IN 1949 Paul Hoffman said to the Council of the O.E.E.C.: "The people and the Congress of the United States, and, I am sure, a great majority of the people of Europe have instinctively felt that economic integration is essential if there is to be an end to Europe's recurring economic crises." He was certainly right in stressing the "instinctive" source of the conclusion, for this put the matter in the realm of feeling, implying an unreasoned background and the absence of any strict definition. The various discussions of economic integration show a common agreement as to the general direction in which Europe should go but also provide an uncommon confusion of terminology (coöperation, coördination, integration, unification) and wide disagreement as to who is to go on which route, how far, and to what specific goal.

"Europe" did not become an important proper noun in American economic foreign policy until General Marshall on June 5, 1947, suggested that United States assistance would no longer be given on a piecemeal basis but rather in relation to a joint program, "agreed to by a number, if not all European nations." When the Marshall Plan was enacted, the preamble to the Act included these words: "Mindful of the advantages which the United States has enjoyed through the existence of a large domestic market with no internal trade barriers," it shall be the policy to encourage "that economic coöperation in Europe which is essential for lasting peace and prosperity." This certainly was a comfortably vague statement.

The position of the European countries was equally unimpeachable and general. And the early reports of the Economic Coöperation Administration are full of phrases such as "maximum benefit for Europe as a whole," "total economic effort of the European nations" and "total European economy." The European Recovery Program therefore focused attention on Europe as such, but there is no evidence that it was to be more than a joint program and coöperative venture.

The advocates of a united Europe were not content to let the matter rest at this point. The effort to write something stronger into the original Marshall Plan legislation had been turned down as implying interference. However, in April 1949, the revised Act included a new declaration: "It is further declared to be the policy of the people of the United States to encourage the unification of Europe." (The House words "and federation" were deleted in conference.) When Senator Fulbright proposed as an amendment the insertion of "political" before "unification," Senator Connally summarily stated that "The committee considered this amendment very carefully, and was almost unanimously against either undertaking to coerce Europe or to pay Europe to achieve union," and the amendment was voted down, 67 to 15. As to the final result, a later report by the Senate Committee on Foreign Relations was guilty of an understatement when it said, "There is some doubt as to the meaning, whether this language refers to political federation, economic federation, or both."

While the Congress was limiting itself to the encouragement of some sort of unification, a much more vigorous position was taken by the E.C.A. Administrator, Mr. Hoffman. On October 31, 1949, he addressed the Council for Economic Coöperation in Paris and outlined two tasks to be performed; first, to balance Europe's dollar accounts, and second,

the building of an expanding economy in Western Europe through economic integration. The substance of such integration would be the formation of a single large market within which quantitative restrictions on the movements of goods, monetary barriers to the flow of payments and, eventually, all tariffs are permanently swept away. . . . The creation of a permanent, freely trading area, comprising 270,000,000 consumers in Western Europe, would have a multitude of helpful consequences. It would accelerate the development of large-scale, low-cost production industries. It would make the effective use of all resources easier, the stifling of healthy competition more difficult.

In developing the theme further, he stressed the need for a substantial measure of coördination of national fiscal and monetary policies, necessary adjustments of exchange rates, means of cushioning temporary disturbances, and the resolution of conflicting commercial policies and practices. At least, here is some real content, although the definition in terms of a specific program still is not very exact.

Another important statement on the subject was made by General Eisenhower on July 3, 1951, before the English-Speaking Union in London. There can be no doubt as to the direction of his argument, although again the concept is not entirely clear. The attack is on "patchwork territorial fences," which foster localized interest, pyramid costs, bar the efficient division of labor and resources, and promote distrust. The plea is for "unity," "a United Europe," "integration of Western Europe," "a workable European federation" and "a similar integration" to that of the British Commonwealth and the United States. "Once united, the farms and factories of France and Belgium, the foundries of Germany, the rich farmlands of Holland and Denmark, the skilled labor of Italy, will produce miracles for the common good."

