European Economic Community
The European Economic Community (EEC) was a foundational regional organization established in 1957, aiming to foster closer economic integration among its member states. It represented a significant step in post-World War II efforts to prevent future conflicts and promote prosperity through economic cooperation, falling under the broad category of international economic organizations. The EEC established a common market designed to eliminate trade barriers and ensure the free movement of goods, services, capital, and people across member countries.
History and Origin
The groundwork for the European Economic Community was laid in the aftermath of World War II, driven by a desire for lasting peace and economic recovery in Europe. A key precursor was the European Coal and Steel Community (ECSC), formed in 1951, which integrated the coal and steel industries of its six founding members: Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany10, 11.
Building on this success, these six nations signed the Treaty of Rome on March 25, 1957, officially establishing the European Economic Community (EEC) and the European Atomic Energy Community (Euratom)8, 9. The EEC came into operation in January 1958. Its primary objective was to create a customs union, progressively abolishing tariffs and quotas between member states and establishing a common external tariff on goods from outside the union7. This marked a departure from previous attempts at international cooperation by committing members to a deeper level of economic interdependence and a shared trade policy. Over time, the EEC expanded its membership, with Denmark, Ireland, and the United Kingdom joining in 1973, followed by Greece in 1981, and Portugal and Spain in 19865, 6.
Key Takeaways
- The European Economic Community (EEC) was a regional organization established by the Treaty of Rome in 1957 to promote economic integration among its member states.
- Its primary goal was to create a common market by eliminating internal trade barriers and establishing common external tariffs.
- The EEC paved the way for the free movement of goods, services, capital, and people among its members.
- It evolved into the European Community (EC) in 1993 and was eventually absorbed into the broader framework of the European Union (EU) in 2009.
- The EEC aimed to foster peace and prosperity by linking the economies of European nations.
Interpreting the European Economic Community
The European Economic Community was interpreted as a significant force for regional economic growth and stability. Its formation facilitated increased intra-European international trade by dismantling customs duties and other restrictive practices. The establishment of a common external tariff meant that goods imported from outside the bloc faced the same customs duties regardless of which member state they entered, simplifying trade relations and promoting a unified stance in global commerce.
The EEC's structure, including institutions like the Council of Ministers, the Commission, and the European Parliament, demonstrated a move towards supranationalism, where member states delegated certain powers to a central authority. This allowed for the implementation of common policies across diverse national economies, enhancing the efficiency of resource allocation and fostering greater competition within the common market.
Hypothetical Example
Imagine a furniture manufacturer located in Belgium in the early years of the EEC. Before the EEC, if this manufacturer wanted to sell their wooden chairs in West Germany, they would face specific German import tariffs and potentially complex customs procedures. This would increase the cost of their chairs, making them less competitive against German-made furniture.
With the establishment of the European Economic Community, and the progressive elimination of internal tariffs as outlined in the Treaty of Rome, the Belgian manufacturer could eventually ship their chairs to West Germany without incurring additional customs duties. This reduction in transaction costs allowed them to sell their product at a more competitive price, increasing their potential market size and fostering greater specialization. This direct benefit to businesses exemplified how the EEC aimed to stimulate economic activity by creating a larger, more unified market for goods and services across its member states.
Practical Applications
The principles and structures established by the European Economic Community had profound practical applications, laying the groundwork for many aspects of modern European economic life. The EEC's success in removing internal trade barriers led to a significant increase in trade among its members, fostering economic interdependence and growth. Its policies, such as the Common Agricultural Policy (CAP), aimed to support farmers and ensure food security within the bloc, though they also attracted criticism.
The EEC's evolution saw it deepen its integration efforts, moving beyond a simple customs union towards a common market allowing free movement of capital and labor. This progress eventually culminated in the creation of the European Union (EU) in 1993 with the ratification of the Maastricht Treaty. The EU effectively absorbed the EEC, retaining many of its core economic functions as the "European Community" pillar. The ultimate goal of monetary unification and the adoption of a single currency, the euro, was a direct continuation of the EEC's foundational ambition for ever-closer union4.
Today, the legacy of the European Economic Community is evident in the vast single market of the European Union, which continues to facilitate trade, investment, and mobility for its member states. For instance, the EUR-Lex portal provides direct access to the founding treaties and subsequent legislation that built upon the EEC's initial framework, demonstrating the continuity of European integration efforts.
Limitations and Criticisms
Despite its successes, the European Economic Community faced various limitations and criticisms, many of which continue to be debated in the context of its successor, the European Union. A primary critique revolved around the concept of national sovereignty. As the EEC progressed towards deeper integration, member states were required to cede certain decision-making powers to supranational institutions, leading to concerns about democratic accountability and national control over policy areas3.
The Common Agricultural Policy (CAP), while aiming to support farmers, was frequently criticized for its high costs and for creating distortions in global agricultural trade through subsidies and protective measures2. Economists also debated whether the EEC's customs union truly created new trade or merely diverted existing trade from more efficient non-member countries to less efficient member countries, an effect known as trade diversion. Some argue that despite the EEC's intentions, trade liberalization in Western Europe was slow and that broader global trade agreements played a more significant role in post-war prosperity than the EEC itself1. Furthermore, the bureaucratic nature of the EEC's institutions, which were later absorbed by the EU, has often been a point of contention, with critics arguing about the complexity and opacity of its decision-making processes.
European Economic Community vs. European Union
The European Economic Community (EEC) and the European Union (EU) are closely related, with the former serving as the direct predecessor and core component of the latter. The EEC was established by the Treaty of Rome in 1957, primarily focusing on economic integration through the creation of a common market and a customs union. Its mandate was largely economic, aiming for the free movement of goods, services, capital, and people.
The European Union, on the other hand, was formally established in 1993 by the Maastricht Treaty. The EU marked a significant evolution, building upon the EEC's economic foundations to include broader political objectives. While the EEC's economic structures were integrated into the EU as the "European Community" (EC), the EU expanded cooperation into areas like common foreign and security policy, justice, and home affairs. Thus, the European Union represents a much deeper and wider form of integration, encompassing both economic and political dimensions, whereas the EEC was predominantly an economic entity. In 2009, the European Community was formally abolished, and its institutions were directly absorbed into the wider framework of the EU.
FAQs
What was the primary goal of the European Economic Community?
The primary goal of the European Economic Community (EEC) was to foster economic integration among its member states by establishing a common market. This involved eliminating customs duties and restrictions on trade between members, allowing for the free movement of goods, services, capital, and people.
When was the European Economic Community created?
The European Economic Community was created on March 25, 1957, with the signing of the Treaty of Rome. It officially came into operation on January 1, 1958.
How did the European Economic Community evolve into the European Union?
The European Economic Community evolved into the European Union through a series of treaties and deepened integration. The most significant step was the signing of the Maastricht Treaty in 1992 (which came into force in 1993), which formally established the European Union, incorporating the EEC's economic pillar and adding new areas of cooperation such as common foreign and security policy and justice. The EEC was then renamed the European Community (EC) and eventually fully absorbed into the EU framework in 2009.
Which countries were the founding members of the EEC?
The six founding member countries of the European Economic Community were Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. These nations are often referred to as the "Inner Six."
What is the difference between a free trade area and a customs union, as implemented by the EEC?
A free trade area removes tariffs and quotas among its members but allows each member to maintain its own independent trade policies with non-member countries. The European Economic Community, however, established a customs union. This means that in addition to removing internal trade barriers, member states also adopted a common external tariff, applying the same duties to goods imported from outside the union.