The Fourth Force

When the history of the 20th century is written, last week is likely to prove one of its watersheds. For in the seven days which spanned 1958 and 1959, Western Europe began to flex its economic muscles for the first time in a decade, and took its biggest step toward unity since the death of Charlemagne 1,145 years ago.

The simultaneous plunge into limited currency convertibility taken by ten European nations (TIME, Jan. 5) was a dramatic measure of Europe's recovery from the catastrophic economic consequences of World War II. Part of Europe's new confidence in its own currency rested on a decreasing dominance of the dollar. Last year U.S. imports ran considerably above U.S. exports, with the result that $2.2 billion in gold and half a billion in dollars flowed out of the U.S. into foreign treasuries. Armed with increased gold reserves and with the knowledge that the German mark or Swiss franc is just about as desirable a currency as the inflation-dented U.S. dollar, all of Europe's trading nations felt strong enough to accompany Britain into convertibility and thereby to divide the risk of doing so.

Virtually the only European voice raised against this dramatic step was that of British Labor Party Leader Hugh Gaitskell, who charged that it would make the pound "more vulnerable to speculation." (At least part of Gaitskell's fear came from his awareness that a Labor election victory, with its emphasis on welfare-state spending and other inflationary actions, would probably weaken international confidence in the pound.) To the rest of Europe's politicians and money managers, the fact that their nations had at last begun to move toward full convertibility was a source of pride and new hope. Glowed "the engineer of the West German miracle," rotund Economics Minister Ludwig Erhard: "Who will blame me for feeling deep personal satisfaction? After all, it was I who eight years ago in a world of destruction, disorder and disbelief called for convertibility. What did I get? Mockery and scorn. Yet of all conceivable forms of integration in the free world, free convertibility of currencies is the most fertile."

The Dream of the Franks. The timing of convertibility was largely determined by the other major event of the week, the planned birth on New Year's Day of the European Common Market. The boundaries of this new entity are roughly those of Charlemagne's Europe (Charlemagne ruled more of Germany, but only half of Italy). But this new super customs union, among states which remain politically sovereign, has a power potential undreamed of by the 9th century Franks. The 166 million people of the Common Market nations produce more steel than Soviet Russia, do more of the world's trade (one-fifth) than the U.S. No warrior hosts throng around the eight-story Brussels headquarters of the Common Market. Calm-voiced Walter Hallstein, 57, the onetime German law professor who is the Common Market's chief administrative officer, is no Charlemagne. But he has powerful weapons in the freely given adherence and common aspirations of the people of six nations.

A Boon for Endive Growers. Getting off to a cautious start--they plan to spend 12 to 15 years moving toward their ultimate goals of a common tariff wall, common wage and tax levels and interchangeability of workers--the members of the Common Market began last week by giving one another's goods the benefit of relatively small tariff cuts (10% below the January 1957 level). Each nation agreed to raise its import quotas by 20%, or to a figure equal to 3% of its production of the same item.

For some member nations last week's changes caused little or no discomfort. West Germany, where Erhard had long ago cut most tariffs to the prescribed level or below, had little reason to fear new competition in its home markets, and every reason to hope to sell more automobiles in France and Italy. For most of Benelux--and particularly for Belgium's 2,000 endive growers, often forced to let their crops rot because of French import quotas--the coming of the Common Market promised to be an unalloyed boon.

For France, whose industries have long been sheltered by high tariffs, the changeover was painful indeed (see below). Where everything else had failed, the birth of Little Europe had at last forced France to face up to economic reality.

The Frogs' Legs List. Important as the Common Market's economic goals were, the men who first conceived of the idea were chiefly interested in a political objective--the creation of a united Europe that would put an end to the destructive, century-old quarrel between France and Germany. It was this political goal that made the Common Market the emotional center of a bitter dispute. Britain, unwilling to join the Six because of its own Commonwealth tariff commitments, cried "discrimination" when some benefits of membership were denied it. The British were less concerned by the possible exclusion of their products from the Six than by the prospect that they would not be allowed to expand their sales within the Common Market as greatly as member nations would. This, said London, would be intolerable, and Britain would be forced to retaliate economically.

Partly to take some of the steam out of the British threat. France's De Gaulle last week completely abolished his country's import quotas on some 900 products. Some British businessmen, glumly concentrating on the fact that France had retained quotas on automobiles and Scotch whisky, angrily labeled the whole lot "a snail and frogs' legs list." But German businessmen noted that more than 10% of the items in question were chemical products and that the others included tractors, refrigerators, cameras.

For all their exaggerated fears, the British had some cause for complaint. Steady progress toward free trade is vital to the economic health of the whole free world, and particularly so for a trading country like Britain. But it was Britain's own decision to stay outside the Common Market. Sooner or later, Britain would have to come to terms with it, for barring catastrophe, the Common Market will one day take its place alongside the Soviet bloc, the dollar area and the sterling area as a fourth great force in the world economy.

This file is automatically generated by a robot program, so reader's discretion is required.