The Roots of the European Union

From the beginning, the European project had more to do with jumpstarting capitalism than ending war.

The signing of the Treaty of Rome in March 1957. EPA / ANSA

During a press conference earlier this month, German chancellor Angela Merkel had something of a disagreement with President Donald Trump.

After Trump claimed that German trade negotiators, in securing trade deals with the United States, “have done a far better job than the negotiators for the United States,” Merkel was forced to clarify: Germany does not have its own trade negotiators. Nor does the country agree its own trade accords. Germany’s trade agreements are arranged through the European Union (EU). This is true for all twenty-eight member states. And it has been for a long time.

The treaty establishing the European Economic Community (EEC), the precursor to the European Union, was signed sixty years ago this month, on March 25, 1957. Commonly known as the Treaty of Rome, the accord set up a customs union and common market between Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. It also granted the EEC the power to handle external trade relations for its members.

Believing that the United States and Germany bilaterally negotiate trade is an embarrassing faux pas for a president who bragged about his deal-making acumen throughout the campaign, but Trump is surely not the only person to find the relation between the European Union and its member states confusing.

The sixtieth anniversary of the Treaty of Rome provides an opportune time to look back at the EEC’s founding, and to clear up some common misconceptions.

First, the oft-told story of Jean Monnet as the driving force behind the EEC and European unification is just plain wrong. This narrative is relayed by both the European Union’s opponents and supporters. As the European Union’s partisans tell it, Monnet was the great visionary who guided Europe out of an era of war and strife and into an era of peaceful cooperation. According to the European Union’s opponents, Monnet was the elitist cosmopolitan who undermined European democracy by transferring power away from national parliaments to a distant bureaucracy.

Both versions of the story are wrong. Monnet simply did not matter that much. Most of his initiatives failed or only half succeeded, and he had little involvement in the EEC’s creation. The real impetus behind the EEC was economic: namely, the need to reduce tariffs to facilitate the expansion of European trade, and thereby increase European growth.

The specific form the EEC took, however, wasn’t inevitable. It reflected the changed political situation in postwar Europe. While many European liberals simply wanted to reduce tariff barriers, the shifting political context necessitated that workers and farmers receive at least some protection from the vagaries of trade. It’s that context which has changed in the ensuing decades, leaving us with a profoundly undemocratic European Union.

Monnet’s Road to Nowhere

The standard story of the EEC’s founding, including the version told by the European Union, is one that’s reminiscent of boilerplate American history, with tales of founding fathers and great visionaries driving change forward. In the European story, the unlikely figure of Jean Monnet takes center stage.

Monnet was a diplomat, civil servant, and banker. He never ran for elected office or engaged in public politics, but instead worked primarily behind the scenes to advance his deeply held ideological belief that Europe must be unified.

Monnet’s first strategy was to try to expand the remit of the organizations administering the Marshall Plan. When that went nowhere, he set about attempting to establish a common European administration of Europe’s coal and steel industries, which were largely based in the German, French, and Belgian borderlands.

Monnet laid out his grand vision in the 1950 Schuman Declaration (named for Robert Schuman, the French foreign minister and former prime minister who co-wrote and presented the document in May of that year). In it, they set no less a goal than world peace. But they accepted European unification as an incremental advance, and took “the pooling of coal and steel production . . . as a first step.”

The negotiations for the European Coal and Steel Community (ECSC) were rocky. A major setback occurred when, with the outbreak of the Korean War, America appeared to be withdrawing its support for the initiative. With the Cold War heating up, defending against any potential Soviet invasion was a more pressing concern for the US government than Europe’s economic integration and recovery. America decided that Germany needed to be rearmed, and sent more US troops to the country.

Monnet responded to this change of focus by expanding the ECSC negotiations with the Pleven Plan (named for the French prime minister of the day). The Pleven Plan called for the creation of a one-hundred-thousand-strong army under the name the European Defense Community. Under the plan, Germany’s armed forces would be organized exclusively through the EDC, answerable directly to it and not the German government. The armed forces of Belgium, France, Italy, Luxembourg and the Netherlands would report to their national governments while participating in a joint EDC command structure.

