EXTERNAL RELATIONS OF THE EUROPEAN ECONOMIC COMMUNITY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A005300120006-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 14
• Document Creation Date: December 21, 2016
• Sequence Number: 6
• Content Type: REPORT

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EXTERNAL RELATIONS OF THE EUROPEAN ECONOMIC COMMUNITY
The European Economic Community has treaties
of association with 18 independent African states
and with Greece and Turkey. In addition, the EEC has
concluded nondiscriminatory trade agreements with Iran,
Israel, and Lebanon. These specialized arrangements
--and the others which seem likely to follow--stand
greatly to complicate the community's foreign rela-
tions.
The convention just signed with Nigeria and
other preferential agreements under consideration
each have unique circumstances and problems. Some of
them are at variance with the principle of nondis-
criminatory international trade. Some of the complex
organizational ties and economic commitments in-
volved may complicate the community's internal eco-
nomic and political development.
Completion of the pending special arrangements
will be a slow process, however, and their shape can
thus still be influenced considerably by other de-
velopments. Notable among these would be a success-
ful outcome to the Kennedy Round trade talks--which
might make trade preferences less imperative--or a
British initiative to join the Common Market--which
for a time, at least, would overshadow the EEC's
other external negotiations.
Nigeria
The association agreement
between Nigeria and the EEC
signed in Lagos last week fol-
lows two years of negotiations.
The agreement comes up for re-
newal in May 1969, at the same
time as the Yaounde Convention
which links the EEC with the 18
Associated African States and
Malagasy (AASM). The Nigerian
agreement is the first reached
with an African state not for-
merly a colony of one of the EEC
members and may spur other non-
AASM states to seek special
trade ties with the Common Mar-
ket. Kenya, Uganda, and Tangan-
yika have in fact held discus-
sions with officials of the EEC
Commission, and in the past
Sierra Leone has also shown in-
terest. The Nigerian associa-
tion casts some doubt on the EEC
and African arguments that the
Yaounde Convention, with its pro-
visions for reciprocal prefer-
ences, was a uniquely sanctioned
derogation from most-favored-na-
tion trade principles, necessary
only in order to ease the transi-
t-ion from a colonial relationship
to economic independence.
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EUROPEAN ECONOMIC COMMUNITY (EEC) AND ASSOCIATED MEMBERS
[ZI EEC Members
European Associates
Signatories of Trade Agreements with EEC
Associated African States and Malagasy (AASM?
Commonwealth Associate
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Nigeria's attitude toward
the EEC has shifted several times,
and is indicative of the ambiv-
alence of Africans about close
ties with Europe. Initially fa-
vorable to association following
its independence in 1960, Ni-
geria in 1962 turned away on the
ground that association would
represent a continuation of co-
lonialism. Nigeria's objectives
in again opening the door in
1964 were limited to gaining
trading concessions similar to
those of the AASM, conceding a
minimum of preferential access
to its markets by the EEC, and
keeping to a minimum the insti-
tutional framework for the as-
sociation. Nigeria has substan-
tially achieved these goals,
largely because of the negotiat-
ing skills of its representation
in Brussels and to the high value
placed by the Six on extending
the community's influence in
Africa beyond the original as-
sociates.
Nigeria's trade with the
EEC does not suffer at the pres-
ent time because of the prefer-
ences enjoyed in the Common
Market by the AASM. Nigeria's
interest in "equal status" with
these states is based rather on
concern over the long-term ef-
fects of such preferential ac-
cess on Nigerian exports. The
new agreement provides that
tariffs on Nigeria's exports
will be the same as those ap-
plied to trade within the EEC--
and between the Six and the AASM.
Nigeria's major AASM-competitive
exports, however--cocoa beans,
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plywood, palm oil, and peanut
oil--are granted only tariff-
free quotas, with normal com-
munity tariffs due on exports
in excess of the quotas. Unlike
the EEC's arrangements with the
AASM, the Nigerian agreement
provides for no financial assist-
ance from the EEC.
