In 1957 the Europeans created the European Economic Community, which is the basis for today’s European Union. Despite its name, this Community has not been able to promote communitarianism in the sense used in this book, namely a policy seeking to bolster the group at the expense of others, for example through protectionism, or through assertive foreign and military policy. As a liberal and peaceful project, European integration has thrived as a market governed by rules that are supposed to be neutral. However, agreeing on more discriminatory policies has proven difficult. Creating a European organisation based on community has involved grappling with complex questions: Who is a European and who is not? Who is a partner and who is a foe? Should Europeans be favoured or not? Should Europeans be capable of defending themselves independently, or through the US alliance? This includes questions about industrial policy (Which company should receive a grant?), protectionism (Which sector should be protected?), foreign policy (What are European diplomatic interests and how to promote them), and defence (Should a European army be created, and who would it be used against?).
This chapter will show first that during the Cold War defence and diplomacy were largely coordinated on a North Atlantic scale through NATO, despite numerous attempts to create a ‘European power’. Second, some form of European protectionism nevertheless thrived in specific areas, such as agriculture and later aeronautics, but surprisingly not in energy, and this in spite of multiple attempts. Third, and most importantly, the ubiquity of national industrial policies led European institutions to counterbalance these policies through free market rules rather than the creation of Europe-wide industrial policy.
5.1 National and Atlantic Approaches to Foreign Policy and Defence
Promoting a governance of capitalism based on community entails considering the European Community not just as a market, but also as a superpower in the making. To achieve this, Europeans must: 1) clearly identify allies, partners, and enemies; 2) determine when and how to intervene (diplomatically or militarily); and 3) be willing to intervene on their own (not just in concert with the US) and decide who will produce weapons.
These three issues often proved insoluble during the Cold War. Europe was dominated by the two superpowers, the US and the Soviet Union, in terms of nuclear weapons. Western Europe has been divided between countries attempting to influence international affairs, often former colonial powers and/or those victorious during the World War II (UK, France,), and countries that were neutral or defeated during the war (Germany, Italy, Ireland, Switzerland, Sweden, and Austria). The former are more inclined to intervene in their former colonial empires, or at least to assert their interests explicitly, while the latter are often more pacifist. A second division concerns the relationship with the US: almost all Western European countries considered the US to be indispensable to defending the continent against the Soviets, and as a counterweight against the possible rise of a new German threat. But Paris developed a more distant relationship with Washington after de Gaulle’s return to power in 1958.1 He replaced the old imperial discourse with a post-imperial one marked by France’s ‘grandeur’. Its influence in the world was no longer based on its colonial empire (largely dismantled by de Gaulle himself), but on a message of emancipation for all peoples. This involved criticising America’s involvement in Vietnam, securing the withdrawal of US troops from France in 1966 (with NATO’s European Headquarters being moved from Paris to Brussels), and attempting limited rapprochement with the Eastern bloc. De Gaulle nevertheless did not call into question the Western Alliance. Other European countries, such as Italy, whose Communist Party peaked at 34 per cent of the vote in 1976, or Spain, which hesitated to join NATO after its return to democracy in 1975, also showed occasional outbursts of anti-Americanism, or had powerful anti-American constituencies.
Despite these deep divisions, the project of transforming Europe into an assertive community was promoted through three different projects: the federal and Atlanticist European Defence Community (1950–54), a more Eurocentric intergovernmental project for nuclear cooperation (1957–58), and a French project to transform Europe into an independent geopolitical actor (1961–62). In the end it was a fourth project that prevailed: intergovernmental cooperation dominated by national and North Atlantic dynamics.
5.1.1 The Federal Ambition of the European Defence Community (1950–54)
In a striking development, a genuinely European army was almost created in the early 1950s.2 The project was born out of the Korean War, triggered in June 1950 by the surprise attack of communist North Korea on its capitalist neighbour to the south. The conflict created a stir in Europe, where fears of an imminent invasion by Soviet troops resurfaced. Eastern conventional forces were much more numerous than Western ones, and the detonation of the Soviet atomic bomb in August 1949 wiped out the American technological advantage. This prompted the Americans and British to pressure France into accepting rapid German rearmament; German divisions had to be created quickly to fill the vacuum in Central Europe.
