The European Common Market was born in 1957 when France, West Germany, Italy, Belgium, Luxembourg and the Netherlands signed the Treaty of Rome. Its establishment came at an end of a series of steps aiming at the political, military and economic integration of Europe.

It had all begun with the Marshall Plan in 1948, when the Organisation for European Economic Co-operation was formed. After this came Nato in 1949 and the European Coal and Steel Community in 1951. The Korean War accelerated the growth of Nato and the formation of the European Defence Community, which collapsed in 1954 when the French refused to ratify the empowering treaty. In 1957 the political military and economic integration of Europe took a decided step forward when EEC and the European Atomic Energy Commission were formed together at Rome.

The EEC has a common external tariff, making it the largest customs union The Treaty also provides for tree internal movement persons, services and capital. There are common agricultural and transport policies, and angements to secure free internal competition, once all tariffs down. Provision is made for the action of a Social Fund to improve works' living standards and a European investment Bank to help economic expansion.

Four Institutions

The EEC has four main institutions. A Council of Ministers makes all big decisions. The European Commission is the day-to-day executive body, and its members are international civil servants. Treaties and regulations are interpreted by the European Court of Justice. Finally, there is the European Parliament, comprising members of the six national parliaments. It can dismiss the Commission by a two-thirds censure vote.

When Britain enters, EEC will comprise 220.000,000 inhabitants. It will surpass both the U.S. and Russian coal and steel production, its output of electric power, oil and cars will be greater that those of Russia, and its economic power, added to that of the U.S. will leave Russia far behind. It is not then surprising, that EEC observers call the proposed British entry, a "decisive turning point in the modern world".

Holmes Clarifies

For a comment on Britain's proposed entry to EEC Salient approached Professor F. W. Holmes, of the Economics Department V.U.W. and Chairman of the Monetary and Economic council.

"The British Government thinks that joining the EEC will be good for Britain. it will allow British exporters free access to a large continental market without paying the EEC's common external tariff," he said. "British industry will gradually be exposed to more competition from the continent as trade barriers are lowered, and the British Government hopes this combination of stimulus and opportunity will speed up the low rate of growth of the British economy."

The Professor felt that although it was not publicised, the British authorities were probably worried about the long-run position of sterling as an international currency if Britain remained outside EEC, especially if the Six pooled their gold and dollar reserves. This was likely. He thought the continent would then become a more attractive place than Britain to hold exchange balances.

"Britain could not contemplate with equanimity the substantial drain of gold and dollars which a marked transfer from sterling to 'Eurodollars' would imply," he said. "By joining EEC she would be a more attractive place for foreign investment, and would be able to participate in any arrangement for pooling reserves."

Professor Holmes said these were strong reasons for joining. "They involve a calculated risk that although continental competition may put some firms out of existence and force others to contract operations, British industry generally will be able to hold its own reasonably well in free trade." It was hoped that no serious unemployment would be caused, and the expansion of efficient firms would clearly outweigh the contraction of the less efficient.

Free Trade

However, said the Professor, free trade would aggravate Britain's balance of payment problems if these assumptions proved incorrect, as terms of entry greatly affect this. "Any customs union on a regional basis involves the potential disadvantage for its members, that the arrangement will induce their importers to divert trade from outside countries towards less efficient sources within the union. Losses thus incurred must be set against internal gains."

He felt that the extent of diversion would depend on the height the common external tariff, or the severity of the common import restrictions. As only a relatively small proportion of Britain's import and export trade was currently done with Europe, she had a strong interest in keeping these barriers low.

"Britain must be particularly anxious about the effects of her entry upon other Commonwealth countries, "continued the Professor. "Collectively they form a much more important market for British exports than the Six, though this has been growing very slowly in the last few years." If Britain joined on terms which damaged Commonwealth interests, then the resultant slowing up of Commonwealth growth would offset British gains in Europe.

"Entry would involve for many Commonwealth products, loss of preferences, or the establishment of reverse preferences in favour of European products, or restrictions on entry of Commonwealth products into the U.K.." he said. "Britain must therefore expect an acceleration of the removal of preferences in her favour in Commonwealth markets." He commented that some Britons said these were gradually going anyway, but he still felt that their quickening disappearance was part of the price of entry.

Much Further

He spoke of Britain's hopes for good terms. "Britain will clearly not get all she wants from her negotiations. What she is agreeing to now, is a far cry from the Industrial Free Trade Area she proposed in 1957. She will have to go much further than she wanted to then, in giving up economic and social sovereignty, particularly in common agricultural and transport policies and in dismantling the system of Commonwealth preference."

Professor Holmes said that obviously Britain could join only with some damages to Commonwealth interests. The Six, were, however apparently prepared to make several departures from then original arrangements to reduce these costs.