This position was restated by President Eisenhower on January 20, 1953, in his inaugural address: "In Europe, we ask that enlightened and inspired leaders of the Western nations strive with renewed vigor to make the unity of their peoples a reality." Three weeks later, Secretary Dulles, returning from his first flying trip abroad as Secretary of State, said that, "It has been clear for some time that the biggest single postwar task would be to end the disunity in Europe which makes for weakness and war." Although not explicitly stated, his interest clearly lay in avoiding the division of Europe "into rival national camps." His report was concerned primarily with the European Defense Community, although he pointed to the Schuman Plan as an outstanding example of accomplishment.

There can be no doubt about the strong American interest in European integration, but it also has had European support. Many European statesmen have actively endorsed the notion, although they often put more emphasis on the obstacles. Many of the most enthusiastic supporters do so for political reasons, usually related to the problem of Germany and her relations with the West. On the other hand, many have stressed the economic importance of a unified Europe. Europe, they say, is cut up into small pieces and national boundaries create major obstacles to the flow back and forth of economic goods, labor and capital. The result is that resources are not used effectively, trade is restricted, competition is limited and economic growth is hampered. The structure of each little economy is forced into an unspecialized and inefficient pattern. In the absence of economic expansion, class conflicts are sharpened, and monetary policies are limited to the narrow base of each country's resources. Economic aggression, retaliation and international distrust result.

The confusion in terminology obscures the significance of recent developments. From the economist's point of view, it is not difficult to describe economic integration in terms of the ideal. The fundamental purpose of economic policy is to develop and utilize resources so that they will produce the maximum supply of goods and services, and to distribute the economic product so that the effective demand for it is best satisfied. The maximum satisfaction of wants can be achieved when there is the freest flow of resources and products, when arbitrary interference with economic forces is at a minimum. In a large country like the United States, this objective is fairly well achieved because there is a single market: labor and capital can move about freely, the economies of large-scale operation can be achieved, and products produced over a wide area can be marketed over a similarly wide area. There are no currency problems since the dollar is legal tender everywhere and commercial and legal procedures are fairly well standardized. The forces of competition can work over a whole continent and provide that dynamic element which leads to higher productivity.

The same state of affairs would certainly be achieved for Europe if a single government replaced the governments of the separate Western European countries, but few indeed have ever argued for such a drastic step. A much larger group of advocates talks of federation, but disagrees as to the essential area that should be federated and the amount of authority to be transferred to the central government. Neither single government nor federation has appeared. More than five years have passed since Congress stated the American position in one sentence and Paul Hoffman outlined the economic argument in more detail. In both cases, it was clear that the proponents believed that a substantial amount of economic integration could take place even without political unification. How much progress has been made since then?

II. THE FIRST TEST: THE FLOW OF TRADE

A phrase which recurs again and again in discussions of economic integration is that of "the common market." The first test of whether progress has been made, then, is the degree of the reduction of trade barriers in Europe and the expansion of trade. The immediate postwar period found the European countries not only impeding trade by tariff barriers but directly cutting down their imports by quota restrictions. They were all in difficulties over the balance of payments as the result of the heavy demand for imported goods, the shortage of goods for export, the reduction in invisible earnings, the loss of foreign assets and the increase in foreign liabilities. Imports had to be limited to the foreign purchasing power available (plus assistance) and this was done by import controls.

At first, efforts to resume trade took the form of bilateral agreements, with more or less equal commitments on each side to buy and sell in increased amounts, thus not adding to each other's trade deficit. Obviously, this was a very limited approach and only the establishment of the European Payments Union made possible multilateral settlements whereby a country might use its surpluses with one country to offset deficits with another. At the same time, the O.E.E.C. embarked on a program of trade liberalization whereby the various member countries simultaneously undertook to remove quota restrictions against each other. There have been times when countries felt their reserves were threatened and have backslid. But in June 1954, the average degree of liberalization achieved was about 80 percent; Austria and France had freed more than 50 percent of their trade, while Germany, Italy, the Netherlands, Portugal, Sweden and Switzerland had freed more than 90 percent.

