Orchestrating Europe (Text Only). Keith Middlemas
for initiating ‘the process of integration’, they nonetheless provided a pool of new ideas and a vocabulary that decision makers could draw upon when confronted by immediate political problems. This occurred most dramatically when, in May 1950, the French foreign minister, Robert Schuman, announced his plan to form a coal and steel pool which embraced Germany. When this call was answered by the Benelux countries and Italy as well, the way was cleared for the ‘Six’ to embark upon a series of institutional experiments built around the concepts of supranationality and surrender of sovereignty.
It was by no means preordained that six countries would become irrevocably associated with each other in a series of supranational communities, nor that those six would be France, Germany, Italy, the Netherlands, Belgium and Luxembourg. To appreciate how ‘the Six’ reached that stage, we have to go back to the creation of Benelux, and the reaction of France, especially, to that development.
Benelux was the oldest of the post-War experiments in regional integration in western Europe. It linked Belgium and Luxembourg (whose own economic union, the BLEU, dated back to 1921) to the Netherlands, first through a monetary agreement concluded in 1943, and then by a customs union treaty signed a year later by the three governments-in-exile in London. Before the War the BLEU and the Netherlands had conducted approximately 10% of their trade with each other, although there had increasingly been an imbalance in favour of the former. The greater wartime damage in the Netherlands served to accentuate the Dutch deficit, which doubled between 1947 and 1951. Despite the manifold difficulties, the customs union came into force in January 1948, when all tariffs were abolished to be replaced by a common external tariff. However, trade was still impeded by the widespread imposition of quotas, especially on the side of the Dutch. To remove these, even if only towards the BLEU, threatened to aggravate the deficit. Progress was only made possible by two further measures. Firstly, Belgium granted ever greater credit extensions (which it was willing to do if it meant securing the Dutch market from Germany, while the latter’s industry was still operating at artificially low levels) and eventually the problem was subsumed into the European Payments Union. Secondly, the Dutch were able to secure preferential access to the Belgian agricultural market. They had wanted completely free access, since this would have helped remedy their trade deficit, but they had to make do with a provision which left Belgium’s domestic protectionism intact.14
From its inception, the Benelux experiment attracted considerable attention from policy-makers in France. This should be no surprise since before the War Belgium had been France’s largest European trading partner. Just as Belgium hoped to supplant Germany in Dutch markets, so France to needed to expand into the German vacuum to fund its own modernization plans. However, whereas the Benelux tariffs lay close to each other at the lower end of the range when they agreed to a common external tariff, it was realized that any union with France would be behind highly protectionist walls. Moreover, the Netherlands required the German market for its agrarian exports and its traditional shipping services. This required a reciprocal ability to purchase German imports; something that would be impossible if the Netherlands agreed to the arrangements proposed by the French.
From 1944 onwards there was continuous French pressure to break open the Benelux. It was headed off by the creation of a joint consultative body, known as the Conseil Tripartite, which arranged swaps of raw materials in the early post-War months, attempted to co-ordinate policy towards Germany (difficult given the different national provisions) and provided a forum for French attempts for a customs union. These efforts to break open the Benelux were countered by a demand that the move could only be considered if West Germany were to be included; a demand that ran counter to the reason for the French wanting the union in the first place. In 1947 the French used the CEEC conference in Paris to bluff the Benelux partners into daring to turn down the option of a customs union. They had hoped to use American leverage, who themselves wanted to use dollar aid as a way of securing their goal of closer regional integration.
Instead the study group for a pan-European customs union was created to deflect some of the pressure. They deliberated until the end of 1948 but ultimately failed because no decision had yet been taken on the German economy and its position in any future schemes. More immediately, the French found their challenge to move to the immediate formation of a customs union accepted only by the Italians. The fact that France’s primary goal remained the Benelux was reflected in two further approaches in 1948 to persuade them to join. Both were refused.15
By December 1947 the first feasibility study for the Franco-Italian Customs Union was ready. It was surprisingly optimistic and a second commission was established to investigate how it could be implemented. In March 1949, Sforza and Schuman signed a treaty that would effectuate a customs union in a number of stages. A tariff union was already envisaged for 1950 and full economic union about six years later, but through fear of Italian competition, in particular in agriculture, the French Conseil Economique (a tripartite advisory body representing labour, industry and agriculture) thrice rejected the treaty. The government drew the inevitable conclusion and demurred from presenting it to parliament for ratification.16
It was whilst the issue of the Franco-Italian customs union was still alive that the French economy was confronted by a highly localized but serious problem; a balance-of-payments deficit with Belgium. From such unpromising beginnings was born FRITALUX, the name given to the grouping of France, Italy and the Benelux. The French solution to this trade imbalance had been a devaluation against the Belgian franc, with all the help from the Belgians in managing these ‘broken exchange rates’ that this move implied. From there the idea developed to a ‘mini payments union’ with a flexible exchange rate mechanism. Thinking in this direction was reinforced by the prospect that US dollars would be available to sponsor regional integration initiatives, which served to lubricate the discussions long after the exchange rate realignments of September 1949 had resolved France’s original problems. Given the advanced stage that the talks between France, Italy and Belgium had reached and the implications all of this would have had for Benelux, it is amazing that it was only in September 1949 that the Dutch were actually informed of what had been happening. They immediately declared that they disliked the idea and would only consider it if it were supplemented by a customs union, which would also embrace the newly sovereign West German state. The French, whilst not rejecting the idea out of hand, argued that the union would better be created first and that Germany could join later. The Dutch feared this would never materialize and that entry, if it were ever agreed, would be surrounded by so many exemptions and escape clauses that Germany might not be willing, or even able, to join. There the negotiations stuck until the spring of 1950, when it became clear that the Americans had decided to do something else with their cash – provide the initial capital for the EPU.17
With the exception of the Benelux itself, the episodes discussed in this section all ended in failure. Yet they reveal several imperatives guiding policy in the immediate post-War period. The first was the motivation in all the modernization programs to utilize the breathing space created by Allied control over the post-War German recovery, to supplant the German position in both domestic and in foreign markets. The second was the fear of unrestricted German competition. Towards the end of 1949, Allied controls were already being relaxed; yet the powers of the new supervisory authorities were ill-defined and as yet untested. With or without the complication of the Dutch insistence on surrendering frontier controls against Germany, which a customs union would imply, the re-emergence of German industry was already a certainty. It was upon meeting that challenge, either politically or economically, that the entire commercial future of Europe depended.
The coal and steel sectors of western Europe took time to recover from the War. These key industries figured prominently in governmental recovery programs, such as the Monnet Plan in France. It was not accidental that the first major broad-based plan to integrate a specific industrial sector was the European Coal and Steel Community (ECSC). Coal and steel were important traded goods and essential industrial resources. Since they were largely similar products, they were easy to control and had a long history of being subjects of international cooperation. However, neither the timing nor the authorship of the first proposals for integration was accidental. The French initiative stemmed from an acceptance that this plan would, realistically, be their only method of establishing any control over German re-industrialization. French plans for the reconstruction of their steel industry had