Of course, any such army would require political oversight, so the scope of the negotiations grew and grew — from talks over a coal and steel community, to a coal and steel community plus an army, to a coal and steel community with an army and a state-like institution called the European Political Community (EPC), which would exercise political control over the EDC.

Ultimately, however, Monnet had little to show for his efforts. In 1954, the French National Assembly rejected the EDC proposal, seeing it as a sacrifice of national sovereignty. The EDC-EPC plan came tumbling down, leaving only the core of the original plan: the ECSC.

The Paris Treaty, which established the ECSC, was signed in April 1951 and came into force in July 1952. It created a rather odd arrangement. A single market, free of trade barriers, was set up for coal and steel; external relations between the European coal and steel industry and other nations were conducted through the ECSC; and the industry was regulated in common.

The ECSC also created a high authority, which ran the ECSC day to day; a legislative assembly, made up of parliamentary representatives from the six member states; a council of ministers, comprised of the relevant ministers; and a court of justice, which dealt with legal challenges and conflicts over the ECSC.

It was a vast set of infrastructure for a relatively minor institution. But it was this infrastructure that secured the ECSC’s place in history, because, unfortunately for Monnet and Schuman, coal and steel proved to be a shaky foundation for European unification.

With the growth of electricity and oil, and with transformations in the transport industry, the coal industry went into decline, and the need for heavy industry to be located near coal fields essentially disappeared. Rather than break down borders, the ECSC effectively oversaw the decline of two old European industries.

The EEC Was About Economics

As the EDC-EPC plan was dying, Dutch finance minister Johan Willem Beyen began pushing his own proposal for European economic integration: a customs unit composed of the ECSC’s six member states. This economy-centered plan reflected a wider Dutch belief — also held, for example, by their Labour Party prime minister Willem Drees — that the real threat during the Cold War was not a land invasion from the Soviet Union, but that Europe would fail to recover from economic stagnation. Drees believed that economic security, not military security, was the most effective defense against the Soviet Union.

This concern with the economic wasn’t unfounded. Between 1913 and 1950, Western European economies had grown at an average of just 0.8 percent per annum — lower than any other comparable period in the previous two hundred years. The middling growth rate was only slightly higher than that between 1870 and 1913 — when Western Europe expanded at a 1.3 percent clip — and shockingly, it was lower than the 1820–1870 period, when growth was 1.1 percent per annum even though the industrial revolution was only beginning to be felt in Europe.

In retrospect, of course, we know that the postwar era would become an epoch of unparalleled economic growth in Western Europe, with the regional economy expanding 4 percent annually, easily outstripping any earlier period. But at the time, it was far from obvious that economic growth would pick up.

The key to postwar expansion was the increase in investment and trade.

After a precipitous decline in trade and exports between 1913 and 1950 — exports dropped by 0.14 percent per year — both took off in the decades after World War II. Between 1950 and 1973, exports from Western European countries surged by an astounding 8.38 percent annually.

Many historians of European integration, such as Andrew Moravcsik and John R. Gillingham, rightly point to this dramatic increase in trade as the key element in European postwar integration. Put simply, the creation of the European Economic Community is largely an economic story. Despite what the European Union’s boosters might say, the EEC’s primary purpose was not peace, or the creation of a federal government for Europe. Its purpose was to reduce trade barriers and restore international markets in Europe, thereby spurring economic growth.

However, what Moravcsik and Gillingham fail to explain is why the liberalization of European markets took the form it did. The EEC was not the only proposed method of liberalizing trade. Britain recommended the establishment of a European Free Trade Area (EFTA), which would have reduced trade barriers without all the EEC bureaucracy.

For Gillingham, the EFTA and the customs union were practically identical. They both achieved what he believed to be their sole aim: trade liberalization. The only difference was that the EFTA did it efficiently and without fanfare. Freeing up trade meant shifting Europe from the state-based system to a more market-based system. “The market principle,” he writes, “has gradually supplanted that of the state in Europe’s long march from the economy of war to that of peace.” According to Gillingham, the fact that Europe went down the road of the EEC and not the EFTA is simply a matter of misfortune — Europe was unwilling to make the right decision and commit itself more fully to liberalization.