This is real progress, of course, but the quota restrictions that remain are important, and from time to time countries have had to suspend liberalization (the United Kingdom in November 1951 and France in February 1952). Also, it should be noted that liberalization of trade in agricultural produce lags behind that in raw materials and even manufactured goods. Furthermore, the liberalization program does not relate to trade on government account, and this has increased substantially since before the war.

Quotas are largely a postwar phenomenon. Although they were adopted originally for reasons of balance-of-payments, they also provide protection for domestic industries. The substantial residue still present is therefore net loss when compared with the earlier European trade picture; but the situation is decidedly better than it was in the immediate postwar years.

It is difficult to evaluate the argument sometimes heard that reduction of barriers to intra-European trade will increase competition within the area, that this will lead to increased productivity, and that this greater production will act to strengthen European sales in markets outside the European area. This seems to be a series of propositions containing many "leakages," so that the premise does not necessarily lead to the conclusion. It is not clear that increase in productivity requires such a large market, except for a few products involving very large-scale production. (The argument was first put forward by an automobile manufacturer.) Competition may come from outside, or may take place in the outside markets where a small country would certainly have to sell to obtain foreign exchange. And differences in productivity can be more than offset by the level of foreign exchange rates. In fact, it is easy to postulate that a preferred market within Europe might reduce some of the pressure to venture into other areas, or to argue that competition is a cultural habit and not much related to whether the area involved is large or small. Despite these caveats, most economists would agree that removing barriers will tend to lower rather than increase costs. It is clear that the E.P.U. and the program to liberalize trade made possible a considerable expansion in intra-European trade, and this is certainly to be desired.

The O.E.E.C. focused its attack on quantitative restrictions for four reasons. First, their economic effect is likely to be greater than that of a tariff. Tariffs add a fixed amount to the cost of delivering the goods to the importing customer, but there is no limit to the amount of goods which can flow over the barrier. Quotas, however, establish a limit in terms of quantities and the effect on price is limited only by the elasticity of the demand. Second, quotas may be used for discrimination among competing countries, while tariffs, at least so long as the most-favored-nation clause applies, do not inject an artificial selection among foreign producers. Third, quota restrictions are the latest in date of the various types of international barriers and have the least vested interest behind them. Finally, tariffs are more clearly in the domain of GATT--the General Agreement on Tariffs and Trade--and international organizations have an undue respect for the "no trespassing" rule.

The measurement of tariff levels is certain to be an unsatisfactory undertaking. However, estimates published by GATT indicate that European tariffs rose substantially from 1925 to 1939 and that the trend has been downward since 1947 as a result of multilateral negotiations at Geneva, Annecy and Torquay. While Scandinavian tariffs were lower in 1952 than in 1925, those of the United Kingdom and other countries of Western Europe were higher. The prospect is not bright for further reductions by the method of reciprocal concessions, because some countries already have very low tariffs and therefore cannot reciprocate. GATT has been considering proportional reductions as a possible road to further progress, but no agreement on principle or method has yet been reached. Thus in regard to tariffs as well as quotas the situation is worse than in the inter-war period but better than during the early postwar years, with further improvement appearing to be increasingly difficult.

If one dares to draw generalizations from statistical aggregates, it may be noted that the records show that the value of export trade by the O.E.E.C. countries has increased each year since the war, and, with the exception of 1950, each year since 1948 has seen the value of their exports to each other expand more rapidly than exports to other areas. The percentage of intra-O.E.E.C. exports to total exports during the first six months of 1954 was slightly higher than the prewar level (50.6 compared with 50.4). Since imports from outside the area are related to the amount of external aid, and since this has been diminishing, imports from sources within the area have increased more rapidly since 1948 than imports from other countries. There does not appear to be any appreciable difference in price behavior for export trade within the area and to countries outside it, so the percentage changes in value of exports reflect changes in volume of trade. However, prices of goods from outside the area have risen relatively more from prewar levels than prices of goods traded within the area, so the increased ratio of imports within the organization to total imports (44.1 compared with 39.3) probably understates the changing source of imports.

