commercial innovation is controlled by self-regulating monopolies insulated from commercial pressures . . . Exhortations to greater individual risk-taking are now heard as often from Socialist ministers in France as in Britain and West Germany. They agree that there is a short supply of people with the drive, vision, and management flair needed to turn today's small firms into tomorrow's big businesses.