DISSENT versus TECHNOLOGY

(A Partnership in the Making)

The Community's crisis which started during
the meeting of the Council of Ministers of June 30,
1965, had hardly ended - a rather provisional end,
admittingly - when De Gaulle decided to open a new
crisis, this time on a more specifically political
ground: NATO.

Of course the Community crisis was, too,
especially a political crisis. It has been the
main episode in De Gaulle's attempt to rebuff the
Community's likely political developments and to
confine it to the status of an Organization dealing
only with economic problems; and even then only on
the grounds of a Customs Union (with the only exception,
of course! of agriculture, where the French interest
is preponderant). But in the case of the Community
crisis the dispute over the agricultural policy and
the Commission's role provided somehow a smoke-
screen. Also, the fact that it only involved the
Six (which is obviously a rather short-sighted view)
helped in making it look like a family quarrel. The
NATO crisis brings into the open in a much more obvious
way the fact that the dispute actually concerns the
political future of Europe and its relationship with
the United States. It is undoubtedly a self-evident
truth that the Community crisis and the NATO crisis
are two episodes of the same confrontation.

Quite probably the decision of solving the
EEC crisis was taken in Paris well before the French
general elections of November 1965 and it can be said
that the end of January (when the Luxembourg agreement
took place) was, from the French point of view,
definitely a dead-line. De Gaulle was unwilling and
couldn't afford to handle two crises at the same time
and, on the other hand, the NATO crisis had to be
officially opened at least a few months before
De Gaulle's visit to Moscow. We all knew that this
new crisis was bound to come. Still De Gaulle

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managed to take us by surprise. Yet, and in
spite of what P.H. Spaak seems to think (1),
his allies can hardly say that the General had
not warned them in time of his intentions. They
may regret that he should regularly choose, to
announce his decisions, the method of the press
conference or of the public statements, rather than
the more discreet means of traditional diplomacy.
But from the point of view of his allies, it wouldn't
have made much difference even if he had done so.
Instead, for the French, the choice of the means
was in itself relevant, in so far as in De Gaulle's
policies the "image" is at least as important as
the substance. While the Americans, the Russians
and the Chinese do have real power to back their
diplomatic action, De Gaulle has replaced power
with psychological warfare and he certainly plays
it brilliantly. In the case with which we are now
concerned with, he had to state loudly and to all
his will to carry ahead his plans about NATO's
future, in order to make the most of his visit
to Russia.

At the moment his allies are faced with a
bitter truth: in today's world, psychological
warfare may at times prove to be or look more
effective than power, simply because power is a
more delicate weapon to handle. Things look as
if it may force the Russian-American tête-à-tête
over peaceful coexistence to come out to the open
and accept uninvited participants. What this will
mean exactly and whether it is going to be for
better or worse remains to be seen. What should
be kept in mind, however, is that the psychological
warfare of General De Gaulle is partly due to the
fact that France and her partners don't agree in
the interpretation of the meaning and consequences

(1) On "Sunday Times" of London, May 8, 1966.

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of the changes which have been taking place
since 1949 (1). Because of this disagreement
De Gaulle chose to behave as he does. He is
probably satisfied with it (2). He would have
hated to think that any common man could reach
the same conclusions that he has, at the same
time. The others will follow, naturally. Be-
sides, all this has helped in putting France
into the spotlights as an ambitious candidate to
Europe's leadership and in making her citizens
aware of la grandeur de la Patrie.

Meanwhile France could hardly find any
reason for complaining about her partners be-
haviour. The United States as well as the
Europeans have made it quite clear that they attach
the greatest importance to the fact that France
should remain in the Alliance, in spite of the
criticism and impertinence of the French. Monsieur
Couve de Murville explains this by saying that
France's partners are beginning to understand
her reasons or, at least, are resigning themselves
to them. This may be partly true (after all the
fact that the governments of Eastern Europe are
showing more willingness than in the past to en-
large their relations with the West can't be
denied) but it's more true, probably, that France's

(1) It may be observed that what is happening now had been clearly outlined in De Gaulle's Memoirs. From 1958 onward the General has been busy in translating into terms of reality, step by step, the vision of the world as he stated it then. Though reality is still far below that vision, I recognize that this gives enough ground to doubts about the reliance to be placed in the statement that De Gaulle's policy is mainly a product of objective changes in the world's situation. It can be said, however, that the General has strongly contributed to make those changes possible.

(2) As Couve de Murville has put it, the most im-
portant thing about the General's visit to Russia
is that it has taken place.

is that it has taken place.

bordent thing spent the General's art to Bruce
(S) As Conne de Muraille has but it, the most im-

formerly, that the General has strongly contributed
changes in the world's attitude. It can be said,
De Guille's botch is mainly a broach of ophiolite
apart the refinance to be done in the statement that
I recognize that this gives enough ground to couple
through refinance is still far below that avion,
the avion of the world as he stated it then,
transferring into terms of refinance, at least by age,
from 1928 onward the General has been paid in
but been clearly outlined in De Guille's Memoirs.
(F) It was operated that what he happened now

denied) put it's a more true, properly, that Bruce's
fate their relations with the West can't be
showing more willingness than in the best to en-
treat that the Government of Eastern Europe are
to them. This may be rather true (after all the
reasons or, at least, are requiring themselves
Bruce's baronies are beginning to nagging at
Conne de Muraille explaining quite well eating that
artificial and inerritience of the French. Neurtem
apart remain in theVVillette, in spite of the
the greatest importance to the last that Bruce
Europeans have made it quite clear that they attach
importance. The United States as well as the
reason for completing spent her baronies pe-
Nemurville France could hardly find any
name of the Grandson de la Betise.

Europe's ferocious and in working her offiende
into the abettments as an audacious campaign to
win them, if this has perhag in bunting Bruce
time. The others will follow, naturally. Be-
the same concentration that he has, at the same
point to think that and common men could reach
propably affiliated with it (S). He would have
De Guille done to pieces as he does. He is
since 1848 (1). Because of that disagreement
of the changes which have been taking place

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partners are behaving with great political
wisdom and that each of them has decided that
when somebody in the family is misbehaving
and by doing so endangering the common good,
there is no point in hitting him on the head.
Patience and caution in dealing with the rebel,
smiles rather than anger, are the best policy.
Besides, in the more serene and discreet atmosphere
of the diplomatic talks the French have stated
explicitly (or have shown unmistakable signs
in that direction) that they don't intend to cut
the bridges behind them. It was quite obvious
to everyone on the night of May 11 in Brussels,
during the meeting of the EEC Council of Ministers
which ended at four o'clock in the morning after
a unanimous decision on agricultural policy had
been reached, that Couve de Murville did want an
agreement and that he didn't intend (and couldn't
afford) to fly back to Paris without one. Some of
the concessions which the French made over the
Kennedy round on that occasion, are far from being
irrelevant. During the NATO conference in Brussels,
in June, Couve's attitude was certainly not the
attitude of somebody who is ready to walk out of
the room and to bang the door. The truth is that
the French policy needs, in order to be carried out,
some extent of covert assent from the American and
European partners. This may represent a painful
admission for some of these partners.

But not for all of them. Denmark has gone
further, in putting forward a proposal for a formal
Conference between Eastern Europe and the Western
countries. The Norwegians have declared themselves
in favor of it. The final statement released by
the NATO ministers in Brussels last June included
a reference to the need of closer relations with
Eastern Europe.

The fact that, in spite of the NATO crisis,
the EEC Council of Ministers managed to reach an
agreement on the common agricultural policy and on
the completion of the customs union for industrials
goods, was a great diplomatic success for the French,

Goode, was a great diplomatic success for the French, the completion of the outcome made for industrial agreement on the common tariff between France and on the EEC Council of Ministers managed to reach an accord that, in spite of the NATO criteria, Eastern Europe.

a reference to the need of closer relations with the NATO盟友in Prussia that June included in favor of it. The final statement released by countries. The agreements have declared themselves Conference between Eastern Europe and the Western Union, in butting forward a broadeet for a forward but not for all of them. Denmark was gone

equitation for some of these partners. The way represents a beginning some extent of coövert ascent from the American and the French below needs, in order to be carried out, the room and to pass the door. The fruit of that attitude of somepok who is ready to mark out of his line, Conve a attitude we certainly not the reference. During the NATO conference in Prussia, Kennedy round on that occasion, are far too few the consequences which the French made over the effort) to fly back to Paris without one. Some of agreement and that he isn't going (and continu's been reached, that Conve de Muratville qtd must be a immense decision on antifunctional below had which engaged at ten o'clock in the morning after during the meeting of the EEC Council of Ministers to everyone on the night of May 11 in Prussia, the bridges pending them. It was quite obvious in that direction) that they don't intend to end explicitly (or have any number of them of the diplomatic talks the French have made with the盟友, in the more serene and placid mood of somebodier, the peacetime below.

