SPECIAL ANALYSIS INTERCOLLEGIATE DEBATE TOPIC 1962-63 PROBLEMS OF NON-COMMUNIST ECONOMIC ORGANIZATION PUBLISHED AND DISTRIBUTED BY THE AMERICAN ENTERPRISE INSTITUTE .<];;,, 9fu-&.'c Ul.»� 1012 FOURTEENTH STREET,�4 N.W., WASHINGTON 5, D. C. EXECUTIVE 3·8205 THE AMERICAN ENTERPRISE INSTITUTE FOR PUBLIC POLICY RE­ SEARCH, established in 1943, is a nonpartisan research and educational organiza­ tion which studies national policy problems. Institute publications take two major forms: 1. LEGISLATIVE AND SPECIAL ANALYSES - factual analyses of current legislative proposals and other public pol icy issues before the Congress prepared with the help of recognized experts in the academic world and in the fields of law and government. A typical analysis features: (1) pertinent background, (2) a digest of significant elements, and (3) a discussion, pro and con, of the issues. The reports reflect no policy position in favor of or against specific proposals. 2. LONG-RANGE STUDIES - basic studies of major national problems of significance for public policy. The Institute, with the counsel of its Advisory Board, utilizes the services of competent scholars, but the opinions expressed are those of the authors and represent no policy position on the part of the Institute. ADVISORY BOARD Paul W. McCracken, Chairman Professor, School of Business Administratici,n, University of Michigan Karl Brandt Felix Morley Director, Editor and Author Food Research Institute Stanford University Stanley Parry Professor, Department Milton Friedman of Political Science Professor of Economics University of Notre Dame University of Chicago Arthur Kemp, Professor Roscoe Pound of Money and Credit Professor Emeritus Claremont Men's College Harvard University E. Blythe Stason Dean Emeritus, Law School University of Michigan OFFICERS President Allen D. Marshall Vice-Presidents Walter C. Beckjord Carl N. Jacobs Henry T. Bodman H. C. Lumb Treasurer Henry T. Bodman William J. Baroody Thomas F. Johnson Executive Vice-President Director of Research David M. Abshire Joseph G. Butts Director of Special Projects Director of Legislative Analyses SPECIAL ANALYSIS INTERCOLLEGIATE DEBATE TOPIC 1962-63 PROBLEMS OF NON-COMMUNIST ECONOMIC ORGANIZATION OCTOBER 1962 PREFACE This Special Analysis has been published by the American Enterprise Institute in response to numerous requests from college debaters for materials on the national intercollegiate debate resolution. The Institute was fortu­ nate in having Professor John A. Lynch, director of debate at St. Anselm's College, Manchester, New Hampshire, and Mr. Robert M. O'Neil, formerly director of forensics at Tufts University, Medford, Massachusetts, both with extensive backgrounds as intercollegiate debaters and debate coaches prepare the study. While the authors wish to emphasize at the outset that they are not experts in the subject matter of the resolution, they hope that they have organized their material so as to assist debaters in the search for the important issues during preparation to debate this national proposition. This Analysis is not intended to be a complete manual, nor an end to research, but rather a guide to the beginning of research and a compendium of sugges­ tions for its continuation. Frequently, therefore, the particular sources for arguments and points of view have not been specifically identified directly after the statement in question, though they have been listed in the chapter bibliography. Every chapter but the first is a substantive unit devoted to a particular aspect of the problem. The first chapter deals generally with background and historical material, and explores possible interpretations of key terms in the debate resolution. Chapters II through VI are directed to five vital issue areas within the resolution. Each chapter contains a bib­ liography of sources especially relevant to the subject matter of the chapter, and concludes with a list of discussion questions which may stimulate further thought and inquiry on the reader's part. Taking the study as a whole, the authors feel that it will be helpful for the reader to begin with Chapter I, read the entire document, and then return to that chapter after completing the other sections. The American Enterprise Institute and the authors wish to express their appreciation to the following persons who read the manuscript and who offered valuable suggestions in its final preparation: Professor Herbert L. James, Director of Forensics, Dartmouth College; Dr. Robert P. Newman, Director of Debate, The University of Pittsburgh; Dr. Howard S. Piquet, Senior Specialist, Legislative Reference Service of the Library of Congress; Dr. William Reynolds, Director of Debate, Georgetown University; Dr. Wilson Schmidt, Professor of Economics, George Washington University; and Dr. Russel R. Windes, Director of Debate, San Francisco State College. i TABLE OF CONTENTS Chapter I. BACKGROUND AND GENERAL CONSIDERATIONS. I A. The Role of Economic Cooperation in Europe's Post- war Recovery . • . I B. Defining Terms and Framing the Issues 4 I. Non-Communist Nations. 