Two conclusions can be drawn from this record. In the first place, since imports and exports in intra-O.E.E.C. trade must be approximately equal, imports from outside the area have not increased as rapidly as have exports to the outer area. Secondly, trade among the countries which are members of the organization has shown a substantial gain during the postwar period; and they have increased their trading with each other more than with the rest of the world. It might also be added that the volume of intra-O.E.E.C. trade has increased more rapidly than the rate of production, when measured either against the prewar situation or since 1948. These figures would tend to support the conclusion that the European countries constitute slightly more of a common market today than before the war, and substantially more than in the early postwar years.

III. THE FLOW OF LABOR AND CAPITAL

But the notion of a common market does not relate solely to the purchase and sale of commodities. It also involves the flow of the mobile factors of production, labor and capital. In the days when there was substantial migration to the United States and other areas, this safety valve tended to equalize labor differences in Europe. During the inter-war period, restrictions on the international movement of peoples developed rapidly. Doors were closed overseas, and licensing requirements for permission to work, encouraged by labor unions and professional organizations, hampered the foreigner's opportunity in Europe.

Since the war, the situation has remained largely frozen because of the shortages of goods and houses, the fear of a flood of refugees, the implications of higher birth rates, and, finally, the commitment of governments to maintain full employment. To be sure, exceptions have been made--as in France, where it is estimated that there has been a total gross immigration of 500,000 between 1946 and 1952, and in the case of coal miners into Belgium and Great Britain and of foreign seasonal workers into Switzerland. One consequence of the establishment of Benelux is that workers can move freely among the three countries, although they do not seem to have done so in any appreciable numbers. Nevertheless, it is probably true that the boundaries are as tightly closed as before against intra-European migration as a means of achieving more efficient utilization of Europe's labor supply. Certainly, there has been no significant increase in labor mobility.

The entire international long-term capital market has been inactive since the early thirties. Furthermore, the postwar period has been one in which the need for capital within each country, plus the obligations of a number of them toward overseas territories, was so great as to make any redistribution of capital funds among the European countries quite unlikely. It is difficult to get a pooling if it merely means shifting capital from the country where the shortage is least severe to one where it is greater.

Actually, the O.E.E.C. was never able to develop a "plan for Europe." A limited attempt was made to achieve some rationalization in certain strategic areas by setting up technical committees in iron, steel and oil. The member countries informed the committees of projects for expansion, reconstruction or modernization in these sectors of industry. The committees reviewed the projects and in the light of the total European picture reported back to the country and to the E.C.A. It is said that in certain cases programs were revised or adjusted, and that the accumulated information made it possible to consider implications for raw materials, power and the like.

But the nearest to a coördination in the use of capital has come through United States aid. This flow was consciously directed to the different countries with an eye to their need for foreign finance. However, this element in the picture is sharply diminishing. In general, it can be said that the supply of capital in each country is related primarily to its own savings (including enforced savings through taxes) and that each country allocates its investment resources largely within its own boundaries. Thus separate national needs and planning tend to limit greatly the efficient allocation of capital in Western Europe as a whole.

Another element in the disintegration of Europe which reached back to the prewar era was the breakdown of the international monetary machinery. The thirties saw devaluations and related variations in foreign exchange levels. In the immediate postwar years nearly all currencies were inconvertible and international payments were largely on a bilateral basis. Short-term adjustments were made through limited inter-government credits.

Although American assistance improved the situation somewhat, the chief agency for putting intra-European settlements on a multilateral basis was the European Payments Union, established in 1950. Not only did this device provide for the clearing of surpluses and debits among its members but it also provided for the extension of credit within certain limits. Thus, each country could operate on the basis of its economic position toward all the others instead of being concerned over each bilateral balance. The E.P.U. is of course important beyond the European countries involved; it probably handles the settlements of some 50 percent of the payments arising from world trade.

The basic Payments Union agreement itself makes clear that it was not designed to be the first step toward a single currency for Europe, but rather that it would be a transitional system intended to facilitate a return to complete multilateralism in trade and to the general convertibility of currencies. It has achieved its initial purpose of bringing about a substantial degree of convertibility for the currencies of its member countries with each other. However, while convertibility within a regional system is helpful to the members, problems remain because of surpluses or deficits with countries outside the area. The monetary machinery will never work smoothly if the basic economic relationships do not permit general multilateral trade and, with it, the convertibility of currencies.