Moravcsik makes a similar but somewhat more sophisticated point. He also argues that the development of the EEC is an economic story, but relies on political factors to prop up his account. For him, the choice between the EEC and the EFTA came down to a disagreement between France and the United Kingdom over farmer protections. Ultimately, Germany took France’s side for geopolitical reasons.

In terms of the large architectural differences between the EEC and the EFTA, Moravcsik says “federalist ideology is still required to account for the general institutional structure of the EC.” He fails to consider that perhaps France’s desire to protect their farmers and the EC’s general instutitonal structure might be connected.

What Moravcsik and Gillingham both overlook is the enormously difficult political undertaking that was trade liberalization. Since the end of World War I, every attempt to open up trade and restore the classical liberal pre-1914 order had failed.

Creating a liberalized trade regime would be no easy matter.

Reconstructing Europe

In the early 1950s it was by no means obvious that the subsequent sixty-year history of Western Europe would be as peaceful as it has been. Europe was just emerging from the 1914–1945 period, when the classical liberal order of Pax Britannica collapsed into thirty years of war, depression, and economic and political chaos.

The rise of democracy and the labor movement turned trade liberalization after World War I into a live political issue. The result was an impasse where the old-world order could not be restored. But it was unclear what, if anything, could replace it.

Of course, there were many radical ideas in the air, most notably communism and fascism, but for those who wished to defend the liberal order of property, markets, and strong money, it was hard to see how to proceed.

Gradually, elites came to favor increased state intervention into the economy, viewing it as a way to shore up capitalism, while also mitigating its worst consequences and pacifying the recently empowered and emboldened working class.

With the Basic Agreement in Norway (1935), the Peace Agreement in Switzerland (1937), and the Basic Agreement in Sweden (1938), there had already been signs that a new political economic order was germinating. So too with the Atlantic Charter, which the Allies had signed in 1941. The eight-point reconstruction plan called for bringing “about the fullest collaboration between all nations in the economic field with the object of securing, for all, improved labor standards, economic advancement and social security . . . and which will afford assurance that all the men in all the lands may live out their lives in freedom from fear and want.”

It was out of this environment — where economic policy was increasingly seen as a means to orient the market toward a wider social good — that the EEC was created.

Gillingham praises the EFTA as more than a simple organization, arguing the “EFTA was explicitly non-supranational and apolitical, and its tiny headquarters in Geneva had only one real task: to organize the annual membership meetings where technical trade issues were, quite amicably, thrashed out.”

But it is precisely the EFTA’s apolitical nature that made it ill-equipped to manage the postwar expansion of European trade. This was on full display during negotiations over the Treaty of Rome.

From the EDC-EPC to Rome

Initially, the Beyen Plan — the Dutch proposal to create a six-member custom union — generated skepticism across Europe.

Jelle Zijlstra, the Dutch economic affairs minister and future prime minister, expressed concern that a customs union would require common policies on taxes, wages, prices, and employment policy. When the Beyen Plan came up as part of the EDC-EPC negotiations, Zijlstra’s trepidation was echoed by Paul van Zeeland, the Belgian prime minister, and by the Italian delegation, who argued that for a customs union to work, it would need to have the power to make laws on policy coordination.

In 1954, after the French National Assembly voted down the EDC-EPC plan, the Dutch government, believing that the proposal had little chance of advancing without being tied to the wider EDC-EPC negotiations, shelved it for the time being.

Monnet’s solution was to build on the European Coal and Steel Community and bring Europe together industry by industry, starting with transportation and energy. To achieve this, he enlisted the help of Paul-Henri Spaak, the former prime minister and then foreign minister of Belgium.

In April 1955, Spaak proposed a conference to discuss extending the ECSC High Authority’s remit to the transport and energy industries. In response, the Dutch government revived and circulated the Beyen Plan among the foreign ministers of the other Benelux countries (Belgium and Luxembourg). The Benelux ministers met later that month and agreed to a memorandum calling for a customs union with the institutional architecture to harmonize a range of economic policies, the reduction of trade barriers, and a fund to mitigate some of the harmful social effects of trade liberalization.