4 2. Economic Community . 114 Bibliography . • . II. THE EUROPEAN ECONOMIC COMMUNITY. 12 A. Background, Formation, and Structure of EEC 12 B. Special Provisions of the Treaty of Rome. 1715 C. EEC's Economic Growth and Prospects . D. Uniform Agricultural Policy Within EEC. 20 E. European Economic Community, the United States, and the Free World 22 Discussion Questions 25 Bibliography . 26 III. PROSPECTS FOR EXPANSION OF EEC: THE "OUTSIDERS" 33 A. The European Free Trade Association - the "Outer Seven" . 33 B. Great Britain . 35 I. Factors which Favor British Entry Into the Common Market . 35 a. Prospects for Political Union . 36 b. Economic Pressures for British Membership: The Pattern of Trade . 37 c. Domestic Political Pressures for British Admission. • • . 38 2. Factors and Forces Militating Against British Membership in EEC . 38 a. Accommodating the Trade of the Common- wealth Within EEC. 38 i. Manufactured Goods. 39 ii. Raw Materials • . 40 iii. Temperate Foodstuffs. 41 iv. Associate Membership for Certain Com- monwealth Countries.. ....... 41 b. Protection for British Agriculture Against Common Market Competition. 42 c. Association or Membership for Other EFTA Nations. 42 d. Differences as to the Timing and Structure of Political Federation.. ..... ... 43 ii Chapter III (Continued) e. Conflict Between France and Britain Over Nuclear Armaments. • . 44 f. Impediments Created by Domestic Political Pressures. 45 C. Other Member Nations of the European Free Trade Association. 45 1. The NATO Members of EFTA: Norway, Denmark, and Portugal. 46 2. The EFTA Neutrals: Austria, Sweden, and Switzerland . 46 a. Austria . 47 b. Sweden. 48 c. Switzerland 48 D. Two Other Applicants for EEC Affiliation: Ireland and Spain. 49 1. Ireland. 49 2. Spain. • . 50 E. The Special Case of Japan 50 Discussion Questions 53 Bibliography . 54 IV. UNDERDEVELOPED COUNTRIES 61 A. Introduction. 61 B. Trade Problems. • . 62 1. Primary Commodities. 62 2. Manufactured Exports . 64 3. The GATT and Underdeveloped Countries. 65 4. EEC and the Underdeveloped Countries . 66 a. Association of former African Colonies with EEC . 67 b. Special Problem of the British Commonwealth 68 c. Dilemma of the Neutrals . 68 d. Economic Association in Latin America . 68 C. Foreign Aid . 69 D. Private Foreign Investment. 71 Discussion Questions 73 Bibliography . 74 V. EAST-WEST TRADE: THE SOVIET ECONOMIC OFFENSIVE. 76 A. Background and Recent Development of East-West Trade. 76 B. The Nature of the Soviet Economic Challenge: The Trade and Aid Offensive. 80 C. Impact of East-West Trade in Western Europe . 85 D. Probable Effect of Non-Communist Economic Union on East-West Trade . 86 iii Chapter Page V (Continued) Discussion Questions 90 Bibliography ... 91 VI. THE UNITED STATES. 93 A. General Importance of United States Foreign Trade 93 B. The United States Reciprocal Trade Act. 97 C. Classical Case for Free Trade 10299 D. The Case Against Free Trade . E. Free Trade Counter Arguments. 105108 Discussion Questions Bibliography 109 112 GLOSSARY iv CHAPTER I BACKGROUND AND GENERAL CONSIDERATIONS A. The Role of Economic Cooperation in Europe's Post-War Recovery. Historically, the idea of an economic community is not new. Through the span of recorded history, numerous examples of economic integra­ tion might be cited. Yet, it was the recent formation of the European Eco­ nomic Community (EEC) which, more than anything else, was responsible for the selection of the national intercollegiate debate topic for 1962-63. Because many experts trace the roots of this arrangement back to World War II, the present survey will begin with that period. Even within these recent years consideration can be given only to the major international economic arrange­ ments, with the hope that in this way the principles of economic organiza­ tion relevant to this topic will emerge. Finally, both because the debate topic will be of principal concern to American debaters, and because it raises questions of major national policy, the role of the United States will be stressed in this account. Since the military and economic strength of the United States played a commanding role in the defeat of the Axis powers, it was inevitable that this country would assume leadership in the restoration of post-war economic order. Even before the war ended, American economic programs had already begun to take form with two distinct purposes: (1) to provide means of assistance so that nations could recover from wartime