"They are providing for the association of African and Caribbean countries and for most dependent territories. They are willing to remove their 18 per cent tariff on tea and to conclude comprehensive trade agreements with India, Pakistan and Ceylon, although they want to wait till 1966 to do this. They have made small concessions to Britain on agricultural policy, and vaguely offer to work out special terms for N.Z The difficulty is temperate foodstuffs, and here there seems little chance that Britain can get anywhere near what she wants."

He said that if Britain joined, the Six would have better terms of entry to the British market for both industrial and agricultural products. They would gain entry, through the removal of preference to other Commonwealth markets. The price paid would be that of according freer entry to British and some Commonwealth products. Generally, they expected greater growth and high employment throughout the EEC.

Limited Concessions

He felt that the Six were inclined to insist that Britain must take the Treaty of Rome largely as it stood, as the concessions the Six would make, were limited by the desire to preserve the fundamental principles upon which they originally agreed, after very hard bargaining.

Speaking of EEC entry as it affected N.Z., the Professor told Salient that N.Z. wanted her existing arrangements for trade preserved. At present, he said, terms offered by EEC for butter cheese, lamb, and mutton were not acceptable to us. N.Z. hoped that lamb and mutton would continue to be granted fairly free access to the British market, as continentals were not great producers or consumers of those meats. Britain was the only big market in Europe for them.

He spoke of butter. "We want future arrangements for butter to allow entry at least at the present level, and preferably expanded." He said that N.Z. could expect reasonable terms for lamb and mutton, but continentals were producing increasing surpluses of butter and wanted to dispose of them in the British market. Prices would fall too much, unless outsiders were kept out.

The Professor said N.Z. must present for transitional arrangement—firstly a share of the market at current levels, and secondly, suitable World Commodity Agreements. In these, it was proposed to sell all surpluses in underdeveloped countries at very low prices. "What is not known is what share of financing the surplus N.Z. is expected to carry," he commented. The less developed countries would naturally want guarantees of regular supplies on concessional terms.

He felt that N.Z. could not forecast the pinch until final terms were known. To employ her people N.Z. needed imports. With unsatisfactory terms, she would naturally have to place more emphasis on developing new exports and new markets and on building up industries dependent on domestic resources — for example, aluminium and forestry industries.

Referring to alternative markets, he suggested for meat, North America Japan and the underdeveloped countries when their living standards improve. "But Britain remains by far the largest market for our lamb and dairy produce," he said, "and this is why we have such a strong interest in obtaining assurances of reasonable terms of entry in the present negotiations."

Robinson—federalism

For clarification of the political issues involved, Dr A. D. Robinson, of the Political Science Department V.U.W. was contacted. When questioned, he made the following statements.

What kind of political unity are EEC members aiming at?

The EEC counts have been arguing about this among themselves for several years. Their delay in coming to a decision may 'be fortunate for Britain, for if she can enter the EEC fairly quickly, she will have a chance of influencing their discussions.

"At the moment it seems that the likely to be a compromise between the views of General de Gaulle, who strongly believes in the sanctity of the nation state, and those of the European federalists, who strongly favour a form of United States of Europe.

"At present, de Gaulle wants a co-ordination of European defence and foreign policy, at the foreign minister or head of government level. The federalists, strongly represented in the government of France's five EEC partners and in all the national parliaments, want direct election, by universal suffrage, of the present indirectly-elected European Parliament. They desire amalgamation of the executive bodies of the three existing European communities (economic, atomic energy, coal and steel) and the unification of defence and Foreign policy at ministerial level.

"In the long run, the wishes of the federalists are likely to prevail because they are a more permanent force than de Gaulle,"

Nordmeyer—Against

When asked to comment on the situation, Mr A. H. Nordmeyer, speaking for the Labour party, said: "We believe that it is not in Britain's interests, nor in the Commonwealths, for Britain to join the EEC He said that the preponderanee of the British Labour Party was against EEC entry. There were a few who thought entry might assure her best interests, but the British Labour Party would be unanimously against it unless the Commonwealth was protected.

One reason for this was "political implications which would tie her to Europe in a way likely to loosen considerably Commonwealth ties." Mr Nordmeyer said that economic advantages of entry "appear to be much exaggerated while the disadvantages and dangers are minimised."

Speaking of the effects on N.Z. employment, Mr Nordmeyer said: "on information so far available . . . not only the workers in the industries are most vitally affected, but also those who depend for livelihood on securing adequate supplies of raw materials, if N.Z. earning power is diminished. Even Professor Simkin, who is optimistic, concedes that thirty million pounds worth of produce could be affected." Mr Nordmeyer said that such a drop could have "disastrous" effects.

He thought that U.S. would be an alternate market for lamb, and Japan and possibly South East Asia for mutton. There would have to be diversification of dairy products. Milk powder could be sold in South East Asia, which he believed could take increasing quantities even if payment were deferred.