The French had fought three wars with Germany in seventy years (1870–71, 1914–18, 1939–45), and were therefore reluctant to accept. The solution of Europeanisation, already explored for coal and steel after the Schuman Declaration, became a possible avenue, especially since the leader of the French government, René Pleven, was a convinced Europeanist. He was a close associate of Jean Monnet, and Robert Schuman was still the Minister of Foreign Affairs. On 24 October 1950, Pleven proposed to the French National Assembly the creation of a European army, under the control of common political institutions. The project was presented as an extension of the coal and steel initiative to the military sphere, and was fully integrated within the recently created NATO.
The French government played a leading role (with the British one) in the birth of the North Atlantic Alliance in 1949, as it desperately wanted US troops to be permanently stationed in Europe to protect against Germany and the USSR. This was the so-called American ‘empire by invitation’.3 It also played a leading role in this effort to build a European army between 1950 and 1952 (this time without the British, who were opposed to federalism), despite deep divisions among French leaders. Negotiations among the six countries of the ECSC (France, Germany, Italy, Belgium, Luxembourg, the Netherlands) led to the signing, on 27 May 1952, of the treaty establishing the European Defence Community (EDC). The EDC’s institutions were relatively similar to those of the ECSC. Additional declarations linked the EDC to the UK and NATO. The treaty was a compromise: France’s partners conceded this integrated army, and in exchange France had to accept German rearmament and the creation of an EDC in which it was not an undisputed leader.
But how could a common army exist without a common government? To fill this gap, federalists mobilised to create a European authority. To this end, Article 38 of the EDC treaty stipulated that the future assembly, shared by both the ECSC and the EDC, should draw up a project for a ‘federal or confederal structure’.4 The foreign ministers of the Six agreed to entrust the ECSC Assembly with this task. On 10 March 1953, it adopted a fairly federalist project to create a European Political Community.
Numerous opponents mobilised against this federalist dynamic. French President Charles de Gaulle, who had supported the Atlantic Alliance because Soviet troops were stationed just ‘two stages of the Tour de France’ away (speech on 22 July 1947), criticised the EDC.5 It was based on multiple contradictions: a European army was created, but without a genuine government; a European Political Community was hastily negotiated in 1953, but its leadership and doctrine of intervention were unclear; France instigated the EDC to prevent the creation of an autonomous German army, but paid the price of diluting its own army in a common structure where it would wield less influence than the FRG (as French troops committed to the EDC would potentially be less numerous than West German ones). The context had also changed, with the USSR appearing somewhat less threatening after Stalin’s death in 1953. Furthermore, France was focused on decolonisation, admitting defeat in the First Indochina War in July 1954. One month later, on 30 August 1954, the French Assembly refused to ratify the EDC, which came as a shock since the initiative had originated in Paris, and had been ratified by most European countries.
