by Norman Lowe
(d) Britain decides to join
Within less than four years from the signing of the Treaty of Rome, the British had changed their minds and announced that they wished to join the EEC. Their reasons were the following:
By 1961 it was obvious that the EEC was an outstanding success – without Britain. Since 1953 French production had risen by 75 per cent while German production had increased by almost 90 per cent.
Britain’s economy was much less successful – over the same period British production had risen by only about 30 per cent. The British economy seemed to be stagnating in comparison with those of the Six, and in 1960 there was a balance of payments deficit of some £270 million.
Map 10.1 Economic unions in Europe, 1960
Although EFTA had succeeded in increasing trade among its members, it was nothing like as successful as the EEC.
The Commonwealth, in spite of its huge population, had nothing like the same purchasing power as the EEC. The British prime minister, Harold Macmillan, now thought that there need not be a clash of interest between Britain’s membership of the EEC and trade with the Commonwealth. There were signs that the EEC was prepared to make special arrangements to allow Commonwealth countries and some other former European colonies to become associate members. Britain’s EFTA partners might be able to join as well.
Another argument in favour of joining was that once Britain was in, competition from other EEC members would stimulate British industry to greater effort and efficiency. Macmillan also made the point that Britain could not afford to be left out if the EEC developed into a political union.
The job of negotiating Britain’s entry into the EEC was given to Edward Heath, an enthusiastic supporter of European unity. Talks opened in October 1961, and although there were some difficulties, it came as a shock when the French president, Charles de Gaulle, broke off negotiations and vetoed Britain’s entry (1963).
(e) Why did the French oppose British entry into the EEC?
De Gaulle claimed that Britain had too many economic problems and would only weaken the EEC. He also objected to any concessions being made for the Commonwealth, arguing that this would be a drain on Europe’s resources. Yet the EEC had just agreed to provide aid to France’s former colonies in Africa.
The British believed that de Gaulle’s real motive was his desire to continue dominating the Community. If Britain came in, she would be a serious rival.
De Gaulle was not happy about Britain’s ‘American connection’, believing that because of these close ties with the USA, Britain’s membership would allow the USA to dominate European affairs. It would produce, he said, ‘a colossal Atlantic grouping under American dependence and control’. He was annoyed that the USA had promised to supply Britain with Polaris missiles but had not made the same offer to France. He was determined to prove that France was a great power and had no need of American help. It was this friction between France and the USA that eventually led de Gaulle to withdraw France from NATO (1966).
Finally there was the problem of French agriculture: the EEC protected its farmers with high tariffs (import duties) so that prices were much higher than in Britain. Britain’s agriculture was highly efficient and subsidized to keep prices relatively low. If this continued after Britain’s entry, French farmers, with their smaller and less efficient farms, would be exposed to competition from Britain and perhaps from the Commonwealth.
Meanwhile the EEC success story continued, without Britain. The Community’s exports grew steadily, and the value of its exports was consistently higher than its imports. Britain, on the other hand, usually had a balance of trade deficit, and in 1964 was forced to borrow heavily from the IMF to replenish rapidly dwindling gold reserves. Once again, in 1967, de Gaulle vetoed Britain’s application for membership.
(f) The Six becomes the Nine (1973)
Eventually, on 1 January 1973, Britain, along with Eire and Denmark, was able to enter the EEC and the Six became the Nine. Britain’s entry was made possible because of two main factors:
President de Gaulle had resigned in 1969 and his successor, Georges Pompidou, was more friendly towards Britain.
Britain’s Conservative prime minister, Edward Heath, negotiated with great skill and tenacity, and it was fitting that, having been a committed European for so long, he was the leader who finally took Britain into Europe.
10.4 THE EUROPEAN COMMUNITY FROM 1973 TO MAASTRICHT (1991)
The main developments and problems after the Six became the Nine in 1973 were the following.
(a) The Lomé Convention (1975)
From the beginning the EC was criticized for being too inward-looking and self-centred, and for apparently showing no interest in using any of its wealth to help the world’s poorer nations. This agreement, worked out in Lomé, the capital of Togo in West Africa, did something to offset criticism, though many critics argued that it was too little. It allowed goods produced in over 40 countries in Africa and the Caribbean, mostly former European colonies, to be brought into the EEC free of duties; it also promised economic aid. Other poor Third World countries were added to the list later.
(b) Direct elections to the European parliament (1979)
Although it had been in existence for over 20 years by this time, the EC was still remote from ordinary people. One reason for introducing elections was to try to arouse more interest and bring ordinary people into closer contact with the affairs of the Community.
