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Schuman Plan

By William M. Simmons

Among the nicely-turned phrases that popped up in post-war political oratory, "European Union" has been among the most popular and most persistent. It often goes by the name of "Economic Cooperation" or "United States of Europe," but the idea behind all of these phrases is European economic union.

The meaning of "economic union" has already become a cliche--"integration of the European economy." Integration at first appears to be a vague word, but it has a very specific meaning to ECA administrator Paul Hoffman. He has defined it as "the formation of a single large market within which quantitative restrictions on the movement of goods, monetary barriers to the flow of payments, and eventually all tariffs are permanently swept away." This is a radical plan for an area in which almost every country now has restrictions on the volume of imports, rigid exchange controls, and long-established tariffs.

Most of the talk about integration comes from this side of the Atlantic. Such talk is based on a desire to make the European economy look like the American, since the American is obviously functioning better. Europe's several, small, semi-isolated markets a pall the American businessman, who bases his output on a large, nation-wide market. Each European country fosters its own firms in most phases of production. The result is many small, high-cost plants throughout Europe instead of a few large, low-cost plants. Since the several small plants are usually protected from competition by cartels or tariffs, there is little incentive for efficiency.

If these barriers of economic nationalism were taken down, the most efficient firms would survive in each industry, and each nation would tend to specialize in some phase of the total economy, as does each state in this country. Such an organization would, according to its American proponents, lead to a "more dynamic, expanding economy."

Ideal But Impractical

To Europeans, integration is a wonderful ideal, but at the moment is very impractical. Their leaders have been working to restore industry on its pre-war basis. Their attention is focused on national improvement, and no politician will do anything that will temporarily disrupt his country's economy, even if it is for the long run good.

From an economic standpoint, integration is a worthy goal, but the methods of bringing it about are very complex and controversial. For instance, in the nineteenth century abolishing tariffs would automatically integrate economics. But such a move is now useless when nations have other rigid controls on trade. Also integration could never be effective as long as neighboring countries could pursue separate fiscal policies.

The political and cultural arguments against immediate integration are even stronger. Europe is made up of several separate countries, speaking separate languages, and having separate customs. They are historically competitors. In the American scene a man who cannot find work in New York can, without too much difficulty, move to California. But try to tell an Italian he should move to Belgium.

Two factors reduce the urgency of integration: first, an economic union would not solve Europe's major problem of balancing its payments with the United States. Secondly, under the existing organization, with Marshall Plan aid, an excellent recovery of production has occurred.

At the present time, a few countries are experimenting with what amounts to small scale integration. Holland and Belgium have such an arrangement, and Italy and France are discussing one. Europeans are constantly worried about what they are going to do when Marshall Plan aid stops. A European economic union now appears odious, but it may be the only long-run solution.

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