The nature and object of EEC / its impact
The Nature and Objective of the EEC:
Europe’s most comprehensive attempt at economic integration was marked by the formation of the European Economic Community (EEC).
In a treaty signed in Rome on March 24. 1957, six nations of Westem Europe, viz., France, Germany, Italy, Belgium, Netherlands and Luxembourg agreed to merge their separate economies into one single economic unit by establishing a common market area also known as the ‘Inner Six’ arrangement. This six-country arrangement for the creation of a common market’ area is popularly known as the European Common Market (ECM) which came into being on January 1, 1958.
Objective:
The broad mission of the Common Market as defined in the Treaty of Rome is to form a customs union of the six signatories in order to have a large market area, leading gradually, by the end of the transition period (roughly 1970), to an economic union, and ultimately to a complete political integration-a Federation of Europe.
However, the immediate objective of the EEC was to achieve the advantages of increased specialisation and division of labour by making the unified area of ‘Inner Six’ a more powerful unit which ensures the harmonious development of economic activities, continuous and balanced growth, increased stability, a more rapid improvement in the standard of living and closer relations among its component states.
Customs Union: Establishment of a customs union of the six member countries is the crucial provision under the ECM. This customs union signifies the composition of a single customs territory of the participating nations as against the customs territory of each individual nation.
In such a customs union there is complete freedom for the movement of goods and services between the outside world and the partner countries. In a custom union, the members adopt a uniform tariff policy applicable to the outside world, and all tariffs among members are to be abolished.
Economic Integration: The purpose of the Common Market is not limited to the creation of a custom union. It aims at a much broader economic union. The avowed objective of the Treaty of Rome includes free mobility of labour and capital within the Economic Community. I harmonisation of national economic policies of the member States, to promote throughout the Community a harmonious development of economic activities and closer relations among its member nations.
To accomplish all these, the member states are committed under the Treaty of Rome to
1. The removal of customs duties and import-export quotas between each other: 2. The establishment of a common tariff and commercial policy for the outside nations;
3. The abolition within the Community of obstacles to the free movement of labour and capital:
4. The inauguration of common agricultural and transport policies;
5. The establishment of a system ensuring competition in the Common Market;
6. The adoption of procedures for co-ordination of the economic policies of member nations and for remedying their balance of payments disequilibrium. Basic goals in the co-ordination process include external balance, full employment and price stability;
7. The co-ordination of legislation of member states for the smooth functioning of the Common Market; 8. The establishment of a European Social Fund for easing the readjustment problem of workers experiencing unemployment as a consequence of trade liberalisation; 9. The creation of a European Investment Fund which will give financial aid to the industrialists to improve workers’ conditions in the underdeveloped regions of the component states. Another purpose of such a fund is to help in financing projects of European importance;
10. The association of dependent overseas territories within the Economic Community. Hence, an Overseas Development Fund was also established in 1958, empowered to provide loans for projects in the affiliated overseas territories.
Above all, under the Treaty of Rome, provision was made to admit new membership, full or associate. As such, for instance, in 1961, England and Denmark negotiated for full membership which, however, did not materialise. Under the provision for associate membership, however, Greece was accepted as an associate member of ECM in 1961.
The Organisation of EEC: The European Economic Community is a kind of super-government in economic affairs and relations of the Community. Like any government, there, it has specific agencies to execute, to legislate and to settle disputes.
Its principal administrative body is the European Economic Council. It is a sort of economic cabinet of the six component states. It has one member from each of these six states. It functions as an executive agent of the Community. It has to make day-to-day decisions, formulate rules of conduct, make new legislations and goad members to carry out the provisions of the Treaty.
To assist the Council, a nine-man European Commission is set up. The Commission has to look to the application of the Treaty, study special problems and make recommendations to the Council.
A Monetary Committee is also formed as an advisory body to watch over balance of payments and such other matters of the Community.
In addition, the European Economic and Social Committee is created as an advisory body, which consists of representatives of industry, workers, farmers, etc. The Assembly of 106 members is created for the legislative purposes of the community.
A Court of Justice is also set up to adjudicate disputes. The Impact of EEC: The major impact of EEC has been the achievement of larger markets and economies of scale. Within the Community, the gains from trade creation in manufactured goods are substantial on account of their high elasticities.
Further, the most significant result of the Common Market has been the breaking up of monopolies in countries like France. Hence, the gains in productive efficiency could be secured due to promotion of competition. Moreover, special attention could be given to the improvement of underdeveloped areas within the Community by pooling finance and other resources.
Mobility of labour and capital could be increased within the Community which makes it possible to have reallocation of some industries to take advantage to ready access to markets or raw materials and so to reduce transport costs.
In short, the Common Market had important impacts economic, political and social- on the individual members. But the economic impact of the Common Market on the development of entire Europe and other countries is also not insignificant. The growing prosperity of the Common Market areas (of six nations) could hardly be ignored by the rest of the world. For them, progress of the EEC areas represented both competition and opportunity.
