Common Market completes customs union July 1 - C&EN Global


This week, students of geography could well celebrate the coming of age of a new shape on the map of Europe, In the mid-1950's it was for Europeans th...
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Chemical & Engineering

NEWS JULY 1, 1968

The Chemical World This Week mon market was established. This 15% completely disappears on July 1, 1968. Trade barrier removal has been less difficult than had been expected and is credited by some as having been the main stimulus to industrial expansion in E E C countries. U.S. companies exporting to the Six will probably find the changes after July 1 in the customs duties outside E E C small. The common external tariff (CET) which will be in effect will be generally lower than anticipated some years ago. This is because the first two tariff reductions agreed upon in the Kennedy round of tariff negotiations under the General Agreement on Tariffs and Trade will also be made

Common Market completes customs union July 1 This week, students of geography could well celebrate the coming of age of a new shape on the map of Europe, In the mid-1950's it was for Europeans the shape of things to come. T o d a y July 1, 1968—marks the reality of that shape. It is the day when the European Economic Community in its role as a customs union becomes fully effective. As of this day, 10 years and six months from that fateful Jan. 1, 1958, when EEC was officially born, all tariffs and quotas on goods traded within EEC are obliterated; and a single tariff is levied on all goods imported into EEC member countries (Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany) from nonmember nations. But an earlier date, March 25, 1957, marked a day that to a European seems an unutterable distance in the past. On that day, the Treaty of Rome, as the treaty setting up E E C has been familiarly called, was signed. It reads like many treaties, and carries a sense of unlikelihood: "His Majesty the King of the Belgians, the President of the Federal Republic of Germany, the President of the French Republic, the President of the Italian Republic, Her Royal Highness the Grand Duchess of Luxembourg, Her Majesty the Queen of the Netherlands, Determined to establish the foundations of an ever closer union among the European peoples, Decided to ensure the economic and social progress of their countries by common action in eliminating the barriers which divide Europe . . . Have decided to create a European Economic Community." The realization of that "common action" among six European nations is an economic and political milestone in EEC's progress toward full economic union. As E E C says, "It ushers in conditions which a generation ago would have seemed unbelievable, but it also underlines the urgency of continuing the second phase of European integration leading to full economic union."

on July 1.

EEC president Jean Rey With dynamism and faith E E C provides for the free movement of all goods among the member states, regardless of their origin. It differs from a free trade area (such as the European Free Trade Association of Britain, the Scandinavian countries, Switzerland, Austria, and Portugal) which does away with internal tariffs but makes no provisions for the unification of tariffs vis a vis the rest of the world. Customs duties among the Six (as E E C has been nicknamed) have been reduced steadily during the past 10 years, usually at annual intervals in 10% cuts. Just before July 1, 1968, duties were only 15% of what they had been on Jan. 1, 1957, before the com-

For example, a U.S. exporter of sewing machines (a better example than chemicals for simplicity's sake) to E E C now faces a German duty of 9.6% ad valorem. Adjustment to CET on July 1 would have brought this duty to 12%. However, with the first two cuts of the Kennedy round being made the same day, CET will remain 9.6%. In fact, in 1972, after all the Kennedy round cuts are made, CET would have meant higher rates of duty on some E E C imports, but any increases will now be offset by the Kennedy round tariff reductions. Customs duties on imported industrial products now average 14.4% for France, 13.8% for Italy, 11.2% for Benelux (Belgium, Netherlands, and Luxembourg, which put a customs union into operation after it signed the Benelux Customs Convention on Sept. 5, 1944), and 1 1 % for Germany. Without the Kennedy round, CET on July 1 would have been the approxi-

EEC trade with U.S. more than doubled in past decade 1958

EEC imports from U.S. (millions of dollars) EEC imports from U.S. (indexes) EEC exports to U.S. (millions of dollars) EEC exports to U.S. (indexes) Source:

1967

$2808.0

$5858.4

100.0

208.6

$1664.3

$4423.3

100.0

265.8

Commerce Exterieur, Statistique Mensuelles, 1968,

No. A

JULY 1, 1968 C&EN 11

mate average of these national rates— 12.8%. With the first two installments of the Kennedy round on July 1, the average level will be 10.7%. When all five installments have been made—by January 1972-the average EEC tariff level will be about 7.6%. Similarly, by January 1972, the ad valorem duties on "chemical elements and compounds" (as defined under Standard International Trade Classification and assuming abolition of American Selling Price) will be United States, 9.4%; United Kingdom, 8.8%; EEC, 6.8%. What immediate effects are foreseen after July 1? C&EN's reporters in Europe filed these comments: The Secretariat of EFTA in Geneva, Switzerland, recalls that 18 months ago, EFTA countries reached the same stage (as EEC) concerning trade on industrial goods. "The complete abolition of tariffs and quotas among EFTA members led to an immediate and sharp rise in intra-EFTA trade. The EEC businessman is now about to enjoy a similar advantage and intraEEC trade is therefore likely to increase further/' EFTA says. Britain's Chemical Industries Association (about equivalent to the U.S. Manufacturing Chemists Association) had no comment to make. It is waiting to observe the effects. If CET does affect trade, it will be slow, the British association says. Sveriges Kemiska Industrikontor (Sweden's chemical industry association) is "glad that EEC has caught up with EFTA. But it is difficult to know how much it will affect chemical trade." Federation des Industries Chimiques de Belgique doesn't foresee any major changes. As C&EN's reporter in London expresses it: "Like, what they lose on the GATT swing, they'll gain on the CET roundabout." Perhaps the most equivocal and yet most telling comment about July 1 comes from French chemical circles. They refer to the completion of the EEC customs union as "the disarmament." Of course, July 1 marks but a stage in the ultimate full economic union of the Six. There is still a long way to go—the fusion or harmonization of existing national policies, laws, and regulations affecting the full range of the social, commercial, fiscal, economic, and financial life of the community. How the six nations of EEC will tackle that job is best expressed by EEC president Jean Rey, a Belgian lawyer and politician: "In the political, economic, social, and administrative fields, our task will be a difficult one. We shall, however, undertake it with dynamism and with faith in the success of our efforts." 12 C&EN JULY 1, 1968

U.S. chemical process know-how finds market in eastern Europe Opportunities for sale of process know-how to eastern European countries are good and are getting better, according to Raymond J. Kenard, Jr., president of Power-Gas Corp. of America. Speaking at a meeting of the American section of the Societe de Chimie Industrielle at New York's Chemists' Club, Mr. Kenard said that Power-Gas, for example, has received its first contract based on American know-how from an eastern European country—an amines plant for Romania. Power-gas has four bids outstanding for other eastern European projects based on American know-how. The opportunity for the Romanian sale, he says, started about three or four years ago when Romania relaxed conditions with the West and received in return access to U.S. equipment, know-how, and some Export-Import Bank credit. A catalytic cracker has since been built in Romania and represents the only U.S. capital investment in eastern Europe. Czechoslovakia is another example of a Soviet bloc nation moving toward more liberal policies. Czechoslovak Premier Cernik has said that his country will accept western capital for "joint ventures" with state-owned industry. Mr. Kenard says the U.S. Government is attempting to encourage this reorientation of certain eastern European countries to the West. The U.S. Government is also exercising flexibility in granting permission for the sale of chemical process knowhow to these countries. According to U.S. Department of Commerce policy on licensing of process know-how, Mr. Kenard points out, Yugoslavia is no longer considered a Soviet-bloc country. Hence, know-how export comes under a general license which requires that the know-how not be exported by the purchaser to a Soviet-bloc country. Romania and Poland have preferred status and approval is granted on most processes, he says. Licenses for most processes will be approved for Hungary, Bulgaria, Czechoslovakia, and the Soviet Union except processes that improve refining capability or have strategic war-making potential, he adds. "In the case of these refining and strategic processes, an evaluation is made to determine if a process from a country other than the U.S. is available. If such is the case, and the process is an up-to-date competitive process, then the U.S. process will probably be released for licensing," he notes. East Germany, however, is a special case, he says; decisions on licensing are made solely on a political basis. So, American process licensors do

have a way to sell know-how to these countries, Mr. Kenard says. And a potential market exists. A recent fiveyear plan for Poland and Romania shows a proposed chemical industry investment of $2 billion, and for the Soviet Union, $3 billion.

U.S. funding nonurgent foreign research, House report charges In the face of an acute need to eliminate the U.S. international payments deficit, the Federal Government is still making dollar grants to foreign scientists to conduct nonurgent research. What's more, the bulk of these dollars—more than $15 million out of an annual outlay of about $20 million— goes for work in prosperous, developed countries which should be able to finance this kind of research themselves. These are two of the charges leveled against the Administration in an angry report, "Foreign Research Dollar Drain," issued last week by the House Committee on Government Operations. The report is based on an earlier investigation by the Subcommittee on Research and Technical Programs (C&EN, April 22, page 9 ) . Rep. Henry S. Reuss (D.-Wis.) heads the subcommittee. In 1966 the committee issued a similar blast aimed at cutting back the dollar drain. The committee recommended then that the Budget Bureau adopt tighter criteria for making these grants and issue a directive to the agencies permitting spending only on projects meeting the criteria. Instead of issuing the directive, the Budget Bureau merely sent out "general exhortations" to cut down on dollar-financed foreign research. "There is an apparent inclination," the committee charges in last week's report, "to regard the amounts involved to be too small to merit separate scrutiny and control." The committee does not support the meat ax approach of making arbitrary cuts in spending. Instead, the report urges that each individual project be measured against appropriate criteria and that decisions be reached on the merits of each case. "In each and every case, questions regarding the project's urgency, U.S. performance, and foreign financing must be asked, and overriding conditions found specifically to exist before dollars are released for projects." Five agencies award most of the foreign research grants and contracts. They are the Defense Department; Department of Health, Education, and Welfare; Atomic Energy Commission; National Aeronautics and Space Administration; and National Science