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and deserves much more attention than it has received up to now. It throws a good deal of light on the real consistence of the European opposition to De Gaulle.

The Rumanians, on the other side, have done their best to strenghten De Gaulle's position. Only two years ago statements like the ones which M. Ceausescu has made recently would have been unthinkable.

And the Americans also, in their own way. They have withdrawn troops from Germany just when the French were busy telling everybody how important it is for Europe to dispose of her own means of defense, on the assumption that nobody can swear on the fact that the United States wouldn't allow their interests in other parts of the world to come first, if circumstances forced them to do so. Senator Kennedy and some other important leaders of Congress recently came out very strongly, much more so than in the past, in favour of a non proliferation Treaty and by doing so reminded the Europeans that such a Treaty would bring great changes in the present European situation. It would mean - among other things - that German demands on some kind of nuclear status shall fall short of a satisfactory answer. There would be nothing bad in that, (actually the majority of Europeans would welcome such a solution) but at the same time we must be aware that its only possibility is enough to raise strong apprehensions in Germany and undermines the solidarity and the stability of the Alliance. The Germans are the first ones to realize (because of their political and geographical position) that peaceful coexistence cannot mean status quo (1).

II.

It is no easy task to sum up briefly the consequences of what has been written above. The world is certainly no longer what it used to be during the post-war period. This has been said so

(1) See "Germany-America: problems of an Alliance" by Kurt Birrenbach, published in "Aussenpolitik" of February 1966.

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often that we are becoming tired of hearing it. Yet the post-war period is still with us. Slowly and cautiously we are creeping out of it and entering a new period in international relations without knowing what it may actually turn out to be. What I would like to point out - and I intend sticking to this aspect of the problem - is that in spite of these changes and of the crisis of the Alliance, the Western World is not weaker than it used to be. The present crisis is, in a way, a consequence of its good health. Growing stronger we find it somehow difficult to fit in the same old clothes. Quarrels may simply mean that we have come to know each other better and that we have become more equal.

What's more, we know that tensions can withstand only a certain amount of strain. Overplaying them would be valueless for all, including those who wanted them. France would be unable to carry through her present policy should she cut the links which tie her to her present partners. A France deprived of the EEC background, and out of the Atlantic Alliance, would hardly appear as being of any interest to the Russians. Her policy has some importance as long as it attempts to promote some changes in the Western policy as a whole. To succeed in this task France has to stay in the system. But this carries another consequence, a very obvious one: in order to stay in the system France has to keep, in spite of all her criticism, in the path chosen by her partners. This path is undoubtedly an Atlantic one. The Germans and the Dutch have made it quite clear. Even Herr Barzel doesn't deny that a European security arrangement must be negotiated with the United States. Even the Italian Socialist Party (the most leftist of all the socialist parties in the EEC) has stated clearly that it is not asking for a withdrawal of Italy from NATO. On top of all this, Americans have shown some signs that they are ready to adapt NATO to the present needs; to divert its forces to original military and defensive tasks to a new approach of East-West relations.

the needs of

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Finally, it should be stressed that the relatively independent policy of France and the cracks which we begin to hear in Eastern Europe, while disturbing the present bi-polar balance, don't install, by themselves, polycentrism. China is the only country in the world which actually can shift the present balance. No European country has the power to do it. From this point of view France must be compared to Rumania rather than to China. What happened at the end of June in Bucarest is highly instructive. Mr. Chou en Lai's visit to Bucarest was undoubtedly most unsatisfactory, from the Chinese point of view. The Rumanians don't intend to join the Albanians. They won't quit the Warsaw Pact. But they do want to provide the Alliance with new tasks. These tasks - according to the Rumanians - should no longer be merely military, but should be transformed in order to serve the needs of a peace offensive aiming at improving relations with the West and strengthening peaceful coexistence. France is very much in the same position. De Gaulle's visit to the Soviet Union proves it. She won't quit the Alliance. She still is, in spite of everything, part of the Western World and she behaves accordingly.

Dissent on some issues of defense and foreign policies does not necessarily, in spite of what the single parties involved would perhaps like to think, imply the lack of a substantial convergence along some lines which perhaps are, after all, the basic lines of a new scheme of international order.

In fact, one could say that the United States have undertaken the burden of dealing the hard way with Communism in a part of the World, Asia, where Communism is still in a phase of expansion while Europe (where France sings impressive solos, but where a chorus is echoing her "au bout des lèvres") is working in order to soften the iron curtain. Europe can afford to do so because European Communism's interests clearly rest on peaceful coexistence. The United States could hardly replace her in this job, mainly because of Vietnam (but let's not forget that peaceful coexistence would never have come to life had it not

./.

that beautiful coexistence would never have come
merely because of France (but let's not forget
states config hardly replace per in their top,
clearly rest on beautiful coexistence. The United
to do so because European Communism's interest
to soften the ironarna. Europe can afford
her "an pond des fées") is working in order
embarrassing else, but where a opera is enough
exaltung while Europe (where France stands
far away with Communism in a part of the world,
states have undertaken the burden of dealing with
In fact, one could say that the United

international order.
after all, the past lines of a new scheme of
convergence along some lines which perhaps are,
like to think, imply the lack of a separate
of what the single barriers involved would have to
result in policies does not necessarily, in spite
Diaspora on some lines of defence and

World and the defenses accordingly.
far in spite of everlarging, but of the Western
borders. De Gaulle's act to the Soviet Union
coexistence. France is very much in the same
relations with the West and strengthening beautiful
need of a peace alternative aiming at improving
put should be transformed in order to serve the
Westerns - should no longer be merely official,
with new tasks. These tasks - according to the
Marxist view. But they do want to bridge the Village
intend to join the Westerns. They want to drift the
Chinese into one. The Westerns don't
Brezest was undoubtedly most maistematical, from
its highly instructive. Mr. Gion en l'ait a drift to
China. What happened at the end of June in Brezest
France must be compared to Westerns rather than to
bes the power to do it. From this point of view
can shift the present balance. No European country
is the only country in the world which actually
won't invest, by themselves, before 1950.
China write stating the present p-boler balance,
cracks which we begin to bear in Western Europe,
relatively independent beneficiary of France and the
Tinylly, it should be stressed that the

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been for Kennedy's and Krutchev's convergent policies and it should also be remembered that when Macmillan went to Russia in 1959, the French were very reticent about his good-will mission) but also because of their position as a Super Power, which calls for more caution. What Europeans are doing reassembles much, for the moment, to what a patrol with exploratory tasks would do. She has little to lose. On the front line of the patrol we find General De Gaulle, the Italian industry and, as newcomers, the Danish government and two Germans, Willy Brandt and Rainer Barzel.

It can be said, in other words, that the West is carrying on at the same time two different (but complementary) policies, according to the different status - as far as power is concerned - of the countries involved and to the different circumstances, which differ considerably from Europe to Asia. The major results of this parallel action must be seen in the relations between the West and the rest of the world. At the moment France is undoubtedly giving the countries of the FThird World (Africa, Asia, Latin America) an image(1) of the West quite different and much more palatable than the one offered by the "Yankees" of San Domingo and Vietnam. This, in the long run, may prove to be highly valuable, in the general interest of Western civilisation. At the time of Suez and Algeria the role was reversed. This sounds cynical, but the important side of the story lies in the fact that a progressive wing can always be found within the political sphere of the Western Powers; while the fact that the representatives of the "liberal look" change according to the situations has little importance: what is important is that they are there and that they succeed in blowing in the cold wind of criticism and in pushing ahead the necessary reforms which allow the club to keep up with the changing tide.

(1) An "image" which often carries practical gains. 16% of the total 1961-64 Western aid (capitals) to the third world was paid by France, 8% by Great Britain, 7% by West Germany. The share of the United States was of 56%. The French spend more, per head, than the Americans do.

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Thanks to them the West can prove that it
still owns a major quality : vitality. Unfortunately,
what the West seems to lack, today, is imagination.
There is no doubt that we strongly need to be provided
with a new interpretation of Western solidarity. To
do it successfully we have first to give up accusing
each other of betraying the rules of the game. If
we fail to see this truth in time, the West (as a
whole - French as well as Americans) will miss the
target. It will be of little consolation to all to
know that we share responsabilities for it.