One of the most important contributions made by O.E.E.C. and E.P.U. is in convincing the members that they have an important interest in each other's business. Thus it has come to be accepted that the economic situation of any member of E.P.U. is subject to detailed examination by a competent group representing the organization. From time to time, the 18 member governments submit to an extremely detailed examination of their economic and financial positions and policies--once closely guarded secrets. These examinations often serve to bring to light repercussions which such policies may have on the economies of other countries. The international organization seems to have no inhibitions about making recommendations concerning the internal financial and economic policies of its members (except direct suggestions as to exchange rates). At this point, something new has been added--a real degree of coöperation among the countries of Western Europe in monetary and fiscal policy.

IV. FORMS OF PARTIAL INTEGRATION

In examining the progress which has been made toward European integration, one must also note certain forms of partial integration, the first being the effort to develop customs unions or other special forms of coöperation by smaller groups of countries. In his Paris speech, Mr. Hoffman had stressed the desirability of such arrangements, and in the renewal of the E.C.A. legislation in 1949 much was made of their promise. However, in spite of brave statements of intent, unstinting work by technical experts and frequent meetings by ministers, Benelux stands out as the only case where the negotiations have led to practical results. The French and Italian Governments signed a customs union treaty but it failed of ratification. The Scandinavian countries began the consideration of a customs union in 1947, but ended by listing the problems which could not be overcome. (To be sure, they did amalgamate their separate air lines.) A project involving both trade and payments to include the Benelux countries, France, Italy and possibly Germany (known by the charming name of Finebel or the less euphonious Fritalux), was dropped since its objectives largely duplicated those of E.P.U. Negotiations between Greece and Turkey appear to be in a stalemate.

The decision to establish an economic union of Belgium, the Netherlands and Luxembourg was made in 1943. Five years later, customs duties among them were abolished and a common tariff against fourth countries was adopted. (Benelux has negotiated in GATT as a unit.) The elimination of tariffs at the time was largely symbolic, since it was not until the middle of 1949 that internal quantitative restrictions on trade were abolished, with some very important exceptions. Benelux is of course a relative success in the absence of progress elsewhere, but it does suggest that substantial difficulties are inherent in economic union. The Benelux Governments have declared that their hope to achieve the free movement of goods and resources makes necessary a close coördination of internal financial, monetary and economic policies as well as joint external economic policies, and that they have not yet succeeded in bringing them into line, though this is their immediate objective.

Various less ambitious arrangements have been made among other nations, perhaps the most important of which involved the United Kingdom and the Scandinavian countries in the payments field (Uniscan). Signed early in 1950, this agreement provided for a limited freeing of some types of capital transfers and service items and the unlimited acceptability of sterling within the area. The recent announcement that France and Germany would endeavor to coöperate more closely on certain matters of common economic interest in trade and investment is as yet only an agreement between heads of governments. How it will be carried out remains to be seen.

There is little encouraging to report in the way of partial integration by geographical sub-groups, but the idea of putting sectors of the economies of several nations under a supranational authority--as in the European Coal and Steel Community--is a recent major experiment. Many supporters of the Coal and Steel Community--the Schuman Plan--feel that it suggests the route to be followed for real European integration. It is too early to be able to judge its effectiveness as an instrument of integration, but it has broken down many barriers within the area of the six countries involved; the intra-community trade in coal has already increased while coal imports into the area have fallen. No notable change in pattern for steel is yet visible. The fact that the Authority has substantial funds from its regular revenue and from a United States loan gives it the opportunity to apply new capital on the basis of over-all economic criteria rather than according to separate national compartments.