More important than any im-
mediate economic benefits, from
the Nigerian point of view, is
the prospect of renegotiating
with the EEC alongside the AASM
in 1969. If EEC preferences to
the AASM are not then in the
process of being "phased out"--
the stated intention of the com-
munity--Nigeria will also be in
a position to insist on a con-
tinuation of its privileged
status with regard to the EEC.
Nigeria has argued that, despite
its desire to see all less de-
veloped countries given preferen-
tial treatment by the developed
countries, it must for the "near
future" seek arrangements where
it can find them.
AASM attitudes toward Ni-
gerian association are generally
favorable, and fears of Nigerian
competition in the EEC market
seem largely to have evaporated.
The AASM have always been con-
cerned, to some extent about
their own association with the
community because of uneasiness
over charges of "neocolonial-
ism" and because of the Yaounde
Convention's potential effect of
dividing the French- and English-
speaking nations of Africa. Now,
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the AASM may see in Nigeria's as-
sociation an opportunity rather
than a danger. The Nigerian
agreement might be taken as a
model for renegotiating the
Yaound6 Convention on a less
formal basis; at the same time
it holds out a promise for a
larger grouping of African states.
At a recent conference of EEC
and AASM parliamentarians in The
Hague, a Senegalese delegate
stated that the AASM "unreserv-
edly" endorsed Nigerian associa-
tion, and that African unity
would be strengthened if Kenya,
Tanzania, Uganda, Algeria, Mo-
rocco, and Tunisia also became
associated.
Economic considerations
have apparently played a minor
role in motivating the Six to
conclude an arrangement with
Nigeria, even though the com-
munity--principally, although
not exclusively, because of
French insistence--successfully
demanded preferences in the Ni-
gerian market for a limited list
of its exports. The Nigerians,
in fact, are pleased that they
succeeded in limiting the items
covered by these "reverse prefer-
ences" to two percent of their
imports from the community.
The EEC acknowledges, but
tends to minimize, arguments
that a preferential arrangement
with Nigeria may violate most-
favored-nation trading principles
to the detriment of the General
Agreement on Tariffs and Trade
(GATT). Officials of the Six
admit their political interest
in extending the EEC's influence
in Africa beyond the French-
speaking states, and the Germans
and Dutch regard the agreement
as an opportunity to "break the
French hold" on community-Afri-
can relations. Even the French,
who appeared reluctant through-
out the negotiations with Nigeria,
are probably not averse to the
EEC's encroaching on Commonwealth
preserves. Once it was clear,
moreover, that Nigerian associa-
tion would provoke no serious
reaction from the AASM, Paris
in fact used the prospect of
association as an instrument in
quietly restoring relations
broken by Lagos when France con-
ducted its third nuclear test
in the Sahara in January 1961.
Maghreb
The type of limited associa-
tion accorded Nigeria may stimu-
late efforts by the Maghreb coun-
tries (Morocco, Algeria, and
Tunisia) to reach an agreement
with the EEC. In June 1965, the
EEC Council authorized the Com-
mission to open negotiations,
separately, with Tunisia and
Morocco "on commercial subjects."
As the talks have progressed,
however, it has become evident
that greater coordination among
the Maghreb countries themselves
may be necessary to ease nego-
tiations with the community.
Relations with Algeria are still
under study within the community.
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The Maghreb countries' desire
for special arrangements with the
EEC arises from concern over the
eventual loss of the privileged
markets deriving from their colo-
nial relationship to France. They
would also like to reach agree-
ments permitting free movement of
their workers into the Common Mar-
ket and assuring EEC development
aid. Morocco especially is con-
cerned about retaining export mar-
kets in the AASM--a manifestation
of how ties with the EEC are also
seen as replacing former links
within the French colonial net-
work. Algeria, which under spe-
cial community provisions deriving
from its former relationship to
France is allowed to benefit from
internal EEC reductions of tariff
barriers, is apparently less im-
mediately concerned than Tunisia
and Morocco about establishing
new arrangements with the commu-
nity.
Although they want to retain
an advantageous relationship with
Western Europe, the Maghreb states
are wary of close political ties.