### III.

The above is by no means the appraisal of
an Alliance (in the restricted sense of the word),
but only a tentative interpretation of the dynamics
of a given situation. Needless to remark such an
interpretation is rather detached (to say the least)
from the declared intentions or even the secret aims
of the single protagonists (but what about those
connections which may exist at the level of the
subconscious, and which policy-makers can't afford
to bring into the open, because this would endanger
the short term credibility of their policies ?).

Of course, it can be said also that the
convergence which we have outlined above would have
much to gain in effectiveness if it came out of
coordination rather than independent initiatives.

Indeed critics may dismiss all this as
wishful thinking or mere speculation on semantics.
After all the American policy in Asia could do
more damage to the West than what we foresee today,
and the dialogue of de Gaulle with Eastern Europe
prove to be less successful than what some people
wish or fear. What's more, the whole game relies
on so many subtle and often hidden balances, that
even a small patch of dust could, under certain
conditions, stop or divert it.

./

✓.

conditions, stop or divert it.
even a small batch of that cond. under certain
on so many, settle and often hidden preferences, that
stay or tear. What's more, the whole game relies
bove to be less successful than what some people
and the dialogue of the Gents with Eastern Europe
more similar to the West than what we foresee today.
After all the American boys in USA cond. do
wholly thinking or mere anticipation on matters.
Indeed, criticism may seem all this as

coordination rather than independent initiatives.
may to gain in effectiveness if it came out of
convergence which we have outlined above would have
Of course, it can be said also that the

the short term credibility of their buffer(s).
to bring into the open, because this would engender
oppositions, and which buffer-makers can't allow
connections which may exist at the level of the
of the aggregate antagonists (but what apports those
from the declared intentions or even the secret aims
interpretation is rather detached (to and the least)
of a given attraction. Needless to remark even an
put only a tentative interpretation of the dynamics
of Alliance (in the restricted sense of the word).
The above is not meant the abstrast of

### III.

Know that we share reasons for it.
Target: It will be of little consequence to us to
whose - French as well as Americans) will mean the
we tell to see that trust in time, the West (as a
each other of penetrating the rules of the game. It
do it successfully we have that to give up according
with a new interpretation of Western solidarity. To
There is no doubt that we strongly need to be provided
what the West seems to lack, today, is imagination.
Still, one major shortcoming : at times, unilaterally,
Thanks to them the West can prove that it

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Still, there are some solid reasons for
believing that the West is getting stronger every
day, and actually more deeply integrated, in spite
of what we might be entitled to think on the
grounds of a mere political approach to the problem.
But if this is true, then some speculations - as
the ones outlined above, and some of the conclusions
which can be drawn from these, become more plausible
and the patch of dust less likely to upset the
course of events.

The laws of economics are perhaps succeeding where politicians find it hard to progress. We should ask ourselves whether economic integration is not tying Europe and the United States together to such an extent that no political design would be able - in the foreseeable future - to part them. Though personally I am convinced that this is what is happening, I realize that it is hard to prove it and that some of the evidence which is available offers ground to dissent and discussion. I'll attempt to outline briefly in the next pages, some of the facts and some of the issues at stake.

IV.

It's generally agreed that a real partnership
can only exist between equals. It's also quite ob-
vious that Europe has failed up to now to raise
herself, both economically and politically, to a standard
allowing her to be considered as an equal to the
United States.

From an economic point of view, the creation
of EEC has highly improved the European chances to
reach that standard. But right now the outlook is
dim. The rate of growth is slowing down (4.3% during
the next few years), especially in Germany, which used
to be the most dynamic among the economies of the
Six. Besides, the feelings of bitterness born out
of the recent EEC crisis (and the NATO crisis certain-
ly doesn't help to cure them) won't make things
easier in the hard job which lies ahead of the EEC's
Commission.

["Commissioner.", "sees in the hard job which free trade of the EEC's\nis open to help to come them) must make things\nof the recent EEC exports (and the WTO exports certain-\nity). Besides, the feeling of perverseness now out\nis to be the most dynamic among the economies of the\nto the next ten years), especially in Germany, which needs\nthe support of the EEC. The rate of growth down (4.3% during\nthe year). But right now the outlook is\nof EEC has greatly improved the European chances to\nfrom an economic being of view, the creation", "United States.", "flowing her to be considered as an end to the\nbenefit, both economically and beneficially to a status\nof the EEC. The rate of growth in the growing down (4.3% during\nthe year). The rate of growth in the EEC, which needs\nthe support of the EEC. The rate of growth down (4.3% during\nthe year). The rate of growth in the growing down (4.3% during\nthe year). The rate of growth

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Also, the attention of the governments and of the politicians will be concentrating mainly on the issue of the relations with Eastern Europe. Though the EEC could well prove to be, in the future, an effective core for a wider European system (1) it's likely that in such a broad context the Community (at the least as it is now, with its present problems) is going to lose its role of prima donna of European affairs. It may even, in certain cases, appear like a nuisance, something too big to be ignored and therefore, by its only existence, an embarrassing burden in the arms of those who will have to negotiate a deal over a wider European security system.

Thirdly, the dragging on of the discussions over the merging of the three Executives and the problems this involves as regards the reorganization of the Community staff, contributes to the impression that the activities of the EEC will slow down considerably, at least for some time. What's more, negotiations over the merging of the three Treaties - which will necessarily follow the merging of the Executives - will force the Six to face again some of the problems on which they failed to reach agreement in the past and which they have carefully avoided since.

Finally, while the European firms are having a hard time in facing international competition, the American ones are comfortably making Europe a second home for their activities.

The growing dimensions of the American firms is the most striking phenomenon of the second industrial revolution born with World War II.

(1) Should Austria join, for instance, the path would be set for further developments.

best world peace set for further development.
(f) Young Americans learn for instance, the

industrial revolution now with World War II.
the most striking phenomenon of the second
The growing dimensions of the American times
home for their activities.

American ones are comfortably working Europe a second
a long time in facing international competition, the
Himself, while the European times are having
adopted since.

ment in the beat and which they felt to reach after-
the problems on which they relied to reach at three-
Executive - will force the six to face again some
which will necessarily follow the meeting of the
negotiations over the meeting of the three Treaties -
separately, at least for some time. What's more,
that the activities of the EC will slow down con-
the Community attack, contribute to the impression
problems due to involve as regards the reorganization
over the meeting of the three Executive and the
Thursday, the dragnet on of the dimensions

wiper European security system.
those who will have to negotiate a deal over a
experience, an embarrassing burden on the sum of
too big to be governed and therefore, by its own
certain cases, absten like a instance, something
brings down of European states. It was even, in
present problems) it is going to face its role of
Community (at the least as it is now, with its
it's likely that in some a proud context the
an effective core for a wider European system (f)
Troy the EEC config well broke to do, in the future,
the name of the relations with European Union.
of the beneficiaries will be concentrating mainly on
Viva, the attention of the governments and

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Out of the 64 firms reaching a total turn-out of 1 billion dollars 49 are Americans (only 13 Europeans) (1)?

The present trend shows that their number is growing fastly and that in a very near future the firms with a total turn-out of one billion dollars or more will be twice as many as they are today. That such a phenomenon should be born in the United States is only natural, because of the size of the American market. But what is happening today is that even their national, continental-size market has become too small for the main American firms. These firms need, in order to keep up with

(1) In the motor industry 4 out of the first 10 firms are American, 6 European; but the first three American firms have a total turn-out of 24 billion dollars, to be compared to the 4,1 billions of the first three European firms. In petrol 8 out of the first 10 firms are American, and the three main ones have a turn-out of 16,7 billions, while the three main European firms total 8,8. In the chemical industries 7 out of the first 10 firms are American, and the total turn-out of the first three is 5,6 billion dollars, to be compared to the 3,5 billions of the three main European firms. In the electrical and electronic industries we can find only 2 European firms among the first 10, while 6 are American. The main American firm has a turn-out of 4,8 billions, the main European firm only 1,5 billions. These are only examples. If we look at profits rather than at turn-outs the distances are much wider. General Motors profit is over 1,5 billions, Volkswagenwerk hardly reaches 0,06, a little less than Chrysler, but still much less than Ford Motor (0,5).

Source: Fortune and a report by U.N.I.C.E. (February 1965). These figures include, for Europe, the EEC and Great Britain. The figures apply to 1965.

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the pace set by their investments, much more
economic space than what the American market can
offer them. They can't solve the problem only
by increasing their exports. The instabilities of
international trade are considerably reduced if a
firm manages to establish herself at the source
of several, rather than just one, streams of
international trade; therefore building factories
in foreign countries or buying shares in foreign
companies; in this second case control of the
means of production and of the direction of the foreign
firm is needed, at least to some degree. Besides,
such an organization allows, in most cases, a
better utilization of the factors of production.
Today more than 700 of the first thousand American
companies own factories in Europe.