The Schuman Plan clearly is an integrating force in Europe. In fact, the chief problem of its future is whether or not it can operate on a common market basis alongside national behavior in other economic categories. If wage, tax or credit policies differ widely among the members, then the common market for coal and steel will be subject to tremendous strains. On the other hand, it will itself exert a pull toward compatible policies. Undoubtedly, the common defense effort will contribute to such a harmonization. Perhaps the single patent office as envisaged by the Council of Europe is also worthy of note as a development in a highly specialized area. At present, however, no other suggestion for sector integration, as, for example, that of a "green pool" to integrate European agriculture, seems to be under serious consideration.

V. CONDITIONS OF FURTHER PROGRESS

By the usual indicators, great economic progress has been made in Europe during the last five years. But progress in the direction of integration has not been so notable, despite apparent European enthusiasm and strong American support. Evidently there are many forces besides social and political inertia which give national boundaries persistent importance, many vested interests which prefer the security of a protected market to the strains of external competition.

It has always been recognized that one obstacle to integration would be the different levels of economic wealth and resources of the various countries. Other differences are also important. A quite complete economic integration would be much easier to achieve if all the countries involved either had totalitarian governments or a minimum of government intervention in their economies. But the fact that they vary so widely in the extent to which governments participate in economic life and take responsibility for it makes unification particularly difficult. Under these circumstances, it has been much easier to arrange joint adventures rather than an unlimited partnership.

As to the likelihood of further progress, three changing factors need examination. The first is that so much economic progress has been made. There is obviously a relationship between the economic pressures under which a country finds itself and its willingness to take revolutionary steps. When there are shortages of raw materials and capital and when the international machinery falters, a small country is likely to be in special trouble. The larger the country, the more its recovery is in its own hands, so to speak, and the less it is at the mercy of the external world. Under such circumstances, size looks very attractive.

Today the economic pressures have eased. The European economies have made a strong recovery. The index for industrial production for O.E.E.C. countries was at 80 in 1948, 100 in 1950, 116 in 1953, and 125 in the second quarter of 1954. Intra-European trade has expanded even more. Measured in volume, it rose from an index of 59 in 1948 to 100 in 1950, 120 in 1953, and 140 in the second quarter of 1954. Rearmament expenditure seems to have reached a plateau. Inflation has been brought under control and reserves are much greater. In other words, the painful postwar economic strains and stresses are relaxing. The countries of Western Europe have more leeway to coöperate in their programs and policies; but by the same token they are less likely to take revolutionary steps, such as a more formal unification of Europe would involve.

Nor is economic pressure the only force which has diminished. The Gray Report (November 1950) stated that rapid progress toward Western European integration was of great immediate significance as an essential element in improving national morale and fears for the future on the Continent. The last three years have seen this picture change also. To be sure, there is continued interest in the joint effort of common defense--an active force for integration. Since a strong defense must rest upon a strong economic base, the interest in economic progress will continue, but it no longer holds the center of the stage and the direct pressures for extraordinary measures of economic integration have somewhat subsided.

The second development of some importance is the growing awareness of the fact that there are limitations on the regional approach. The economist does not think in regional terms; to him, geography is important only as it affects shipping costs and creates a problem of the appropriate location of economic activity. The ideal economic goal is to have or approximate a common market for the world rather than merely for some region. The larger the unit, the better.

The substantial economic progress which has been made in Europe since the end of the war has without doubt been the result of the efforts of the individual countries, plus United States aid, plus the coöperative effort created within the O.E.E.C. However, the problem of Europe is not merely one of its internal economy but of its relationship with the rest of the world. Trade, payments, investments, raw materials are all matters which reach beyond the borders of Europe. Intra-European convertibility still leaves the dollar problem unsolved. Lower trade barriers within Europe are no solution to the expansion of trade with other areas. To be sure, it can be argued that if economic integration of Europe improves its productivity, its competitive position in the United States and in third markets will be strengthened. But barriers outside Europe can also interfere with European progress.

One basic issue is whether or not such a regional preference system works against an even wider multilateralism. Obviously, a system which lowers barriers within the area but raises them against the rest of the world has just this effect. There clearly are economic gains in a system that lowers internal barriers while keeping the outside barriers unchanged. But even so, there are disadvantages if it diverts attention from the wider goal or means the establishment of new structural patterns which do not represent the best allocation of resources within a wider area.

