9.3 Initial challenges and successes of the Common Market

The Common Market faced initial challenges and successes as it worked to integrate Western European economies. Agricultural policies led to overproduction, while political crises like the Empty Chair Crisis tested the balance between national sovereignty and integration.

Despite challenges, the Common Market expanded, welcoming new members and promoting trade liberalization. Economic growth surged in the 1960s, but monetary cooperation efforts faced setbacks due to global economic instability in the 1970s.

Agricultural Policy and Challenges

Common Agricultural Policy and Its Impact

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• Common Agricultural Policy (CAP) established in 1962 aimed to ensure food security and fair incomes for farmers
• CAP subsidized agricultural production led to increased food self-sufficiency within the EEC
• Policy resulted in overproduction of certain commodities (butter, milk, grain) creating "butter mountains" and "wine lakes"
• Implemented price support mechanisms guaranteed minimum prices for agricultural products
• CAP consumed a significant portion of the EEC budget reaching up to 70% in some years
• Policy faced criticism for its high costs and market distortions

Political Challenges and Compromises

• "De Gaulle's 'Empty Chair Crisis'" occurred in 1965 when France boycotted EEC institutions
• Crisis stemmed from French opposition to proposed reforms including majority voting in the Council of Ministers
• Boycott lasted for six months disrupting EEC decision-making processes
• Luxembourg Compromise resolved the crisis in January 1966
• Compromise allowed member states to veto decisions affecting their vital national interests
• Agreement preserved national sovereignty but slowed down integration efforts
• Compromise highlighted the tension between supranationalism and intergovernmentalism in the EEC

Expansion and Trade

Enlargement and New Member States

• First enlargement of the EEC occurred in 1973 with the accession of the United Kingdom, Ireland, and Denmark
• UK's entry marked a significant shift in European power dynamics
• Ireland joined to reduce economic dependence on the UK and access broader European markets
• Denmark entered to secure agricultural export opportunities within the Common Market
• Norway negotiated for membership but rejected it in a national referendum
• Enlargement increased the EEC's population by 64 million bringing it to approximately 256 million

Trade Liberalization and Economic Integration

• European Free Trade Association (EFTA) established in 1960 as an alternative to the EEC
• EFTA included countries unwilling or unable to join the EEC (UK, Sweden, Norway, Denmark, Switzerland, Austria, Portugal)
• Association promoted free trade among members without requiring political integration
• EEC pursued trade liberalization through the elimination of internal tariffs and quotas
• Common External Tariff implemented to regulate trade with non-member countries
• Trade agreements negotiated with former colonies (Yaoundé Conventions) to maintain economic ties
• Kennedy Round of GATT negotiations (1964-1967) reduced tariffs globally benefiting EEC exports

Economic Development

Economic Growth and Structural Changes

• EEC experienced rapid economic growth during the 1960s often referred to as the "Golden Age"
• Average annual GDP growth rates exceeded 5% in many member countries
• Industrial production increased significantly particularly in manufacturing and heavy industries
• Agricultural sector modernized leading to higher productivity and rural-urban migration
• Service sector expanded creating new job opportunities in finance, tourism, and retail
• Infrastructure development improved transportation networks (highways, railways) across member states
• Regional development policies implemented to address economic disparities between regions
• European Investment Bank established to finance projects promoting balanced development within the EEC

Monetary Cooperation and Challenges

• Member states recognized the need for greater monetary cooperation to support economic integration
• Werner Plan proposed in 1970 aimed to create a full economic and monetary union by 1980
• Plan faced setbacks due to global economic instability (collapse of Bretton Woods system, oil crisis)
• "Snake in the tunnel" mechanism introduced in 1972 to manage currency fluctuations
• European Monetary Cooperation Fund established in 1973 to support monetary stability
• Economic shocks of the 1970s (stagflation, oil crises) tested the resilience of EEC economies
• Divergent economic policies among member states complicated efforts for deeper monetary integration