American direct investments in the EEC area
have raised by 183% between 1958 and 1964, from a
total of 1,9 billion dollars to one of 5,4, which
represents about 50% of all foreign investments in
Europe . Figures don't mean much on their own. So
it has been said that this total is less than 2% of
the total EEC investments. But it must be added,
then, that American investments are highly selective.
They concentrate on the important industrial sectors.
They carry with them new technologies. Their impact
on the market is increased by the fact that often
the European investments in that same sector are
spread over too many different firms, in competition
with each other.

Some Europeans call all this with the name
of American economic imperialism. They fail to see
that what's happening is in fact much deeper and
simpler at the same time. While the Americans
companies have understood what modern industrial
development means, the Europeans haven't.(or should
we rather say that they understood it late and that
they are now trying to catch up, with all the dis-
advantages which a late start involves). The

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American companies have filled a void which the Europeans were unable to fill by themselves.

Paradoxically enough, American companies had more to gain, at first, from the creation of a European Common Market than the great majority of the European companies. The American firms were fitted to deal with a continental market, because of their dimensions and their experience. The European firms were - apart from a few exceptions - only national, and were equipped for the needs of a market which was far below the size of a continental one. They knew that the EEC would gradually open their market to the competition of foreign firms, but apparently they thought mainly in terms of competition from the other five member countries. Each of these would have to solve the same problems that they were facing; therefore no immediate danger was going to upset their plans, all the European firms would gradually get acquainted with the problems and the laws of a wider economic space. The graduality of the process gave them what then appeared as a sufficient amount of time for the changes which had to be made. Besides, the dissent existing at the political level among the Six probably induced some to think that the process may be delayed. The European industry apparently overlooked the fact that its American competitors, because of their higher profits, could step through the customs barriers of the Six at an earlier stage, when the European firms were not yet ready to do so to the same extent. As long as the six European markets were not integrating, the principal European firms were quite able to compete, within their own national market, with the American competition. But from the moment that the market was enlarged, even if only to some extent, the American companies were able to throw into the competition the full weight of their dimensions and to take full advantage of it. This has been, I think, the most significant fact in the field of the western industrial competition in the past six years(1).

(1) I have examined this problem in a paper ("L'industrie européenne face à la concurrence internationale") published by the Centre de Recherches Européennes of Lausanne (1966)

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Two other factors strongly contributed to create the present situation, though it would be hard to say which of the two was the most important.

Firstly, because of the post-war reconstruction (as a result of which many European factories had to be completely rebuilt on a modern base) and of the lower salaries, the European industry has known many years of prosperity. The Italian "miracle" is a good example of it. Because things were "going well" too many European companies failed to provide themselves with the means which would have allowed them to keep going even longer. Too little was spent for research and development. While the American companies will spend over 16 billion dollars on R&D in 1966, the European companies will hardly reach the total of 2 billions. It is of little consolation to Europe to know that a good deal of the American expenses is financed by the Federal Government (about 76%) mainly for military and space programmes (1). The results are what they are, standing against criticism: technological progress has become the key to the modern industrial society.

Secondly, the importance attached by the Six to the implementation of a common agricultural policy has been shadowing the problems existing in other fields. All the energies and the attention of the Six governments were called upon agriculture. Though it's true that a failure in solving this problem would have left the Common Market with very little hopes for survival, it is also true that the concentration of the efforts on one problem has delayed the setting up of common policies in the other fields. Today the EEC is very near to the status of Customs Union,

(1) The higher cost of American research allows only a re-evaluation of the in-put, but doesn't balance the overall productivity (out-put) of European R&D activities -considered as a whole - which is far below the level of the American one (apart from other reasons, because of the great amount of duplication - both in organization and activities - involved).

port in organization and activities - (involvement).
reasons, because of the great amount of application -
due to the level of the American one (above from other
activities - considered as a whole - which is ten
everyday productivity (out-bus) of European ESD
a re-evaluation of the in-but, put down, prevalence of
(I) The higher cost of American research efforts only

the ESD in very near to the actual of Ossum/Upton,
no of common beneficiaries in the other fields. Today
of the efforts on one problem has delayed the setting
tor environment, it is also true that the concentration
have felt the Common Market with very little hope
it's a true that a failure in solving this problem would
Six governments were ruled by some statesmen. Work
fields. All the energies and the attention of the
use been dropping the problems existing in other
to the implementation of a common strategy would be
Secondly, the importance attached to the Six
society.

broader has become the key to the modern industrial
shift are, among against criteria: technological
and above programmes (I). The results are much
Federal Government (apart 50%) mainly for further
benefit of the American expenses in insurance by the
of little concentration to Europe to know that a Road
will hardly reach the total of 5 pillion. It is
difficult on ESD in 1966, the European companies
American companies willhang over 10 pillion
was about for research and development. While the
them to keep going strong in the four mm. Too little
themselves with the means which would have afforded
weifh, too much European companies filed to broade
a road example of it. Because things were "going
well here as before". The Italian "mracere" is
the lower industries' European industry has known
to be completely reprinted on a modern pace)and of
(as a result of which much European factories had
freely, because of the post-war reconstruction
portant.

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[c]

[Lc]

- 16 -

but much must be done, still, to achieve economic union. The EEC has neither a common policy in the field of research and development, nor a common industrial policy, two major tools towards the realisation of the dream of a self-confident and powerful Europe.

From this point of view Europe is still in a situation which oddly enough resembles balkanisation. It's quite a paradox to see how little use the Europeans have made so far of a capital of skills and resources which would otherwise easily make them second only to the United States. Because of the present lack of common action in these fields the Soviet Union is now far ahead of them and Japan is about to overtake them too. Even an independent national deterrent has little sense, in the scale of world powers, if it's built on an economy which lacks competitive capacity. Prestige, in such circumstances, is only like a huge marble statue built on an earthenware pedestal. As all fake gods it proves unable, in the long run, to answer the expectations which it arises.

V.

Whatever the causes, it remains that the American technological and economic dominance is perhaps the most striking fact in the present state of the Atlantic Alliance.

It has been said that this technological superiority is an unstabilizing factor in the relations between Europe and the United States. This is certainly true, but it may turn out to be that some strong factors of integration are working under the smoke-screen of the present difficulties, in so far as European economy is reacting in its own way to the American pressure.

Immediately after the war the Marshall Plan gave the Europeans the first substantial chance to cooperate effectively and to start a movement towards unity which, in spite of all the difficulties, is still a major factor in international relations. The success of the Community in the past nine years

The success of the Community in the best nine years has afforded a major factor in international relations, which, in spite of all the difficulties, coexists effectively and to start a movement to give the European the that undeniabl chance to immediately after the war the Marshall Plan can be used to the American dream.

in order to the American dream.
under the smoke-screen of the present difficulties,
that some stronglecme of integration are working
This is certainly true, but it may turn out to be
relations between Europe and the United States.
unfortuit is an unmitigating factor in the
It has been said that the technological
of the Atlantic Alliance.

beneath the most striking fact in the present afuse
American technological and economic dominance in
whatever the cause, it remains that the

V.

the expectations which it arises.
Goes it provee muppie, in the long run, to answer
pufft on an exsanguine degree. As all the
circumstances, to only like a fine muppie taste
fries competitive capacity. Prerife, in and
of world power, it is a pufft on an economy which
national deterrent has little sense, in the case
apout to overtake them too. Even an independent
soviet Union is now far ahead of them and then in
brutal lack of common action in these fields the
second only to the United States. Because of the
and resources which would otherwise easily make them
Europeans have made so far of a capital of skills
It's due to a paradox to see how little use the
effectiveness which equally enough reemphasize demonstration.
From this point of view Europe is a still in
bomberjy Europe.

restatement of the dream of a self-confident and
pugnacious buffer, two major factors to emerge the
tield of research and development, nor a common
munion. The EEC has neither a common buffer in the
put much what be done, still, to secure economic

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[c]

[Lc]

- 17 -

is a reality which nobody can deny. It's also a fact that the hopes of those who thought that the inner forces of the institutions would do the job by themselves, providing an almost automatic process of integration, are falling short of their ambitions. But nobody would have imagined, only a year ago, that the United States would again - as at the time of the Marshall Plan - play a decisive role in pushing ahead the process of European integration. Dissent over the military organisation of the alliance as well as over other problems as the Kennedy round, seemed to point to the opposite: that the United States had lost their interest in European unity, or that they were, at least, feeling bitterly disillusioned. Which was true and probably still is if not more so today. The point is that the American government has very little to do with this new American attempt to unite Europe.