The problem of German rearmament was settled within an intergovernmental and Atlantic framework. West Germany joined NATO, and could reconstitute its military (limited to twelve divisions as in the EDC, and without nuclear weapons). On the initiative of British Prime Minister Anthony Eden, the 1948 Brussels Pact was extended to Italy and Germany via the Paris Agreements of 23 October 1954, which created the Western European Union (WEU). The French head of the government, the anglophile Pierre Mendès-France, hoped it would serve as a crucible for armament cooperation, but London soon lost interest, preferring NATO instead. The Europeans were seemingly not genuinely willing to establish a common defence – whether federal (EDC) or intergovernmental (WEU) – instead preferring to remain under the American nuclear umbrella. This situation both strengthened and frustrated Washington. In an internal meeting held in 1958 with his Secretary of State and other collaborators, President Eisenhower complained about European dependence on the US:
The President recalled that when he first went to SHAPE [the NATO headquarters in Europe], there had been talk that the United States assistance to the NATO countries’ defence efforts would be for a ‘maximum’ of five years. Since then, the NATO countries have come to depend overly on the United States; the President reiterated that it is time for us to begin to wean our allies from overdependence upon us and to encourage them to make better efforts of their own.6
5.1.2 The French–German–Italian Project for Nuclear Cooperation (1957–58)
Some Europeans nevertheless envisioned ambitious but discreet military nuclear cooperation in 1957–58.7 This semi-secretive project originated for several reasons. In France, the nuclear programme had been in full swing since 1954. Guy Mollet, the French president of the Council, wanted to foster European cooperation in this area, with a view to helping fund the French nuclear industry. Mollet had been disappointed by the American stance at Suez in November 1956, when Washington supported Moscow in denouncing the neo-colonial French–British expedition against Nasser. The Euratom Treaty signed on 25 March 1957 fostered civil nuclear cooperation, but preserved the independence of the military nuclear industry.8
In addition, the launch of Sputnik in October 1957 sparked what would become the ‘missile gap’ theory in 1958, since the technology needed to build a satellite rocket launcher and a ballistic missile were one and the same. This led some Western Europeans to fear US military disengagement from Europe: Washington might not want to defend Europe with its nuclear arsenal if it was afraid of being massively targeted by the Soviets. The spectre of US isolationism resurfaced.9 In West Germany, Chancellor Adenauer was also eager to rebuild a true German power that was both Atlantic and fully supportive of European integration, and had access to non-German nuclear weapons.
Following the failure of the Suez expedition in November 1956, Paris held exploratory talks with Bonn on military nuclear cooperation. This discreet project became the subject of public debate in Germany, with scientists publishing an open letter in 1957 protesting Adenauer’s attempt to secure nuclear weapons for Germany.10 Cooperation was later extended to Italy with an agreement concluded in November 1957, although it was solely between Ministers of Defence, and therefore not binding on member states. The agreement provided for producing nuclear weapons on French soil, giving Paris control over operations. This secret agreement was intended to be announced to NATO partners.
The project faltered in December 1957, when the US became more open to nuclear cooperation with Europe. Meetings between the French, German, and Italian defence ministers continued until the return to power of de Gaulle in June 1958, who put an end to these discussions. In the early 1960s, US Presidents Dwight D. Eisenhower and John F. Kennedy launched a complex project for a multinational European nuclear force under the NATO umbrella dubbed the Multilateral Force (MLF).11 It also failed. In the end, the two preferred levels for defence cooperation remained the nation state – France detonated its A-bomb in 1960 – and NATO, through which West Germany, Italy, and other Western European countries gained access to American atomic weapons under US control.
5.1.3 The Ambition of a French European Power
France has been tempted to use European integration as a lever to recapture past international clout for two reasons. First, France was the dominant power in Europe between Louis XIV and Napoleon (1643–1815). It lost this dominance, but went on to acquire the world’s second-largest colonial empire. However, it was crushed by humiliating defeat in 1940, and lost wars of decolonisation in Indochina (1945–54) and Algeria (1955–62). The Cold War imposed a bipolar logic that clearly relegated France to a secondary role despite its global prerogatives (permanent membership on the Security Council since 1945, the nuclear bomb since 1960, widespread use of the French language in international institutions).
The small Europe of Six that was created with the Schuman Declaration of 1950 was valuable from a strategic perspective, as France was clearly the greatest diplomatic power in this grouping. This ambition began to emerge after the Suez fiasco in November 1956, and appears to have been fairly popular: a French newsreel from 23 January 1957 presenting the Common Market (the future EEC) ended with a map depicting the Europe of the Inner Six sliding in between the US and the USSR, and growing to match the size of the two bigger superpowers.12 While the discourse was mainly economic, the geopolitical dimension was clearly present.