Nor is the principle that barriers will not be raised against outside areas always easy to maintain. How can one judge the action of the United Kingdom in 1951 when it increased restrictions against both the United States and the E.P.U. area, maintaining the discrimination established under the European liberalization scheme? Particularly relevant is the case of Belgium when for some time it had been a persistent creditor in the Payments Union in excess of its quota. The program which was followed for several years over United States protest was that Belgium should place additional restrictions against the importation of United States goods as a means of encouraging purchasing power to be diverted to European suppliers, thus helping to correct her intra-European payments position. The good neighbor policy within the European economy came into direct conflict with that of a good neighbor in the world economy.

Many of the objectives of European integration can be accomplished by actions on a smaller scale than the European continent, or require action on a greater scale. Premier Mendès-France is not waiting for the unification of Europe, but has said that he hopes to stimulate French industry by opening the doors to foreign competition. In the monetary field, interest is centered largely on a wider extension of convertibility. Perhaps the best source for further economic progress lies in the directions laid out by the early postwar planners. Regionalism provides only the next best solution.

The third special point to be noted is that many people supported economic integration chiefly as a means to political unification, and their interest has now turned to other areas of international coöperation. Senator Vandenberg said in 1949: "This drive for self-help and mutual aid is not only economic. Already it envisions coöperation for security, and it is political in its ultimate aspiration. Here stems the ultimate United States of Europe or its effective equivalent." Senator Fulbright said it more simply: "The E.R.P. will prove to have been a colossal failure, unless political unity is achieved in Europe."

Clearly, the economic objective has not proved sufficient to bring about actual unification, although considerable economic integration has been achieved. However, the desire for greater European unity now has another driving force in the new Western European Union. In fact, Chancellor Adenauer and President Eisenhower in a joint statement declared that when the decisions taken at London and Paris become effective, "the road towards a strong and united Europe will have been paved." It is likely that, as distinct from the steps contemplated in 1949 when everything seemed to stem from economic interest, further progress toward actual unification will depend upon the strength of other unifying forces. It is likely that, as in the case of the O.E.E.C., the Western European Union and NATO will provide the unity of action needed in their particular fields. Again, the problem is dealt with by a joint adventure rather than a full partnership.

VI. A TREND ESTABLISHED

After this mixed report on European developments, how can one summarize the situation? If one uses the word "integration" in the dynamic sense of a process rather than a goal, then it is clear that many factors are contributing to the integration of Europe, although the goal of the common market and all the rest is still far away. The trend seems toward a gradual lowering of trade barriers. The monetary situation is less and less a positive obstacle. The Schuman Plan represents a major experiment. Some of the lesser geographical groupings have some promise of achieving closer economic relationships.

However, the decided improvement in the European economic situation has made economic necessity less a rallying-point for those who seek unification, and the reduced amount of American economic aid has weakened one strong centripetal force. But if the drive toward integration of the European economy itself seems less persistent, other integrating forces are at work. The defense community will represent an important factor, even though the machinery of supply in the new program does not appear to promise as much centralization as did the E.D.C. proposal. The political community seems to be gathering strength and the Council of Europe concerns itself from time to time with problems in the economic field. Finally, to the extent that the broader world economy achieves relaxation in trade barriers, increased currency convertibility and a more orderly capital market, this will contribute to the strength of the European economic community.

Perhaps the most important element of all is the fact that certain institutions and habits have been formed within the European community. Government representatives have come to realize that the actions of any one country may seriously affect others, and new forms of inter-governmental consultation have developed. In a world where economic life is so greatly affected by government actions of one kind or another, this new intimacy is of major importance. If European integration is still far away from the ideal goal which might be achieved under political unification, at least developments in the last five years have checked the disintegration of Western Europe into autarchic economic islands and set the trend firmly in the direction of a joint effort to deal with common problems.

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  • WILLARD L. THORP, Professor of Economics, Amherst College; Assistant Secretary of State for Economic Affairs and member of U.S. delegations at many international conferences, 1946-52; author of "Trade, Aid or What?" and other works on economic topics
  • More By Willard L. Thorp