The main protagonists of this new momentum of European integration are the big American industrial firms. Thanks to them the standstill which the Community is facing now - for all the reasons which we have listed above - will probably be only a temporary one. American industrial competition will force the Community mechanism back to work.

In other words, I am convinced that the intensive and increasingly important American investments in Europe are having three major effects:

- they are implementing a deeper economic integration within the EEC area;

- they are implementing trans-Atlantic integration and therefore preparing for what one day could turn out to be a "new look" of the Atlantic partnership;

- they are making the improvement of economic relations with the East a necessity for Western Europe; and therefore they are helping to disrupt the old barriers and to strenghten peaceful coexistence.

Each of these three points deserves a few words of explanation. My interpretation of the phenomenon as a whole is only a tentative one, but

phenomenon as a whole is only a tentative one, put
mended or expunged. My interpretation of the
Book of these three chapters concerns a few
coexistence.

ment of the old periphery and to attempt to be civil
Europe; and therefore they are helping to dis-
connect with the rest a necessarily Western
- they are making the improvement of economic
barter system;

and therefore preparing for what one says could
- they are implementing thus Atlantic integration

within the EEC area;

activities in Europe are having three major effects:
intensive and increases significantly important American in-
fluences in other areas. I am convinced that the

temporary one. American industrial competition will
we have fated above - will properly be only a
Community if working now - for all the reasons which
result. Thanks to them the standard of living the
Europeans integration are the best American industrial
The main problematics of the new momentum of

to go with this new American attempt to unite Europe.
About it is that the American Government has very little
trance and properly at all is it not more so today. The
at least, telling pitter-pattered. While we
their interest in European统一, or that they were,
to the object: that the United States had feet
problems as the Kennedy round, seemed to being
organisation of the alliance as well as over other
Europeans integration. Disseminate the wiffling
detaile: role in building speed the process of
as at the time of the Marshall Plan - had a
herald so, that the United States would again -
assumptions. But nothing would have impressed, only
process of integration, are telling effort of their
own themselves, broadcasting an almost automatic
inner forces of the institutions would do the job
tact that the powers of those who thought that the
is a reality which nobody can deny. It is also a

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[c]

- 18 -

discussions over this problem would probably
contribute to a better understanding of what is
going on today within Europe and the United States
and to ease some of the present controversies.

Let's examine briefly each of these three
points. The belief that the American investments
are strongly encouraging European integration relies
mainly upon two facts. In the first place the "state
of emergency" which they have created has forced
the European industrialists to become aware of the
realities of modern industrial competition and to
undertake a vigorous action to reform their inade-
quate structures. As a result of this action
companies from different countries have merged or
associated themselves in various ways. Besides,
mergers between companies from the same country
have been numerous and important (1). The conse-
quences of the "national" mergers are perhaps, in the
present state of the European economy, even greater
than those of the international ones, simply because
a weak industry will put pressure on the government
in order to get protection and therefore, from the
point of view of the country's economy, to delay the
process of integration with other economies. Instead
a strong industry has more to gain than to lose from
an enterprise like EEC. As soon as the size of
national firms grows large enough their natural
trend is towards the disposal of a wider market and
the needs of a wider international market almost
automatically calls for bigger firms than the ones
which are fit for a merely national market. "Big",
in this case, doesn't simply refer to the size; it
means also the ability to cope with the problems
which raise from the existence of a wide range of
demands, which can vary considerably according to
the habits of the customers and to the commercial
practices and regulations of the different countries;
it means also the necessity to make the best use of
the factors which are available in each country,
in order to keep costs at a competitive level (2).

(1) In 1965, in France mergings have been three times as many as in 1957. See *Direction*, June 1966

(2) By the way this explains why, as we have already pointed out, American firms often "buy" European firms, in order to establish themselves in the European market and to raise their profits.

[LC]

These needs can be met only by international mergers. All this may sound simple enough, but it's far from being so in Europe, where the profits of the single firms, even the main ones, are still much lower than those of American firms (1), and therefore have a negative impact on the firm's readiness to run risks of any kind.

In the second place, the Europeans are discovering today that too many legal and financial obstacles make mergers between their companies difficult and expensive and often plainly impossible. They are realizing that these obstacles will disappear only if they will succeed in harmonizing legislative and administrative provisions and in implementing common policies in fields such as transport, social charges, movement of capital, research and development and so forth. So the fears raised by the increasing impact of American investments in the EEC area have strengthened those economic and political forces which are now asking in Europe for more integration.

After discussing a report by M. Charvet, submitted on behalf of the Planning and Investment Section, the French Economic and Social Council recently adopted (by 108 votes to one, with 24 abstentions) an opinion on foreign investments in France. According to this opinion "the Community must work out ways of preventing its interests or aims, or the common policies that have been framed or still have to be framed, from being jeopardized by investments from third countries. Particular attention must be paid to ... all measures liable to be included in the finalization of a common industrial policy. These measures should ensure, preferably by means of persuasion -, that investments from third countries are steered in the direction that is as favorable as possible to the interests of the Community and the proper realization of common policies". Also: "The Economic and Social Council calls on the French Government to raise in the EEC Council, as a question of urgency a) problems related to foreign investments ...; b) taking these

(1) This is also true when the American and European firms are of comparable size.

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[LC]

investments into consideration in the meetings of the Medium-term Economic Policy Committee". The Report by M. Charvet notes that a common policy on foreign investments cannot be complete without agreement between the Six on monetary concepts and practice; and goes as far as saying that the principles for a joint action, that is the "cooperation and coordination" concepts worked out by the Commission (in her proposals on statistical controls and the holding of joint consultations) are inadequate, and suggesting to "extend the line of conduct indicated by the EEC Commission" through examination of the principles stemming from the general objectives incorporated in article 2 of the Treaty of Rome. The Report underlines how an effective action cannot be undertaken without parallel actions in various fields as regional policy, research, competition policy, social policy (1).

This example (and the fact that it comes from a French official body is of particular significance) and shows beyond any doubt that Europeans cannot any longer cope with certain problems on purely a national basis. A French policy on foreign investments would have no effects whatsoever should this policy not be coordinated with the policy of her five partners. What's more, to have a common policy in some field would be of little use without complementary common policies in other fields. It's interesting to note how the Report and the Council make express reference to the Community, to the Treaty of Rome and its institutions, and even criticises the Commission when her proposals look too mild.

The truth is that integration, once set to motion, works like a spiral: to encourage mergings and possibly the creation of new companies with a "European status" would have no sense without a parallel implementation of common legislation and/or policy in fields such as patents, capital market, social charges, transports, taxation, and so forth. At the same time as integration proceeds, pressure from the major interest groups is bound to increase. The C.N.P.F. (Council of the French Industries) opposed the completion of the Customs Union for

(1) The italics are mine. The English text is quoted from Agence Europe.

[LC]

- 21 -

industrial products for as early a date as July 1, 1968, but that was only a tactical move. Its President, M. Villiers, had stated, only a few months earlier, that "harmonization of general policies, legislation and regulations, is essential to fair and fruitful competition. There has already been too much delay in these developments of capital importance ... ". So much for the industrial goods. But what about the situation in three or four years time, when the application of the common agricultural policy will have already become a permanent factor of the six economies? Would any French government - at that stage - ever be able to threaten to withdraw its country from the Community? The pressure of the farmers already weighed heavily during the 1965 crisis, when that policy had not yet been implemented; how would they react once they have become accustomed to living with it? (1)

All this rises a series of stimulating questions. What will happen then? Can a true economic union exist without a common commercial policy? And how to reconcile the need of such a policy with dissent over the foreign policy?

The second of the three major effects of the increasing flow of direct American investments in Europe is - as we wrote earlier - deeper trans-Atlantic integration. This point may at first appear more obvious; but, on the other hand, also more uncertain and controversial, mainly because the two streams of trans-Atlantic investments are by no means of comparable sizes, as the flow towards Europe appears to be by far more important than the other. Some people are therefore more inclined to refer to it as American technological and economic domination rather than integration. The two concepts are not necessarily contradictory but the integration we are referring to here is -

(1) Interests groups are often aware of the importance - from the point of view of the Community's developments - of their action. In an interview published by Fortune (June 1966), Kurt Hansen, Chairman of Bayer, Germany's biggest chemical company, scoffs at the suggestion of merging Bayer with Hoechst and BASF, Germany's other leading chemical producers. "It would by psychologically wrong" he says, "I should much rather merge Bayer with, say, a French company. This would create a state of affairs which the politicians couldn't ignore. Political integration would have to follow".