The ambition to develop Europe as a superpower led by France was more evident under the outspoken de Gaulle (1958–69). He clearly articulated his willingness to develop what he called a ‘European Europe’, not just an ‘Atlantic’ one.13 In July 1960, he explained to Adenauer his desire to create a political Europe based on organised state collaboration, particularly in the diplomatic and military spheres. At the time, both de Gaulle and Adenauer feared partial American disengagement from Europe.14 De Gaulle was firmer against the Soviet Union than British and US leaders during the Berlin Crisis, which was sparked by Khrushchev in 1958 in a bid to extend his influence over West Berlin. The French leader toyed with the idea of including the French atomic bomb, which had been detonated in 1960, within a European framework (with Paris keeping complete independence over its use).15
De Gaulle’s project for a powerful Europe was linked to other objectives. First, he sought to reform NATO in order to strengthen France’s influence in the Alliance. In September 1958, De Gaulle sent a memorandum to Eisenhower and Macmillan requesting (to no avail) the creation of a NATO tripartite Directorate, in which France would be put on an equal footing with the US and the UK. De Gaulle had a second, more discreet objective: to create a European intergovernmental organisation that would limit the Community and prevent any federal drift. Third, in 1961 de Gaulle accelerated discussions because of the UK’s bid to accede the Community. For France, it was important to solidify this Community of Six against its possible dilution in the event of enlargement towards Britain.
The Six agreed to establish a commission to study political Europe, chaired by the French Gaullist Christian Fouchet. On 19 October 1961, he presented the Fouchet Plan to create an intergovernmental union distinct from the EC dealing with issues not connected to the Common Market, such as diplomacy, defence, culture, and human rights. For the first time, European identity was defined, quite broadly, around notions of ‘democracy’, ‘human rights’, and ‘justice in all areas of social life’. This clearly demonstrates the link between the notions of community, power, and identity: to wage an assertive diplomatic policy, it is necessary to define who belongs to the group, and what it stands for.
The other five EC members remained cautious. On 18 January 1962, de Gaulle radicalised the proposal with a second Fouchet Plan making no reference to the Atlantic Alliance, and posing a more direct threat to the EC by giving economic power to the new union. The project quickly failed, because it aimed above all to build a French Europe rather than promoting an independent Europe.
After the creation of European Political Cooperation (EPC) in 1970, diplomatic cooperation was limited to regular dialogue between the diplomatic services of EC member states. It helped bring the positions of EC members closer together at the Helsinki Conference (1973–75), an East–West forum.16 European police cooperation, known as Trevi, also emerged in the 1970s on a purely intergovernmental basis, at a time when several European countries were struck by terrorist attacks.17
Diplomatic cooperation was generally characterised by profound disagreement on most issues in the 1970s and 1980s (the Arab–Israeli conflict, Euro-Arab dialogue, the invasion of Afghanistan). In 1982, the Falklands conflict led to a short demonstration of European unity, before Ireland and Italy condemned the fighting. This episode reinforced British interest in the EPC, as it was purely intergovernmental in nature.18
In 1992, the Maastricht Treaty created the Common Foreign and Security Policy (CFSP), which quickly proved ineffective due to divisions between European countries with respect to the civil war in former Yugoslavia (1992–95). The Minister of Foreign Affairs at the time, Jacques Poos of Luxembourg, famously claimed at the start of the conflict in May 1991 that it was ‘the hour of Europe, not the hour of Americans. If one problem can be solved by Europeans, it is the Yugoslav problem.’ However, the bloody civil war was, in the end, only solved by US military intervention.19
5.1.4 The Military Dimension: The Dominance of National and Atlantic Logic
The national and Atlantic dimension also prevailed in arms manufacturing. While the arms industry has remained essentially national, the rising costs of its development prompted international cooperation in the post-war era. US technological and economic leadership has generated a considerable pull effect, as it has often proven more cost-effective to buy US products (which are cheaper because they have already been sold in the large US market) than to create a European weapon from scratch.