The first elections took place in June 1979, when 410 Euro-MPs were chosen. France, Italy, West Germany and Britain were allowed 81 each, the Netherlands 25, Belgium 24, Denmark 16, Eire 15 and Luxembourg 6. The turnout varied widely from state to state. In Britain it was disappointing – less than a third of the British electorate were interested enough to bother going along to vote. In some other countries, however, notably Italy and Belgium, the turnout was over 80 per cent. Overall, in the new European parliament, the right-wing and centre parties had a comfortable majority over the left.
Elections were to be held every five years; by the time the next elections came along in 1984, Greece had joined the Community. Like Belgium, Greece was allowed 24 seats, bringing the total to 434. Overall, in the European parliament the parties of the centre and right still kept a small majority. The turnout of voters in Britain was again disappointing at only 32 per cent, whereas in Belgium it was 92 per cent and in Italy and Luxembourg it was over 80 per cent. However, in these three countries it was more or less compulsory to vote. The highest turnout in a country where voting was voluntary was 57 per cent in West Germany.
(c) The introduction of the Exchange Rate Mechanism (ERM) (1979)
This was introduced to link the currencies of the member states in order to limit the extent to which individual currencies (the Italian lira, the French, Luxembourg and Belgian franc and the German mark) could change in value against the currencies of other members. A state’s currency could change in value depending on how well its domestic economy was performing: a strong economy usually meant a strong currency. It was hoped that linking the currencies would help to control inflation and lead eventually to a single currency for the whole of the EC. Initially Britain decided not to take the pound sterling into the ERM; she made the mistake of joining in October 1990, when the exchange rate was relatively high.
(d) Community membership grows
In 1981 Greece joined, followed by Portugal and Spain in 1986, bringing the total membership to 12 and the Community population to over 320 million. (These countries had not been allowed to join earlier because their political systems were undemocratic – see Chapter 15, Summary of events.) Their arrival caused new problems: they were among the poorer countries of Europe and their presence increased the influence within the Community of the less industrialized nations. From now on there would be increasing pressure from these countries for more action to help the less developed states and so improve the economic balance between rich and poor nations. Membership increased again in 1995 when Austria,
Finland and Sweden, three relatively wealthy states, joined the Community. For further increases, see Section 10.8.
(e) Britain and the EC budget
During the early years of their membership, many British people were disappointed that Britain did not seem to be gaining any obvious benefit from the EC. The Irish Republic (Eire), which joined at the same time, immediately enjoyed a surge of prosperity as her exports, mainly agricultural produce, found ready new markets in the Community. Britain, on the other hand, seemed to be stagnating in the 1970s, and although her exports to the Community did increase, her imports from the Community increased far more. Britain was not producing enough goods for export at the right prices. Foreign competitors could produce more cheaply and therefore captured a larger share of the market. The statistics of Gross Domestic Product (GDP) for 1977 are very revealing; GDP is the cash value of a country’s total output from all types of production. To find out how efficient a country is, economists divide the GDP by the population of the country, which shows how much is being produced per head of the population. Figure 10.1 shows that Britain was economically one of the least efficient nations in the EC, while Denmark and West Germany were top of the league.
Figure 10.1 Statistics of GDP per head of the population (1977)
Source: based on J. B. Watson, Success in Modern World History Since 1945, John Murray (1989), p. 150.
© Margaret Watson 1989. Reproduced by permission of Hodder Education.
A major crisis erupted in 1980 when Britain discovered that her budget contribution for that year was to be £1209 million, whereas West Germany’s was £699 million and France only had to pay £13 million. Britain protested that her contribution was ridiculously high, given the general state of her economy. The difference was so great because of the way the budget contribution was worked out: this took into consideration the amount of import duties received by each government from goods coming into that country from outside the EC; a proportion of those duties received had to be handed over as part of the annual budget contribution. Unfortunately for the British, they imported far more goods from the outside world than any of the other members, and this was why her payment was so high. After some ruthless bargaining by Britain’s prime minister, Margaret Thatcher, a compromise was reached: Britain’s contribution was reduced to a total of £1346 million over the next three years.
(f) The 1986 changes
Encouraging developments occurred in 1986 when all 12 members, working closely together, negotiated some important changes which, it was hoped, would improve the EC. They included:
a move to a completely free and common market (no restrictions of any kind on internal trade and movement of goods) by 1992;
more EC control over health, safety, protection of the environment and protection for consumers;
more encouragement for scientific research and technology;
more help for backward regions;
the introduction of majority voting on many issues in the Council of Ministers; this would prevent a measure from being vetoed just by one state which felt that its national interests might be threatened by that measure;
more powers for the European parliament so that measures could be passed with less delay. This meant that the domestic parliaments of the member states were gradually losing some control over their own internal affairs.
Those people who favoured a federal United States of Europe were pleased by the last two points, but in some of the member states, especially Britain and Denmark, they stirred up the old controversy about national sovereignty. Mrs Thatcher upset some of the other European leaders when she spoke out against any movement towards a politically united Europe: ‘a centralized federal government in Europe would be a nightmare; co-operation with the other European countries must not be at the expense of individuality, the national customs and traditions which made Europe great in the past’.