- 22 -

[Lc]

In the long run - made up of a balanced and fair participation of all the parties involved. This is not the present case and some may argue that it will never be so, because of the considerable advance already gained by the American industry and of the economic and political difficulties which the Europeans are now going through.

However I think that there are fairly good reasons for believing that the long-term trend is favoring such an integration. Holland - a small country - is certainly not a loser in such ventures as Unilever and Royal Dutch-Shell. I.T.T. can be considered, in many ways, unimportant to be no less European than it is American. Even in a highly controversial case like Bull, it can hardly be said that a 50-50 share is the expression of the domination of one of the two parties (1). It must not be forgotten that in many cases neither the American firms become European nor the European firms go American. Both go "international", and by doing so they obey the laws of economics and fit into the new economic and industrial reality of the post-war era. Mergings of European companies makes this truer everyday. Also these mergings are likely to encourage more European firms to cross the Atlantic and to enlarge the area where the competition takes place. This is already happening to some extent and, for instance, French investments to the United States have been steadily increasing (2).

Here again some interesting questions can be asked. European-American relations are perhaps following the same path which European integration has already tested. After the failure of the first attempt to install military and political union, with C.E.D. (European Defense Community) in 1954, Europeans were forced to cool down their early enthusiasms and to shift their action into the economic field. The Treaties of Rome were born out of this more realistic appraisal of the situation.

(2) Direct investments rose from 18 million Francs in 1960 to 80 million in 1964, portfolio investments from 18 million Francs in 1960 to 696 million in 1964. Total French investments in foreign countries rose from 522 million in 1960 to 3.416 million in 1964.

(1) Except that it took place in a sector (computers) where the American industry practically controls the whole European market.

where the American industry bracingly controls the

(4) Except that it took brice in a sector (combustor)

1964.

rose from 255 millions in 1960 to 3.47 millions in
1964. Total French investments in foreign countries
from 18 million France in 1960 to 196 millions in
1960 to 30 millions in 1964, total investments
(5) Direct investments rose from 18 million France in

one of this more resolute abatement of the situation.
economic field. The Trespass of some more born
enormous names and to split their action into the
Europeans were forced to cool down their early
with C.E.D. (Europeaw Defense Committee) in 1964,
attempt to instill a firm and confident mind,
was already tested. After the failure of the first
following the same bath which Europeaw integration
sake. Europeaw-American relations are bertha
Here again some interesting questions can be

United States have been steadily increasing (5).
extent and, for instance, French investments to the
take place. This is already happening to some
Atlantic and to enlarge the area where the competition
to encourage more Europeaw trade to cross the
trierly easily. Via these mergers are further
enlarged. Meetings of Europeaw countries make this
great economic and industrial resift of the best-mat-
so field opened the ways of economics and into the
bo American. Both to "international", and to going
American trade become Europeaw nor the Europeaw trade
must not be forgotten that in such cases neither the
the domination of one of the two battles (1). It
may find that a 20-40 share in the expression of
controversial case like Buff, it can hardly be
Europeaw thus it is American. Even in a highly
be considered, in many ways,acker to be no less
than leader and Robert Dutch-Breiff. I.T.T. can
country - it certainly not a fear in such ventures
taking such an integration. Hoffnung - a small
reason for defeating that the long-term trend is
However I think that there are several good

which the Europeaw are now going through.
and of the economic and best-fest quantities
advance through gained by the American industry
will never be so, because of the considerable
it not the present case and some may argue that it
benefitment of all the battles involved. This is
in the long run - made up of a preference and fair

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[fr]

[Lc]

Today the Atlantic Partnership has failed to come into existence on the grounds of defense and more generally of foreign policy. It may well be that a "new look" of Atlantic Partnership is taking shape, essentially on the grounds of economic cooperation and/or integration. This new start may finally prove to be more fruitful than the previous one. Though it would be unwise to be over optimistic, it would equally be unwise to dismiss such a possibility. Everything in our power must be done in order to strengthen this trend

The Kennedy round can prove to be a good step in this direction. Having lost its original signification, it is now only a trade negotiation, aiming at lowering tariff barriers and allowing larger exchanges between the two areas. Here again the path is fallen back from the political level to the economic one, which is not necessarily a bad thing, as long as it will contribute to implement integration between the two partners.

The third major effect of the increasing flow of direct American investments in Europe - and, more generally, of the overwhelming competitive capacity of the American industry - is that the Europeans are looking to the East much more so than in the past. Being or feeling unable to compete effectively with their American competitors on the European and on the American markets, forced to reach larger dimensions and having to make the best out of it, the European industry has discovered the Eastern market. Reciprocally, and as a consequence of their improved standard of life, the communist countries are discovering that EEC is not just an expression of the evil and the contradictions of capitalism, but that it can offer something worth taking.

Fiat finds it easier to expand towards the East than to cross the Atlantic. On the other hand, the Russians can ask Fiat (or, subsidiaries, Renault) to contribute to meet the needs of their economic planning, but could hardly run the risk to make a deal with General Motors, for obvious political reasons.

reasons.

a chief among General Horace's for opatene benefit
beyond, but could hardly run the risk to make
contribute to meet the needs of their economy
the resources can ask (or, supereminently, Renssela)
but then to cross the Atlantic. On the other hand,
that brings it closer to extend towards the
taking.

of capitalism, put that it can offer something worth
just an expression of the end and the contractions
communist countries are discovering that EEC is not
seduction of their improved standard of life, the
their standard market. Accordingly, and as a con-
out of it, the European industry has recovered
reached further dimensions and having to make the best
Europeans and on the American market: forced to
effectively with their American competitors on the
in the best. Best or worst simple to compute
Europeans are looking to the East which more so than
certainly of the American industry - to that the
more generally, of the overwhelming competitive
flow of direct American investments in Europe - and,
The thing, major effect of the increasing
integration between the two belligerents.

put thing, so long as it will contribute to improve
the economic one, which is not necessarily a
the best it can be, from the benefit felt
faster exchanges between the two areas. Here again
seeming at lowering tariff barriers and slowing
amplification, if it is now only a trade negotiation,
ated in this direction. Having lost its original
The Kennedy round can prove to be a good
trang

om power what he done in order to approach this
to diameters and a hostipity. Marrying in
to be over optimistic, it would easily be made
than the previous one. Though it would be much
new attempt may successfully prove to be more fruitful
of economic cooperation and integration. True
and it is striking indeed, essentially on the ground
well to do that a "new look" of Atlantic belliger-
ent more generally of foreign benefit. It may
come into existence on the ground of defense
Today the Atlantic belligerent has tailed to

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- 24 -

By doing so Western Europe gives some substance to her ambition to play an active role in the research of stable conditions for peaceful coexistence. She could not afford to play any effective role on merely political grounds. No collective security system can possibly be built in Europe without the United States. But the Soviet Union can't afford to move in that direction as long as Vietnam stands in the way. So the Europeans are doing the only thing which - in the present situation - is possible and reasonable. The fact that one of the major results (perhaps the only tangible one) of De Gaulle's visit to Russia is cooperation in the scientific and technological field is no coincidence.

Some degree of contradiction may be seen between the second and the third point, in so far as Europe may choose the latter way as the easiest one, and implement a "containment policy" on the increasing pressure of the American companies. But I don't believe that this will happen. Trade with the East involves only a small portion of the total trade of the Six and is of little importance when compared with the trade with Western Europe and the United States. The two trends will probably coexist and the deepening of economic trans-Atlantic integration will make the economic links between Western and Eastern Europe all the more significant. Besides economic co-operation between the two halves of Europe rests mainly on trade relations, while integration is by now the key factor in trans-Atlantic economic relations.

VI.

Of course all this can be highly controversial. But it shouldn't be dismissed without further examination and discussion if we don't want to run the risk of ignoring what could prove to be a powerful factor

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[LC]

in the strengthening of trans-Atlantic relations (1) The ones which have been outlined above are medium or long-term developments and some factors could stop or divert the whole process. The pace at which things are taking place is such that both Americans and Europeans may lose control of it. What would happen if things should get out of hand is unpredictable but it certainly won't serve the interests of trans-Atlantic cooperation.