On May 20, 1955, the Benelux memorandum was sent to the foreign ministers of France, Germany, and Italy, the other members of the ECSC. Two weeks later, the foreign ministers of the ECSC’s six member states convened in Messina, Italy to discuss plans for future European integration.

Messina has taken on something of a legendary quality in the history of the European Union. It is as though this weekend in Sicily was the equivalent of the four-month constitutional convention in the United States, only with added fairy dust. People went into it expecting nothing and came out with the European Union.

But while it makes for a good story, this telling is far from the truth. Much of the work on the Benelux memorandum was completed prior to the conference, and the main decisions were simply to build off the memorandum and to establish an expert committee, chaired by Spaak. After a year of discussion, the Spaak Committee produced the Spaak Report, and serious negotiations over the report began in October 1956.

The social impact of trade liberalization took center stage, reflecting the relative power of labor. These weren’t a facsimile of nineteenth-century trade negotiations.

The French demanded that market integration proceed only with a harmonization of social policy. Working-hour regulations, paid vacation time, gender equality provisions — all should be set across the ECSC.

The French also insisted on the creation of an agricultural policy that would shield farmers from the shocks of trade liberalization.

The Final Treaty

The final treaty, signed in March 1957, was more ambitious than many had likely expected. At its core was the creation of a customs union, where tariffs and most trade quotas would be gradually reduced over the subsequent four years.

Additionally, it committed member states to facilitating the “free movement of persons, services, and capital.”

On the question of social policy, signatories vowed to ensure “the application of the principle of equal remuneration for equal work as between men and women workers” across the member states within four years, promised “to maintain the existing equivalence of paid holiday schemes,” and declared their intention to promote close collaboration between member states in the social field, particularly in matters relating to employment, labor legislation, occupational training, social security, protection against occupational accidents and diseases, industrial hygiene, and trade union law. In addition, they set up a social fund to deal with trade-induced social dislocation, and included language that led to a massive transfer policy to support farmers and agricultural workers.

The treaty replicated the ECSC’s architectural infrastructure: the EEC would be administered by the European Commission, a permanent authority in Brussels that was effectively identical to the ECSC’s High Authority; it would have a Council of Ministers, just like the ECSC, where the relevant minsters could meet to discuss and develop proposals; and it would share with the ECSC the Court of Justice and the parliamentary assembly (which was renamed the European Parliament in 1962). The document also laid down a procedure through which the assembly could become directly elected (which occurred in 1979).

As for Monnet, his transport-and-energy strategy barely left a mark. One section in the treaty obliged the EEC to develop a common transport policy (although nothing much came of the provision). And a second treaty was signed establishing Euratom, the European Atomic Energy Community. Highly respected scholars like Ernst Haas have written that this period was when “Monnet’s doctrine of a strong, united Europe . . . resting on a large common market came into its own.” But really, Monnet’s contribution was quite limited.

Rome Today

Following the Treaty of Rome, European unification proceeded slower than expected. From 1957 to the mid-1980s, there was a smattering of developments that inched toward that goal: the agreement of the Common Agricultural Policy, the implementation of tariff and quota reductions, the EEC’s incorporation of Denmark, the United Kingdom, Ireland, and Greece.

Neither the anticipated homogenization and integration of social legislation nor the industry-wide regulation occurred.

Not until the Single Market Act sparked the second wave of European integration — leading to the creation of the single market and the European Union through the Maastricht Treaty — did things really take off. However, by this stage, the politics of Europe had changed.

The novelty of the EEC might have been its bureaucratization of trade, through which it recognized its political nature and made it subject to democratic contestation and control. Subsequent developments in Europe proceeded rather differently. They have involved the bureaucratization of economic governance, thereby denying its political nature and removing it from democratic contestation and control.

By the mid-1980s, elites were intent on finding ways to manage the economy without democratic oversight or accountability. Building on the foundation of the EEC proved a formidable way of pursuing this aim. In the three decades since then, the European Union’s antipathy toward popular government has only grown.