They have thus placed their bids
for new arrangements in the con-
text not of "full association,"
but rather of a free-trade area
"with added special privileges."
Reflecting Paris' desire to
have the EEC assume part.of its
burden in the Maghreb, the French
representative in Brussels said
last year that France wanted an
arrangement which called for the
community as a whole to extend to
Morocco and Tunisia the same pref-
erences now given by France, "plus
a little more." Also desirable
would be "some modest reciprocal
preferences" and an EEC commit-
ment to provide some aid.
Concerned about its rela-
tions with the Arab world, West
Germany is receptive to the Tu-
nisian and Moroccan requests for
EEC ties, and would also like to
legitimize Algeria's special
status with the EEC. Bonn is
apparently aware, however, of
the danger in arousing excessive
Maghreb hopes. An official from
the German Ministry of Economic
Cooperation, for example, at a
symposium held in Tunis last
April on the EEC, stressed that
the Federal Republic, "though
deeply interested in Tunisia's
future and anxious to assist it,
could not hope to take the place
of France as Tunisia's major
trade and aid partner."
The Mediterranean Area
The EEC's North African
problem is part of the larger
issue of its ties in the Medi-
terranean area as a whole.
Since talks began with Tunisia
and Morocco, Spain has renewed
its bid for community attention,
and Israel has indicated dissat-
isfaction with its present EEC
arrangements. Rome has taken
a special interest in the pro-
spective extension of the EEC's
commitments in this area inas-
much as Italy's traditional ag-
ricultural exports often compete
with those of the other Mediter-
ranean countries.
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Italy insisted at the out-
set of talks with Tunisia and
Morocco that the EEC Council ex-
clude from its negotiating man-
dates to the Commission any dis-
cussion of the products of prin-
cipal export interest to those
two countries: vegetable-oils
and fruits and vegetables. This
has made it impossible to carry
the negotiations very far, and
all parties have now agreed that
the community's own policy on
these products must be resolved
before negotiations are resumed.
The Commission is attempt-
ing to use this stalemate as an
opportunity to push for an EEC-
Mediterranean "orange agreement."
Although in substance such an
agreement could turn out to be
protectionist from the point of
view of nonmembers--and of com-
munity consumers--it can be re-
garded as an attempt to remove a
major obstacle to agreements
with prospective Mediterranean
"associates." The Commission's
initial proposal was turned down
by the Six, reportedly because
it would discriminate against
Israel and Spain and because it
contained the notion of produc-
tion controls--considered by the
Six an unacceptable precedent
for the EEC's agricultural pol-
icy. The Commission will prob-
ably offer a revised version,
however.
In any case, the Council is
now committed--as part of the
"package" agreements reached in
May on financing the EEC's ag-
ricultural policy--to "take into
consideration... in...negotiations
with countries of the Mediter-
ranean basin" a 1964 Italian
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memorandum which asked that the
community agree on guidelines on
association policy. If the
Italians succeed in forcing a
general debate on association
policy, this might push the Ma-
ghreb states as well to seek a
common approach to the EEC--pos-
sibly along with other Mediter-
ranean countries. Although such
coordination is scarcely immi-
nent, it might eventually become
a significant factor for rela-
tions around the Mediterranean.
For the present, it is apparent
that any pressure on Mediter-
ranean countries for common ap-
proaches must come from the EEC.
Spain
The Commission seems likely
also to use a June Council deci-
sion requesting a report on ex-
ploratory talks held with Spain
as a reason to raise the issue
of Mediterranean policy. The
Council decision is largely the
result of Spain's recent inten-
sive diplomatic campaign to get
community action on its bid for
links with the EEC.
At the time of Madrid's
first application in 1962, Spain
envisaged as its goal something
like the EEC's association agree-
ment with Greece--which conceived
of association as an interim
phase leading to membership. The
Council, however, in giving the
Commission a mandate in 1964 for
discussions of the "economic
problems" between Spain and the
community, anticipated that a
commercial treaty--not associa-
tion--might be the result. Spain
is now in effect pressing for a
revised and expanded Council man-
date.
