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Views & comments: A seminar by Professor Ralf Dahrendorf on the EEC and the Third World

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
December 1975
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The EEC and the Third World

Report on a seminar given by Professor Ralf Dahrendorf at the World Bank, October 17. 1975.

Professor Dahrendorf opened the seminar by saying that the most important aspect of the European Community had turned out to be, at any rate until about 1972, its establishment and functioning as a customs union. It had attained considerable success in this function, first among the original six members and then among the countries of the enlarged Community, and this had been accomplished progressively, stage by stage. Tariffs were brought down for one set of commodities by a given target date, and then for another set by some later date, and so on. But in the next period, 1971 to 1973, the stage-by-stage procedure proved to be inadequate mainly because the problems that the Community, and in particular those in the economic and monetary field, had to face were by then quite different. The method broke down, and a low point in the Community’s affairs was probably reached at the Copenhagen meeting, which registered widely varying points of view. Since 1973 the Community has discovered that a strict calendar—a formal dated program—could not be imposed on the kinds of events with which it now had to deal. Monetary reform and inflation, rising costs of energy, and relations with developing countries were three of the problems facing the Community, as well as most of the rest of the developed world. Each of these problems demanded ongoing policies, continuing negotiations, and constant adjustments, not imposed programs.

The new problems

In a sense the new problems to be faced since 1972 were even more intractable and fundamental than those of foreign trade. From the 15th of August 1971, the Bretton Woods—and to some degree the GATT—systems were effectively obsolete. New structures had to be found. Yet even by the end of 1975 no stable alternative system has yet emerged from such bodies as the Committee of Twenty. Or again, the Yom Kippur War, and the oil price rise that followed, illustrated a major power shift in the world which had not yet been fully reflected in the structure of the international community. Apart from such shifts in relationships, there had been important changes in moods, opinions, and attitudes. The ideas of zero economic growth, or of the Club of Rome, had eroded the earlier general assumption that economic expansion was unquestionably desirable.

Furthermore, the economics of developed as well as of developing countries had become harder to understand—the older certainties had disappeared. By 1975 the difficulty of generalizing about either of these groups of countries was more widely appreciated. For events had shown that economic policies once believed to be applicable to most developed countries were not in fact successful; they might in some cases give rise to perverse effects. Floating the pound sterling down, or the deutsche mark up, might have little effect on either imports or exports—so many factors were involved. Besides, objectives of different developed countries could be very different. The political economy to be adopted in the Federal Republic of Germany might be more concerned with stability than with growth, while in France the main concern might still be growth, or in Britain inflation and plans for a take-off in the 1980s. Indeed, differences in their perceptions of the future distinguished the different countries and were as important as their similarities.

If there was, as might be the case, no great visible identity of interests in the short term among all members of the Community, the budget discussions were bound to be troublesome. This was one cause of the Community’s difficulty in adopting a common policy toward developing countries.

Aid and tariff preferences

The Yaoundé and Lomé arrangements were based on a kind of implied theory, whatever the historical reasons that accounted for them. The theory may be stated as first, aid from the Community should have a first priority for the poorest countries in its list of clients; second, to avoid frittering aid away in minute packages, there should be concentration of effort principally into one region (and that region would include most of Africa); and third, direct governmental aid itself, the provision of experts—of whom the Community has many—and the use of European agricultural surpluses—the famous mountains of beef, butter, or whatever—would be the politically most accepted way (at home) of helping developing countries. Guarantees of markets to help stabilize the incomes of developing countries with raw materials to export were also regarded as acceptable.

But the generalized tariff preference theory had been somewhat superimposed on this first basis of Community action. What the implied theory of generalized tariff preference says is that it is good policy to help those especially who have begun to help themselves. This is contrary to the maxim that priority should be given to aiding the poorest of the poor. Some observers were astonished that generalized tariff preferences failed to benefit the poorest countries, but they should not have been astonished.

A compromise can be found between these two principles of action by helping some countries to move up fairly quickly into an active stage of development by means of preferences extended to them, while at the same time reserving a significant share of total aid for the poorest countries of all.

The Community has, perhaps wisely in view of the magnitude of the world’s aid problems, neglected South Asia as compared with Africa—and even to some extent South America. Perhaps this fits in with the pragmatic appraisal that has served the Community well since the completion of its own customs union. The Community is not a super power (nor does it include any) and has a good claim to being able to understand the problems of developing countries more fully, and with fewer political preoccupations, than can the super powers themselves. It can more readily accept shifts in power, and both the rhetoric and the reality of the new economic order. The experience of the Community, and of its members, teaches it to accept without impatience the fact that whatever else may be said about it, the solution of the main problems of the developing countries is going to be a long, long process.

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