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The Making of a World Trading Power: The European Economic Community (EEC) in the GATT Kennedy Round Negotiations (1963-67)

Author(s):Coppolaro, Lucia
Reviewer(s):Maneschi, Andrea

Published by EH.Net (November 2015)

Lucia Coppolaro, The Making of a World Trading Power: The European Economic Community (EEC) in the GATT Kennedy Round Negotiations (1963-67). Farnham, UK: Ashgate, 2013. xvii + 237 pp. $135 (hardcover), ISBN: 978-1-4094-3375-0.

Reviewed for EH.Net by Andrea Maneschi, Department of Economics, Vanderbilt University.

This book is a valuable addition to the economic, political and historical literature on the evolution of the European Economic Community (EEC), and how it affected — and was affected by — the contentious Kennedy Round of negotiations that took place in Geneva under the aegis of the General Agreement on Tariffs and Trade (GATT) between 1963 and 1967. Lucia Coppolaro wrote it as part of a postdoctoral program at the Institute of Social Sciences of the University of Lisbon. Her painstaking research into an important episode of European economic history is based partly on the archives of GATT; the European Union and its institutions, particularly the Council of Ministers and the European Commission; American, British, French and German archives; and interviews with officials and politicians who participated in the Kennedy Round.

As Coppolaro notes, President John Kennedy proposed this GATT Round, later named after him, partly in response to the creation of the EEC. Its member countries were still learning how to interact with each other, and the world at large, in their decade-old customs union. The EEC then consisted of France, the Federal Republic of Germany, Italy, Belgium, Luxembourg, and the Netherlands, known as “the Six.” In addition to eliminating tariffs on each other and creating a Common External Tariff, their attention was focused on the difficult task of devising a Common Agricultural Policy (CAP), a vital component of their union. Hence two sets of negotiations took place concurrently: among the EEC member countries, and within the GATT itself. The other members of the GATT viewed the EEC with some suspicion because of the opportunities for trade diversion that their customs union might engender, when EEC countries shifted their import purchases from cheaper world suppliers to their EEC partner countries. The CAP gave the EEC a great bargaining advantage in the GATT, since its proposals (once reached after much arduous intra-EEC bargaining) could not be modified, and the U.S. did not wish to challenge the CAP.

Kennedy’s initiative forced the EEC to take the important steps of formulating a common commercial policy, and anticipating the creation of the CAP in order to participate from a position of strength in a possible liberalization of agricultural trade in the GATT. While learning to organize trade among themselves, the Six were under pressure to limit trade diversion from their trade partners in America, the Commonwealth countries, the European Free Trade Association, their former colonies, and other less developed countries (LDCs). In addition, they were faced with the United Kingdom’s application to join the EEC, which again complicated their task.

Coppolaro focuses on three main issues: the thorny bargaining among the Six, as they sought to establish a common position in the Geneva negotiations; the roles of the six member states and of the EEC institutions (primarily the European Commission and the Council of Ministers of the EEC) in formulating a common position in Brussels and conducting negotiations in Geneva with other GATT countries; and the impact that the evolving EEC played in the GATT negotiations and their final outcome.

The European Commission achieved an increasingly important role in the EEC’s trade policymaking. Coppolaro describes how the policies of the EEC member states interwove with those of the EEC’s Council of Ministers, which was subject to the interests of its member states, and of the supranational European Commission. Social scientists have debated whether the Council or the Commission was the more powerful of the two. The Commission was subject to a strict oversight by the six member states from 1963 to early 1967. Coppolaro convincingly argues that, in the concluding phase of the Kennedy Round, the Commission gained new capacities and much greater discretion, and ended up as a strong and independent agency.

The creation and evolution of the EEC and its CAP played important roles in the GATT negotiations and their final outcome. The dramatic events in the history of the EEC’s trade policy that Coppolaro describes include the “Chicken War,” a commercial war that broke out in 1962 between the EEC and the United States over American chicken exports. It was concluded in 1963 just as the Kennedy Round talks were starting, with the U.S. imposing retaliatory duties on EEC exports. This first test of the acceptability of the CAP by the EEC’s trade partners showed how seriously the EEC intended to defend its CAP. Another crisis became known as the “Empty Chair Crisis,” when France in 1965 withdrew from the Council of Ministers, causing the Kennedy Round negotiations to grind temporarily to a halt.

International trade economists have long debated whether preferential trade agreements such as the European Union or NAFTA are stepping stones or stumbling blocks toward the multilateral liberalization of global trade achieved in successive GATT negotiating rounds. Coppolaro argues that the EEC acted as a stepping stone to liberalization with regard to industrial products, where its industries could compete advantageously with those of its GATT partners. With regard to agriculture the EEC was instead a stumbling block, since it was so busy setting up its own CAP that it did not wish to explore the possibility of trade gains for its own farm exports in the GATT round, and instead favored protection.

Negotiations among GATT members, and among the EEC member states, during the Kennedy Round were motivated by neomercantilism, not by a free trade ideology based on the advantages of mutual specialization. Coppolaro repeatedly points out that the GATT, including the Six EEC countries, worked “like a bazaar.” To obtain trade concessions from other countries, member countries needed to grant them reciprocal favors on a pragmatic basis. An important exception to this self-serving behavior was that of the United States until the conclusion of the Kennedy Round. After the success of the Marshall Plan, the U.S. strongly supported the creation and further development of the EEC, first under the Eisenhower administration and then under Kennedy’s, despite the fact that the CAP ran counter to the interests of American farm exporters. As Coppolaro puts it, “The CAP was considered the price the United States had to pay for European integration.” She argues that the U.S. was the only true leader in promoting GATT rounds and upholding worldwide integration, a role that the EEC never wished to claim. However, the GATT acted like a “rich-man’s club” vis-a-vis the LDCs, since it failed to liberalize trade in the commodities (such as textiles and farm products) of greatest interest to them. To the LDCs’ dismay, the EEC became a major exporter of agricultural products thanks to its CAP.

The EEC turned out to be a primary beneficiary of the Kennedy Round, since the GATT negotiations forced it to make the compromises necessary to become a trading bloc with common commercial and agricultural policies, which converted it (as the “European Union”) into a trading power comparable to the United States in international economic clout and geopolitical importance.

Andrea Maneschi is the author of Comparative Advantage in International Trade: A Historical Perspective (1998) and of articles on David Ricardo’s trade theory.

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Subject(s):International and Domestic Trade and Relations
Geographic Area(s):General, International, or Comparative
Europe
North America
Time Period(s):20th Century: WWII and post-WWII