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Madrid apparently has de-
liberately left vague the precise
form of relationship it seeks with
the Common Market. Wary of the
opposition still existing within
the community to political ties
with the Franco regime, it has
suggested it would be satisfied
with something less than associate
membership provided it was more
than a mere commercial agreement.
The Spanish foreign minister has
also spoken, however, of the
"Austrian model" as a satisfac-
tory precedent. Presumably he
had in mind an arrangement which
--unlike the EEC's agreements
with Greece and Turkey--would
not allude to the possibility of
ultimate full membership.
Spain's economic argument
for special consideration is
essentially that its trade defi-
cit as well as its trade with
the community is growing. Two
years ago the government claimed
that the success of its develop-
ment plans--the second of which
is now being drawn up--depended
on Spain's maintaining and ex-
tending its markets in the EEC,
the country's largest single
trading partner. Since then,
Spain's deteriorating balance
of payments has probably given
added urgency to its trade re-
lations with the community.
Madrid fears its traditional ag-
ricultural exports may eventually
fall victim to EEC restriction
or be hurt by an EEC agreement
with other Mediterranean coun-
tries. Moreover, Spain's ex-
ports of workers to the commu-
nity's labor market is highly
beneficial to the Spanish econ-
omy, and Madrid would like to
assure continued access as well
as get equal treatment for these
workers, both in terms of pay
and such fringe benefits as
social security and training.
Madrid's other important objec-
tive is to induce more EEC capi-
tal into Spain.
Spain's short-run economic
needs probably do not wholly
explain its recently increased
diplomatic activity toward the
:EEC. The end of last year's EEC
crisis coincided with a new un-
certainty over Europe's future
.Look, brought about largely by
the crisis in NATO, but also by
the ambiguous settlement of the
Common Market dispute itself.
In addition, Madrid apparently
sensed a lessening of ideologi-
cal antagonism partially because
of the weakened influence in
the Belgian and Dutch govern-
ments of the Socialist parties
which have led the opposition
to Franco.
Madrid deems the present as
good a time as any to bargain
for a better defined relation-
ship to the Six. It may believe
that the US is sufficiently con-
cerned about its own defense
agreement with Spain--up for
renewal in 1968--to be more sus-
ceptible to Spanish overtures
that it exert its influence with
the Six on behalf of Spain. Ma-
drid also has let Germany know
that the present undefined sta-
tus of German overflights--re-
quired for links with the German
base at Beja, Portugal--cannot
be taken for granted.
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Germany has been Spain's
strongest supporter among the
Six and, recently, has taken the
lead in sounding out its part-
ners' views on Spanish associa-
tion. The communique issued at
the time of Foreign Minister
Schroeder's visit to Spain last
March stated that Germany would
"seek to obtain a rapid and ef-
fective development of the cur-
rent negotiations between Spain
and the community." Subsequently
in the Bundestag, Schroeder
warded off a question as to why
Spanish political liberalization
could not be a price for EEC en-
try by responding that Spain was
not seeking a full membership
which would entail participation
in EEC decision-making.
The Netherlands, whose trade
and political interests require
it to place a high priority on
settlement of EEC relations with
the seven-member European Free
Trade Association (EFTA), would
like to link this problem with
that of associating Spain with
the community. In particular,
they wish to avoid a form of as-
sociation with Spain involving
institutional arrangements and,
hence, one having political ram-
ifications. Nevertheless, al-
though prepared to agree to "some
sort of trade agreement," even
the Dutch concede that Spain's
problems cannot be met by the
type of most-favored-nation agree-
ment the community has with Is-
rael and Lebanon.
France has not taken an ac-
tive role in promoting Spain's
case, but has appeared to favor
at least some sort of commercial
relationship. At various times,
however, De Gaulle has alluded
to Spain's entry together with
that of Britain, thus raising the
suspicion that the Spanish issue
could eventually become involved
in a French attempt to change
the structure of the community
along with its membership.
