Saturday, June 04, 2016

The European Union: A bore or an opportunity?

If the EU seems such a bore to so many people that's because, quite simply, it really is. As its name suggests, it is about tariffs, quotas, customs duties and other such matters of vital interest to capitalist firms but of no importance whatsoever to the great majority of us who have to work for a wage or a salary for a living. It's a businessmen's club whose main concern is buying and selling. All the same, if we want to understand why our capitalist rulers and their political servants are getting agitated over this matter we are forced to consider the world of free trade areas, customs unions and other trading arrangements.

The Treaty of Rome, which set up the Common Market, was signed in 1957 by six European states (France, Germany, Italy and the Benelux countries) with the aim of creating a single vast market in Europe for industrial goods and agricultural products to be called, pompously, the "European Economic Community" (EEC). In 1973 the Six were joined, after protracted negotiations, by Britain, Ireland and Denmark and the union reached its current size of 28 member countries with the accession of Croatia on 1 July 2013.

The establishment of a European "one market" is an ambitious project in that it involves creating the same sort of trading conditions throughout Europe as now exist singly in each of the member states. In other words, not simply the abolition of customs duties but the establishment of a single European currency and a single European economic policy. As anyone crossing a European frontier knows, this is far from being the case at the moment. VAT rates, not to mention other taxes, differ from country to country.

“The principle of the free circulation of goods and people and the free offer of services within the European Community is one of the foundation stones of the Treaty of Rome. Twenty-five years after signature however, it is still not a reality. The Community has got little further than the abolition of tariffs. This falls well short of our business community's expectations. What they experience day by day is a range of non-tariff barriers and administrative measures which impede a true common market for both goods and services, which seriously add to the cost of trading across frontiers, and which indeed are in danger of growing, despite recent efforts to make progress in this area (paper presented to Special EEC Council of Ministers meeting, 20/21 September 1983).

 An EEC document explains:
 “In international law, a customs union consists of an economic area comprising members who undertake contractually: (i) to refrain from applying to one another any customs duties, charges having equivalent effect, or quantitative restrictions; (ii) to apply a common external customs tariff to countries not within the union. ("The Customs Union", European Documentation, No 6/1983.)

So, in the EU, there are no customs duties on trade between its member states while goods entering into the area are subject to a uniform tariff no matter which country imports them. This latter means that the EU enters the world market as a single trading bloc; the biggest in the world in fact.

“The Community's common external tariff means that it is seen as a single trading partner by other world trading powers. By volume of trade, it is well ahead of its partners. Averaging imports and exports, the Community has 19% of world trade, compared to 14% for the United States and 8% for Japan ("The External Trade of the European Community", European File, December 1983).

As a matter of fact, the main economic conflict in the world today is not, as might be imagined from between America and Russia but between America, China and the EU as these three trading groups jostle each other for markets, investment outlets and sources of raw materials. Even some of the political and military conflicts are not what they seem. For instance, the conflict in Central America is not so much between America and Russia as between America and the EU, with America trying to prevent the EU countries from entering its traditional hunting-ground.

The British ruling class made the choice to join the European trading bloc in the late 1960s. It wasn't a unanimous decision since it meant sacrificing the commercial interests of certain sections of the capitalist class: those who imported from outside Europe, especially the Commonwealth, and who would now face tariff barriers where none existed before.

The agricultural anomaly
Since the aim of the EU is essentially to create the conditions for freer trade and since trade in Europe is mainly trade in industrial goods, why has it adopted a "Common Agricultural Policy"? Or rather, why did it adopt one so early in its evolution (since the long-term aim of a true common market would indeed have to involve agricultural products too)?

The Common Market could have chosen to allow its member states to pursue their own agricultural policies, subsidising and protecting their farmers in the ways their national governments thought fit, while pressing ahead with progress towards complete free trade in industrial goods. This was the option taken by the European Free Trade Area (EFTA), set up as a sort of rival to the Common Market around Britain in 1959 and which still survives but is now dominated by Sweden and Switzerland (in fact free trade in industrial goods exists between EFTA and the Common Market so the whole of Western Europe is already a vast industrial free trade area). There is free trade among the EFTA countries in industrial goods but each country is left to pursue its own agricultural policy. Thus, although farmers in Sweden, Norway, Finland, Iceland, Switzerland, Austria and Portugal are subsidised like farmers in the rest of Europe, this is done by the national governments concerned, not by an inter-governmental organisation.

The answer to "the Common Market having an agricultural policy lies in the conditions under which the Treaty of Rome was signed:

“It is important to appreciate that the Rome Treaty was a delicate balance of the national interests of the contracting parties. Let us consider West Germany and France in terms of trade outlets. In the case of West Germany the prospect of free trade in industrial goods, and free access to the French market in particular, was extremely inviting. In the case of France the relative efficiency of her agriculture (particularly her grain producers) as compared with West Germany held out the prospect that in a free Community agricultural market she would.make substantial inroads into the West German market. This was obviously likely to result if the common price level of grain, for example, was set well below the West German level but at or above the French level. Agriculture had therefore to be included (D. Swann, The Economics of the Common Market, 1970, p.78).