(1) I keep referring to trans-Atlantic cooperation, or, in certain cases, integration, rather than Atlantic Partnership. The latter is a long-term objective and it requires equal partners. But the two likely partners are still far from being equal. Therefore today the problem lies mainly in examining trans-Atlantic relations in order to see in which way these relations can improve the economic and political status of the weakest of the two prospective partners. One of the most dangerous statements which are often echoed in American public opinion is that "now that Europe is rich (thanks to the American aid), Europe should take a larger share of the burden that the United States are carrying in the general interest of the Western world". In fact, "Europe" is an equivocal concept. There is no Europe as such, not just yet. There are separate countries, seeking unity and discovering that much must be done still in order to achieve it. The European "economic miracle" is a smoke-screen which hides a structural weakness of the European economy, and this weakness has been brought into the open by the competition coming from the other side of the Atlantic. As Robert Schaetzel put it clearly in his recent article :" What is alarming is the effect of the more limited European performance on American attitudes. We become irritable as we contemplate a world with Americans cast as the ubiquitous gendarmes, while the affluent Europeans, so the image goes, enjoy the security ensured by our "unappreciated" efforts. We tend to overlook a number of critical points: the European contribution to our common defense is real and substantial; we are in Europe not merely to protect Western Europe but to protect ourselves; we cannot equate ourselves, with our economy of $700 billion, with the several European states. But tides of irrational irritability and criticism can mount and lead to insistent demands that if Europe is unprepared to defend itself, or to provide further help to our balance of payments or to make a fair contribution in Southeast Asia, then a reduction of the American commitment to Europe is in order."

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[LC]

Should the pressure of American competition overwhelm the European capacity to stand up to the challenge, then the result may well be the end of EEC. In a situation of emergency stirred by an excess of American pressure no common European action would probably be possible. The Community would be split between those countries - like Belgium - where there already is a widespread opinion that the European industry can't keep up with the pace (and that buying licences is the only way to keep business going) and those countries - like France - where such a policy would be opposed(1). French requirements on common

./

(1) The third possible attitude - the belief that Europe is doing well - is equally dangerous. In a paper presented recently to a symposium in Rome, M. A. Albonetti, director of Economic Studies and of External Relations at the CNEN (Italian Atomic Energy Commission), wrote, among other things, that:
a) research - only one among other factors of production - is a key factor to economic development in highly industrialized countries, like the U.S., but it's relatively much less important in the other countries;
b) this is proved by the fact that European economy is doing better than the American one (M? Albonetti quotes figures on industrial production, productivity, exports);
c) besides, it's not true that European research can't be compared to the American one. By applying the "research exchange rate" and by eliminating from the total all space and military expenses, M. Albonetti reaches the extraordinary conclusion that Europe (EEC plus the United Kingdom) spends more for R&D activities than the United States (8,4 and 7,7 billion dollars respectively).

Unfortunately for those who share such an optimism, Europe must be reminded that:
a) though research is not the only factor of economic development, the lack or inadequacy of it may jeopardize the whole process;
 Western Europe is a highly industrialized area (M. Albonetti seems to suggest that all or some European countries aren't) and even countries like Italy, simply by being members of EEC, share the problems of a highly industrialized society;
b) rather than looking at total figures one should look at the key sectors of the economy: it would then be seen that Europe is not doing so well compared to the U.S.;
c) the "R&D exchange rate" has been much criticized and it only refers to the in-put and doesn't take into consideration the overall productivity of R&D activities; besides, M. Albonetti's thesis overlooks the "fall-out" of space and military programs as well as the stimulative effects of such programs on the American economy.

But apart from all this we may wonder whether this is the right moment for telling the Europeans that they are doing fine and that they don't need to worry.

they are going true and that they don't need to worry.
It's the right moment for telling the Eurobees that
But apart from all this we may wonder whether
It's the right moment for telling the Eurobees that
But apart from all this we may wonder whether

effects of any program on the American economy.
of abase and miltary programs as well as the affirmative
peacemakers, M. Viponetti's theory overcomes the "hit-off"
consideration the overall productivity of R&D activities
and it only relates to the "in-but and goes, at the same time
into" the "R&D exchange rate," has been much criticized.
Eurobees is not going so well, compared to the U.S. ;
sectors of the economy : it would then be seen that
looking at certain figures one should look at the key
of a highly industrialized society ; p) rather than
itself, simply p) putting mempera of EEC; aware the propria
Eurobees countries are ; q) and even countries like
new (M. Viponetti seems to understand that all or some
process ; Western Europe is a highly industrialized
key or indeed weak at all may be thought the worse
we not the only factor of economic development, the
Europe what be reminded that : a) though research
Unfortunately for t'here who aware such an optimism,
willion dollars reabsorbed).

for R&D activities than the United States (8,4 and 1,5
that Europe (EC) brings the United Kingdom) close more
M. Viponetti reaches the extraordinary conclusion
from the total all abase and miltary expenses,
abutting the "research exchange rate" and p) eliminating
research can't be compared to the American one. B
exporta) ; c) pages, it's a not true that Eurobees
doesn't figure on industrial production, productivity,
to do better than the American one (M. Viponetti
p) this is proved by the fact that Eurobees economy
relatively was less important in the other countries ;
industrialized countries, like the U.S., put it's
a key factor to economic development in highly
s) research - only one among other factors of production
- European Community), more, among other things, that :
of External Relations at the OECD (Isaiah Ateme
M. A. Viponetti, director of Economic Studies and
paper presented recently to a symposium in Rome,
Europe is going well - it's either gaudious. In a
The third best attitude - the perfect that
(1)

now it's being (f). French requirements on common
toose countries - like France - where are a few left
influence is the only way to keep business going) and
inately can't keep up with the pace (and that paying
more is a wide spread opinion that the Eurobees
between those countries - like Belgium - where there
properly be beautiful. The Community now is abit
American pressure no common Eurobees action now
In a situation of emergency attached to an excess of
surplus, then the result will be the end of EC.
overcome the Eurobees capacity to stand by to the
only the pressure of American competition

- 5c -

[c]

- 27 -

[LC]

policies on science and industrial development wouldn't be met by the EEC's Council and that would mean the end of economic integration. Each of the Six would have to find its own way out of the entanglement. In the long run the difficulties and sore feelings raised by the situation would make Europe a boiling pot of separate and inconsistent nationalisms, leading nowhere, both economically and politically. The dream of a European unity would sadly end up in a "cul-de-sac".

Between this possibility (which is unlikely but which can't be dismissed all together) and the process of integration which we described earlier the contradiction is only apparent. The two coexist and it will be a matter of time and of what will be done in the meanwhile, whether one or the other will succeed.

So the problem today is first avoiding that the process of trans-Atlantic integration should fall back into what would be looked upon by Europeans as American economic domination; secondly, enlarging the already existing integration and assessing it on a fair and effective base.

In order to achieve these two objectives something can and must be done, in Europe, in the United States and, thirdly, by the Europeans and the Americans together. I'll try to review very briefly and by no means exhaustively, some of the initiatives which could be taken on the two sides of the Atlantic.

In Europe, the main initiatives should aim at: 1) modernizing the industrial structures (this objective calls for action in various fields, as we have already seen and mergings would be only one aspect of a common European policy); 2) increasing public investments in R&D programs. As far as the first point is concerned, the reform of the capital market appears to be a priority. As for the second point, it may be observed that increasing public expenditure would be partly fruitless without a certain degree of coordination between the different countries. Duplications should be avoided, as well as spreading the money available over too many projects. Modernizing R&D structures is also a necessity, in many cases, in order to increase the productivity of such expenses.

["of such expenses. Much can be done in order to increase the productivity of modernizing MED structures if also a necessary, in some degree, of coordination between the different executive bodies would be thoroughly unified without a point, if such be observed that increasing MED market abounds to do a benefit. As for the second that point is concerned, the reform of the cabinet bureau investments in MED programs. As for the aspect of a common European budget) : 2) increasing public spending seen 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闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻闻

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Each of these actions has strong inductive effects - as we have already pointed out - and would mean a step forward towards European integration; but from the point of view of the case in hand, their main effect would be the strengthening of the European firms' capacity to face American competition.

It may be worthwhile to note that these actions meet some objective needs, mainly the reform of European industrial structures which are no longer able to cope with the problems of a modern industrial society. This is a good reason for feeling optimistic about the possibility that they will be implemented - in spite of the opposition of those who fear their political consequences on European and trans-Atlantic integration.

In the United States, the main initiatives should aim at:
1. encouraging European direct investments, by reforming some restrictive clauses of the federal legislation, for instance by allowing foreign companies to finance their investments also from the American market and not only from abroad, as it often the case now (1) and by allowing exceptions to the rule which requires foreign companies to undercut the American competitors by at least 50%, in all tenders for equipment related to defense, projects; 2. avoiding excesses in the American investors policy in Europe, excesses which are likely to increase the European fears on the "unfairness" of American competition (2); 3. a closer contact between the American investors and the European governmental authorities, in order to appease European fears that the (desorderly) increasing American investments upset national economic planning; 4. increasing the research activities of American firms in Europe (3); 5. more generally

(1) Besides, some State legislation doesn't allow foreign ownership.