Italy's past opposition to
Spanish association has been on
both economic and political
grounds. Spain's oranges and
olive oil compete with Italy's;
and Italian Socialist distaste
for Franco's Spain is still a
factor. The development of Ita-
ly's own economic ties with
Spain, however, especially in
nonagricultural fields, is tend-
ing to soften economic opposition;
and Foreign Minister Fanfani has
taken a more equivocal line than
have previous Italian governments
on the possibility of a community
link with Madrid. During his
July visit to Bonn, Fanfani ex-
pressed opposition to Spanish mem-
bership or formal association with
the EEC but said he could favor
an "informal economic associa-
tion." The Italians have never-
theless made it clear that they
still want the EEC to agree on a
"theory of association" to be
broadly applied to all countries
seeking a link with the community.
The EEC Commission is op-
posed to Spanish association, and
has been annoyed by the Spanish
"pressures" in recent approaches
to member states outside the
framework of consultations be-
tween Spanish and Commission offi-
cials. The US mission reports
that the Commission regards a
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Austria
Austria is the only European
country actively negotiating
with the community for associate
status or special ties. Austria's
effort is a legacy of a general
attempt in the early 1960s by it
and its six EFTA partners (Den-
mark, Norway, Portugal, Sweden,
Switzerland, and the UK) to over-
come the split between the Six
and the Seven. Now, the "Aus-
trian model"--designed to cope
with Austria's special status as
a neutral state--is being looked
at with interest by some of the
other EFTA members, particularly
neutral Switzerland. Whereas
the somewhat cumbersome institu-
tional apparatus devised for the
Greek and Turkish associations
is intended as an interim meas-
ure on the way toward full member-
ship for these countries, the
Austrian negotiations envisage a
permanent semiautonomous joint
council--a possible precedent for
associating other European states
while keeping them at "arm's
length."
Based on a March 1965 Coun-
cil mandate--the Austrians having
first requested negotiations in
December 1961--the talks with
Austria have been conducted by the
Commission, along with member-
state "observers," in a series of
meetings which adjourned last
February. The Commission sub-
mitted its report to the Council
Given the inherent diffi-
culties, the discussions have
made considerable progress. The
Commission, in particular, seems
to have shown considerable will-
ingness to meet the special cir-
cumstances involved in an Aus-
trian agreement. Many ticklish
problems remain, however, even in
the strictly trade areas on which
Austria and the Commission have
reached understandings in prin-
ciple. Moreover, some of the
principal areas of disagreement
have been set aside until later
stages in the negotiations.
The underlying problem for
the community is to ensure that
Austria keep in step with EEC
policies and actions without
breaching its neutrality. If re-
quired to comply with EEC deci-
sions, Vienna would be subordi-
nating its sovereignty--and pos-
sibly also its neutrality. If on
the other hand, Austria is al-
lowed to decide whether to ad-
here or not to adhere to commu-
nity policy, the very concept of
the association would be under-
mined, risking both economic and
political damage to the community.
The legal issues involved have
given the lawyers in Brussels and
Vienna many headaches, and if
the association finally comes off,
the convention will almost cer-
tainly contain an intricate maze
of safeguards for both sides.
Not the least of the political
problems is what body will adjud-
icate differences between Austria
and the community.
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commercial treaty on a most-fa-
vored-nation basis as the only
immediate solution but one which
could perhaps lead in time to
association and eventual full
membership.
in April and is awaiting the fur-
ther mandate it requires to con-
tinue the negotiations.
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That Austria must apply the
EEC's common external tariff to
the EFTA members, thus divorcing
itself from the free-trade
grouping, is a sine qua non for
the community. There is little
doubt that Vienna understands
this position; yet--probably for
internal political reasons--pub-
lic statements by the government
have frequently been equivocal on
this point. A difficult time may
come this fall, when Austria
must decide whether or not to go
along with EFTA's scheduled
elimination of internal tariffs.
Similarly, Vienna--publicly, at
least--professes to see little
difficulty with the ultimate ac-
ceptance by the Soviet Union of
an Austrian tie to the Common
Market. Soviet statements, never-
theless, continue to condemn any
such link.
