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Powerhouse or Protectionist Bloc?
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19622 |
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Section : |
CURRENT ISSUES
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| Issue
Date : |
10 / 1991 |
1,782 Words |
| Author
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Christian Watrin
Christian Watrin is professor of economics and social studies
at the University of Cologne in Germany, where he holds the
chair for economic policy; the managing director of the
Institute for Economic Policy; and the director of the Seminar
for Economic Policy. He has been chairman of the Advisory
Council to the Federal Ministry of Economic Affairs since
1987. |
From the devastation of the Second World War, Western Europe quickly regained its role as one of the centers of economic progress in the world. And now Eastern Europeans are looking to their Western neighbors to lift them from the miseries of the communist legacy.
But are these expectations realistic? Is the economic potential of the European Community (EC)--or after the 1989 revolutions more adequately the Western European Community--really as big as many think? Pointing to the benefits of the Single Market project, which should be finished by the end of 1992, the Brussels Commission should answer in the affirmative. According to the commission's claims, the Common Market founded in 1958 will be transformed into an economic union by the end of next year. Then not only should free trade of goods prevail but also free trade of services and unrestricted mobility of labor and capital. Further, some important steps have been taken to form a (Western) European currency union with a unified central banking system. Therefore, by the end of the century national monies (e.g., the French franc, the British pound, the German mark) might disappear from financial reports. What was only a paragraph heading in the 1986 Single European Act, namely that the EC aims at becoming an "economic and monetary union," could come to pass within a decade.
But would such a course of events benefit the world economy? Would it also make the poorer countries in the East and South better off? There are doubts.
Regionalism is not multilateralism
True, the far-reaching and radical Single Market project will increase competition inside the EC. It is based on the general rule that the opening up of the domestic market guarantees equal access to the markets of all member states, thereby increasing the market sizes for all. The enlarged markets will strengthen competition, fight down all sorts of organizational slack, and increase economies of scale in production. But the great danger is that a higher degree of competition in the unified markets inside Western Europe would lead to increasing demands for protection from imports. The economic reason for this is simple: The EC is a regional trade bloc at odds with the current principles of free trade.
Historically, the economic affairs before the First World War under the unwritten rule of the Pax Britannica came very close to the ideal of unrestricted trade among the major nations of the world economy. This bygone
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