Or, as a more recent Common Market propaganda document puts it, "Community countries most dependent on agriculture inevitably made the free trade in farm produce a fundamental condition of their willingness to open their markets to the industrial goods of their neighbours" (European File, March 1984, p.12). In other words, the Common Agricultural Policy (CAP) was the price industrial Germany had to pay to have a European-wide market for its industrial goods. De Gaulle kept the British capitalist class waiting on the doorstep until it too agreed to pay this price.

What the adoption of the CAP meant was that farm prices and farm subsidies are fixed annually by Common Market Agriculture Ministers meeting in Brussels. In view of the large number of lobbies and vested interests involved it is not surprising that these sessions have often lasted all night before coming up with a compromise agreement. So, with the CAP, European farmers are subsidised, feather-bedded as the Americans say, from European funds rather than directly from national funds. Up to 70 per cent in fact of the Common Market's total budget is devoted to agriculture. Since it is the industrial countries, Germany and Britain, which contribute proportionately more to the Common Market budget, they are at the same time paying proportionately more towards subsidising European farmers. This is what the famous "budget issue" is all about, with Britain complaining loudly and Germany more discreetly.

The fact that agricultural policy is decided at European level has meant that decisions to stockpile or destroy agricultural so-called "surpluses" (butter mountains, wine lakes, bulldozing of tomatoes, pouring diesel oil on peaches) are made in Brussels, not in the national capitals. This has given rise to the illusion that it is the EU that is responsible for these actions, thus allowing anti-Marketeers to turn people's legitimate indignation at this destruction of food and productive capacity against the Common Market. But this is to mistake the real cause. It is capitalism, not the European Union, that is responsible. Milk, for instance, was being poured down disused mineshafts before Britain joined the Common Market and this would happen again from time to time even if Britain withdrew. All the Common Market has done in this respect is to centralise the process by which these decisions are made, but it is the logic of capitalism that imposes such decisions whether they are made at European or national level.

The British capitalist class's campaign against its "unfair" contribution to the Common Market budget has involved trying to drum up mass support through such exhibitions of mindless nationalism as the Sun's anti-French campaigns. But this issue does not concern wage and salary earners. It is not "our money" that is going to subsidise French, or for that matter British, farmers. The only money that is ours is what we are paid as wages and salaries plus any state hand-outs to which we may be entitled. What we produce over and above this belongs to the capitalists to use as they think fit. We have no control over what they do with the wealth they take from us and certainly no interest in taking sides when they fall out over how to use it.

If Heath and his Tory government negotiated a bad deal for the British capitalist class in 1972 and other governments since in re-negotiations it's too bad for them, but we have no interest in allowing ourselves to be stirred up by them as a means of trying to renegotiate yet another “better” deal today.

A single crumb
Since the EU represents to a certain extent a normal stage of development of capitalism ― towards bigger trading units and bigger markets ― it would be surprising if it didn't bring a few marginal improvements for workers. We've scraped the bottom of the barrel and have only been able to come up with one relatively insignificant change which could be seen as an improvement compared with what happened before; namely, the free movement of labour. But we hasten to add, this change does not warrant abandoning a position of complete indifference to the EU. We merely note it as a consequence of an inevitable trend under capitalism to break down national frontiers and national differences.

We appreciate too that the free movement of labour is only a corollary of free trade in other commodities since what we are talking about here is free trade throughout the European Union in the commodity labour-power. All the same, this has meant that workers have been able to travel freely over a larger area than previously (even if this is only a return to a situation which existed in Europe before 1914) and this is a real, if marginal, improvement.

The first thing to notice about the European Parliament is that it is not really a Parliament. Real decision-making power in the Common Market lies with the Council of Ministers from the various member states who come to decisions on the basis of proposals from the European Commission in Brussels. The so-called Parliament is merely a sort of advisory committee that is consulted in the course of this decision-making process.

When elections to the European Parliament take place workers in countries all over Europe are being given the opportunity to express their views at the same time. At the moment they misuse this opportunity by confining their support for capitalism but, when the socialist movement has reached a more developed stage this will provide an occasion for socialists to demonstrate their strength across frontiers, to turn these at the moment meaningless elections into a Europe-wide referendum on the issue of "socialism or capitalism"?

The referendum on staying or leaving the EU is taking place on 23 June. Socialists will be able to express their support for world socialism by writing "WORLD SOCIALISM" across their voting paper.

The Socialist Party will be mounting an intensive propaganda campaign, during which your help will be needed. Please contact the Head Office for details.

Adapted from an article from the Socialist Standard, May 1984.