(g) The Common Agricultural Policy (CAP)
One of the most controversial aspects of the EC was its Common Agricultural Policy (CAP). In order to help farmers and encourage them to stay in business, so that the Community could continue to produce much of its own food, it was decided to pay them subsidies (extra cash to top up their profits). This would ensure them worthwhile profits and at the same time would keep prices at reasonable levels for the consumers. This was such a good deal for the farmers that they were encouraged to produce far more than could be sold. Yet the policy was continued, until by 1980 about three-quarters of the entire EC budget was being paid out each year in subsidies to farmers. Britain, the Netherlands and West Germany pressed for a limit to be placed on subsidies, but the French government was reluctant to agree to this because it did not want to upset French farmers, who were doing very well out of the subsidies.
In 1984, maximum production quotas were introduced for the first time, but this did not solve the problem. By 1987 the stockpiling of produce had reached ludicrous proportions. There was a vast wine ‘lake’ and a butter ‘mountain’ of one and a half million tonnes – enough to supply the entire EC for a year. There was enough milk powder to last five years, and storage fees alone were costing £1 million a day. Efforts to get rid of the surplus included selling it off cheaply to the USSR, India, Pakistan and Bangladesh, distributing butter free of charge to the poor within the Community, and using it to make animal feed. Some of the oldest butter was burnt in boilers.
All this helped to cause a massive budget crisis in 1987: the Community was £3 billion in the red and had debts of £10 billion. In a determined effort to solve the problem, the EC introduced a harsh programme of production curbs and a price freeze to put a general squeeze on Europe’s farmers. This naturally caused an outcry among farmers, but by the end of 1988 it was having some success and the surpluses were shrinking steadily. Member states were now beginning to concentrate on preparing for 1992 when the introduction of the single European market would bring the removal of all internal trading barriers, and, some people hoped, much greater monetary integration.
(h) Greater integration: the Maastricht Treaty (1991)
A summit meeting of all the heads of the member states was held in Maastricht (Netherlands) in December 1991, and an agreement was drawn up for ‘a new stage in the process of creating an even closer union among the peoples of Europe’. Some of the points agreed were:
more powers for the European parliament;
greater economic and monetary union, to culminate in the adoption of a common currency (the euro) shared by all the member states, around the end of the century;
a common foreign and security policy;
a timetable to be drawn up of the stages by which all this would be achieved.
Britain objected very strongly to the ideas of a federal Europe and monetary union, and to a whole section of the Treaty known as the Social Chapter, which was a list of regulations designed to protect people at work. There were rules about:
safe and healthy working conditions;
equality at work between men and women;
consulting workers and keeping them informed about what was going on;
protection of workers made redundant.
Britain argued that these measures would increase production costs and therefore cause unemployment. The other members seemed to think that proper treatment of workers was more important. In the end, because of British objections, the Social Chapter was removed from the Treaty and it was left to individual governments to decide whether or not to carry them out. The rest of the Maastricht Treaty, without the Social Chapter, had to be ratified (approved) by the national parliaments of the 12 members, and this had been achieved by October 1993.
The French, Dutch and Belgian governments supported the Treaty strongly because they thought it was the best way to make sure that the power of the reunified Germany was contained and controlled within the Community. The ordinary people of the Community were not as enthusiastic about the Treaty as their leaders. The people of Denmark at first voted against it, a
nd it took determined campaigning by the government before it was approved by a narrow majority in a second referendum (May 1993). The Swiss people voted not to join the Community (December 1992), and so did the Norwegians; even in the French referendum the majority in favour of Maastricht was tiny. In Britain, where the government would not allow a referendum, the Conservatives were split over Europe and the Treaty was approved only by the narrowest of majorities in parliament.
By the mid-1990s, after almost 40 years of existence, the European Community (known since 1992 as the European Union) had been a great success economically and had fostered good relations between the member states, but there were vital issues to be faced:
How much closer could economic and political co-operation become?
The collapse of communism in the states of eastern Europe brought with it a whole new scenario. Would these states (Map 10.2) want to join the European Union, and if so, what should be the attitude of the existing members? In April 1994, Poland and Hungary formally applied for membership.
Map 10.2 The growth of the European Community and Union
10.5 COMMUNIST UNITY IN EASTERN EUROPE
The communist countries of eastern Europe were joined in a kind of unity under the leadership of the USSR. The main difference between the unity in eastern Europe and that in the west was that the countries of eastern Europe were forced into it by the USSR (see Section 7.2(d), (e), (g)), whereas the members of the EC joined voluntarily. By the end of 1948 there were nine states in the Communist bloc: the USSR itself, Albania, Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, Romania and Yugoslavia.