(2) When Deere-Lanz fought its way into the German market it could afford to run at loss for some years, thanks mainly to its American profits.

(3) The Long-Range Planning Report: R. and D. in Europe by the Stanford Research Institute, in a survey of 200 American companies operating in Europe, estimated that only 4% of the research activities of these firms are undertaken in Europe (a percentage which is less than half of the percentage of the European investments of these firms

the percentage of the European investments of these times taken in Europe (a percentage which is less than half of that of the research activities of these times are mugerous combusives operating in Europe, estimated that only the Stanford Research Institute, in a survey of 500 American students, would be able to fund research in Europe.

(3) The Long-Hanske Brandung Beruf: R. and D. in Europe, paid mainly to the American broilers. It could afford to run at least for some years, thanks to the German market.

(4) Reichen, some state legislation does not afford

American time in Europe (3); 2) were generally distributed; 4) increasing the research activities of creating American investments in other national economy to absorb European loans that the (ideally) and the European Government authorities, in order to increase consent between the American investors and the European Government, would require European combusives to implement the case won (1) and pay flowing exceptions to the American market and not only from abroad, as it often countries to finance their investments since the federal legislation, for instance pay flowing foreign payments, pay reforming some restrictive clauses of the foreign aim at: 1) encouraging European direct investment in the United States, the main initiatives

consequences on Europe and thus -Advisory integration, the opposition of those who fear their benefit, possibility that they will be implemented - in spite of it a good reason for keeping optimistic about the with the problem of a modern industrial society. Thus industrial structure which are no longer able to cope some objective needs, mainly the return of Europe.

It may be worth to note that these actions meet

European times, especially to face American competition, mainly effect only the strengthening of the put from the point of view of the case in hand, their own a step forward towards European integration; effects - as we have already pointed out - and mainly each of these actions has strong incentive

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restraining American investments in those sectors where an excess of American pressure would be likely to kill European competitive capacities and consequently the very existence of an European industrial potential in that sector (and therefore raise uncontrolled apprehension and reactions). To sum up, it can be said that the constant rule of American investors in Europe should be "don't overplay it".

Finally, some joint action should be undertaken by the European and the US governments, aiming, among other things, at: 1) establishing closer cooperation in the scientific and technological fields (up to now, for instance, American proposals on space cooperation have been judged by Europeans as too restrictive and too favorable towards American commercial interests); 2) studying the conditions under which mergings between European and American firms can take place in the interest of all the parties involved; 3) bringing to a solution (agreed upon by both sides) the problem of the American balance of payments; 4) from a more general point of view, avoiding too many and expensive duplications in American and European scientific and industrial programmes. This seems especially important, in the interest of the Western world, because of the size of the problems still to be solved in the development of the Third World, if we want the Third World to be a factor of peace rather than instability in international order.

These are only examples of what can be done. I feel like adding just one observation: when the Kennedy Round will be over and tariff barriers between the two areas will be lower, all that has been said above will appear even more important and necessary. There is nothing to be gained by waiting till that day (when urgency will make solutions more difficult) to examine the best means for a fair and reciprocally beneficial industrial cooperation.

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VII.

In a recent paper on some aspects of American foreign aid policy, published by Foreign Affairs, James A. Perkins wrote: "The United States as a mature but still growing nation has an apparently unlimited demand for precisely those people most desperately needed by the countries we are spending billions of dollars annually to help". The "counter-flow of brainpower" strongly reduces or eliminates the gains brought in by the "flow of assistance". J.A. Perkins was referring to the underdeveloped countries but there would be some truth in the same statement if we had to consider Europe instead. Though Europe doesn't benefit from the Foreign Aid Program, there is much more to it: the ambition to establish a partnership. Flows and counterflows acquire - from the point of view of such an objective - greater importance and significance. When skill flows out of Europe towards the United States it generally flows back incorporated in various products of advanced technology. It can be said, in other words, that brain drain hurts Europe twice (1).

Of course it's true also that Europe can use to her own advantage the advanced technologies which the American firms import into her market, more especially so when the Europeans are themselves unable to produce such technologies; and that the best way to stop the brain drain would be the creation in Europe, by the Europeans, of improved and enlarged facilities as well as a better climate for R&D activities.

But whatever the reasons and the final balance may be it's quite obvious that here we face a problem. Americans and Europeans must work together to solve it.

(1) More precisely: 1) the investments which the Europeans have put into the education and training of these men are lost; 2) the know-how acquired by these men during their period of professional activity in Europe goes as a net profit to the American economy; 3) these men contribute to the technological progress on which the competitive capacity of the US companies on the European market is largely dependent.

["on the European market in largely geodesic\non which the combative object of the US combats\n(2) these men contribute to the technological brocade\nin Europe goes as a net benefit to the American economy;\nthese men during their brief period of brocade activity\nat these men are lost; (3) the know-how transmitted by\nEuropeans goes into the equation and training\n(1) More broadly: (1) the investments which the\nAmerican and European must work together to solve it.\nmay be its diverse operations that here we trace a problem.\nBut whatever the reasons and the true nature\nfor R&D activities,\nand emerged technologies as well as a better climate\nthe creation in Europe, by the Europeans, of improved\ndistances which the present way to achieve the plain goal would be\nsatisfactory would be\nsufficiently simple to broade and technologically;\nand\nmore especially so when the Europeans are them-\nwhich the American times afford into her market,\nto her own advantage the advanced technologies\nOf course it's a true idea that Europe can see\nparts Europe twice (1).\nIt can be said, in other words, that plain gain\ncoordinated in various broades of advanced technology.\nthe United States is generally thus pack in-\ncidence. When skill flows out of Europe to foreign\nand counterflows of income - from the benefit of some\nof the surplus to offset a balance of payments.\nThus\nthe Foreign Vig Program, there is much more to it:\nEurope financed. Though Europe doesn't benefit thus\ntruly in the same statement, it may be to consider\nunderdeveloped countries put there to serve some\nof assistance\". J.V. Berkman was referring to the\nor. eliminates the same brought in by the \"flow\nThe \"counter-flow of production\" strongly recommends\nthe expanding flow of dollars unilaterally to help\".\nbecome most geographically needed by the countries we\nare abysmally misstuffed demand for precisely those\nstates as a mature put still growing nation has\n(1) States, James V. Berkman wrote: \"The United\nAmerican foreign aid budget, fulfilled by Foreign\nin a recent paper on some subjects of", "parts Europe twice (1).\nIt can be said, in other words, that plain gain\ncoordinated in various broades of advanced technology.\nthe United States is generally thus pack in-\ncidence. When skill flows out of Europe to foreign\nand counterflows of income - from the benefit of some\nof the surplus to offset a balance of payments.\nThus\nthe Foreign Vig Program, there is much more to it:\nEurope financed. Though Europe doesn't benefit thus\ntruly in the same statement, it may be to consider\nunderdeveloped countries put there to serve some\nof assistance\". J.V. Berkman was referring to the\nor. eliminates the same brought in by the \"flow\nThe \"counter-flow of production\" strongly recommends\nthe \"counter-flow of production\" strongly recommends\nthe \"counter-flow of production

This is only one aspect (but a rather
significant one, as it sums up many of the
other problems), of a very urgent task. We
are today living in that very narrow fringe
which lies between American economic domination
of Europe and trans-atlantic integration or, at
least, close and fair cooperation. It's up to the
Americans and the Europeans to decide on which side
the balance shall fall.

This is the problem today. De Gaulle's
policy is only a short term phenomenon. It has
quickened the pace of certain changes and this may
not necessarily be bad; but it is bound to be re-
absorbed, one day, in what will be the common
interest and the common policy of the West. What is
at stake today are the respective shares of Europe
and of the United States in the direction and
responsability of that policy. A third solution,
of a Europe independent both from the United States
and from the Soviet Union, seems hardly possible.
Such an objective would be intellectually justified
only in view of a long term and revolutionary new
international order, where we would no longer think
in terms of blocs and of military power. Unfortunately
it's too soon for that. What's more, Europe can
hope to bring some substantial contribution to such
an objective only by working within the frame of
the Western Alliance. A Europe separated from the
United States would only become an off-post of the
American economic power and would hardly find her-
self with the economic and political tools which she
would badly need to carry out her long term
ambitious plans.

Alessandro Silj

Brussels, July 1966