The Germans and French have
-ully supported Austria's desire
for EEC association, but the
French may yet prove sensitive
to Soviet objections or, on the
other hand, even attempt somehow
to use an agreement as an ele-
ment in Paris' policy of East-
West detente. Before De Gaulle's
recent Moscow trip, the French
told the Austrians that, if ques-
tioned, De Gaulle would support
the Austrian position. He would
not, however, bring up the ques-
tion himself. The Dutch are con-
cerned about possible agricul-
tural competition from Austria,
but possibly more important will
be the Dutch assessment of the
effect of Austrian association
on the other EFTA members' pros-
pects for eventual EEC member-
ship.
Although Rome has gone
along with the Commission's lim-
ited mandate to discuss associa-
tion, it is probably still luke-
warm toward close EEC-Austrian
political ties. One problem is
Italy's fear of Austrian com-
petition for its fruits and
vegetables, and this difficulty
may be mitigated if the Italians
get adequate safeguards in the
EEC agricultural policies now
being decided in Brussels. How-
ever, Italy might conceivably
find it politically difficult to
welcome Austria if the conten-
tious issue of South Tirol (a
largely German-populated region
of northern Italy) remains un-
settled between the two coun-
tries. Moreover, Rome has shown
considerable interest in expand-
ing its trade with Eastern Europe
and might look askance at excep-
tions to community tariff pro-
cedures permitted Austria for its
Eastern trade, especially since
the community has shown no signs
of being able to agree on common
rules for its own commerce with
the East. Italy--along with the
Netherlands--is likely at some
point to raise the question of
what effects Austrian associa-
tion would have on the political
efficacy and supranational char-
acter of the Common Market.
Rome may suggest that, as in
the case of Spain, further com-
munity decisions regarding Aus-
tria await a general debate on
association Policy.
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Prospects and Problems
The list of outside claimants
for community attentions seems
likely to grow, but even the pres-
ent list suggests the economic and
political importance of these de-
veloping links.
Whatever the economic dis-
advantages for other areas, the
agreements with the Africans have
provided a mechanism for continued
European involvement in the Afri-
can continent. The convention
with Nigeria is, despite its pref-
erential character, one way to
lessen the discriminatory impact
of the EEC's arrangements with
the AASM. A limited agreement be-
tween the EEC and the Maghreb
countries could bring political
advantage for the West in this
area.
The associations with Greece
and Turkey may become a politically
more significant tie between them
and Europe if in the future the
NATO ties become less binding.
Spanish ties to the community
could initially constitute an-
other drag on the EEC's advance
toward political unity, but they
would offer an additional possi-
bility for reinvolving Spain in
Europe. An association with
Austria has potentially broad
implications for the future of
East-West relations because of
Austria's trade connections with
the countries of Eastern Europe.
At the same time, Austria's case
involves some risk of weakening
community institutions as the
price of the EEC's expanding its
coverage.
Even the present arrange-
ments do not appear to be frozen
in their present form, however,
and the ponderousness of commu-
nity procedures will retard the
proliferation of special arrange-
ments. If at the same time such
global trade-liberalizing efforts
as the Kennedy Round and, possibly,
the United Nations Conference on
Tirade and Development (UNCTAD)
show greater promise, the number
or at least the nature of appli-
cations for community links could
be altered.
All of the agreements under
consideration would clearly be
overshadowed by early negotiations
with Britain for entry in the
Common Market. With the UK ne-
gotiating for full membership,
most of the other prospective
EFTA candidates would probably
follow. Moreover, all of the
intra-European relations poten-
tially involving the EEC would
be seen in a new light and a
debate over the community's or-
ganizational effectiveness--
a:Lready implicit in the present
or comtemplated association agree-
ments--would seem unavoidable.
British entry would also
compel another look at the EEC's
extra-European relationships.
With the UK's world-wide special
trading ties at issue, a reso-
lution of the question of whether
to extend community preferences
or phase them out--either through
global preferences or movement
toward free trade--would be made
more imperative than ever.
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