The best example is probably the emblematic field of combat aircraft. On the one hand, Europeans have cooperated in American programmes, co-constructing some aircraft or parts, such as the F-104 Starfighter in the 1960s (nicknamed the ‘widowmaker’ in Germany due to its frequent accidents), the F-16 in the 1980s, and the F-35 in the 2010s.20 This dynamic further reduced investment in European aircraft. The other type of cooperation has been with programmes rolled out on a European scale, but with no connection to the EC: the French–German Transall transport aircraft was launched in 1963, and the German–Italian–British Tornado combat aircraft was launched in 1974.21 French–German aircraft cooperation, envisaged during a 1984 meeting between President Mitterrand and Chancellor Kohl, did not prevent France’s decision in 1985 to go it alone in developing its new fighter aircraft.22 The result was the French Rafale launched in 2002, and the German–Italian–British Eurofighter Typhoon, which made its maiden flight in 2004.
Lastly, in terms of military cooperation, NATO kept the upper hand during the Cold War, both in terms of strategic planning and tactical cooperation. NATO standards in arms manufacturing and military procedures facilitated the interoperability between European armies as well as with their North Atlantic allies, as did NATO exercises. In addition, NATO’s London Summit in 1990 considerably expanded its missions, paving the way for it to play a leading role in the post-Cold War era.
To conclude, European cooperation failed in diplomacy and defence, where national and North Atlantic logic has been dominant due to considerable US influence, as well as Europe’s willingness to be comfortably shielded under the American umbrella. The project for a European army collapsed due to hostility towards federalism, while de Gaulle’s vision fell victim to the ambiguity between what he referred to as ‘European Europe’, and what others saw as a French Europe. Nevertheless, a little-known project for European cooperation in nuclear weapons shows that a more voluntarist approach did exist. Combining European integration and the principle of community has been envisaged in diplomacy and defence on multiple occasions, but has not yet materialised.
5.2 A Protectionist Europe in Specific Areas
Europe as a protectionist community has existed in very specific fields, characterised by robust state intervention and a strong incentive for European cooperation, namely in agriculture, aeronautics, and aerospace, but not in energy.
5.2.1 The Common Agricultural Policy (CAP)
The Common Agricultural Policy (CAP), Europe’s most important redistributive policy, was very protectionist from its inception in 1962 to its reform in 1992. It was based on European preference: imports of non-EC agricultural products were heavily taxed, while exports were subsidised. It favoured producers by creating a single price throughout the EC, backed by European subsidies.
This led to far-reaching and enduring Europeanisation in agricultural policy, but one that was not inevitable, as two other schemes were devised beforehand.23 The first involved bilateral agreements, such as the one concluded between France and West Germany in agriculture in 1954. The second was an international agreement without federalisation that came immediately after the Schuman Plan of May 1950 (dubbed the ‘coal–steel pool’), when French Minister of Agriculture Pierre Pflimlin launched a project for a ‘green pool’ on 12 June 1950, with a view to organising European agricultural markets within the intergovernmental framework of the OEEC, not just the Six.
The three most influential players in the CAP’s emergence in 1962 – the two major agricultural exporters France and the Netherlands, and the European Commissioner for Agriculture Sicco Mansholt, himself a former farmer and Dutch Minister of Agriculture – supported its orientation towards maximising food production.24 Memories of the food shortages of the 1940s were still vivid in the 1960s. The CAP also had a social objective. After the crisis of the 1930s, which devastated agriculture and weakened democracies, all states, including the most liberal, increased aid to farmers. In 1957, even the famous Swedish economist Gunnar Myrdal (who went on to win the Nobel Memorial Prize in Economics) considered the agricultural policies of rich countries to be striking manifestations of the welfare state.25 This was a crucial objective for Gaullist France, which faced violent rural demonstrations in 1960–61, described by Gordon Wright as a ‘rural revolution’: ‘railways and roads were blocked, towns invaded by tractor-borne demonstrators, telephone lines sabotaged’.26
West Germany was divided on the issue. The ordoliberal-inspired Ludwig Erhard (Minister of Economics from 1949 to 1963, Chancellor from 1963 to 1966) was opposed, while the Minister of Agriculture insisted on high prices to satisfy the agricultural lobby. Bonn subsequently became ‘Veto Player No. 1’ according to Kiran Klaus Patel, which is to say the most reluctant country in the Six-Party negotiations, particularly those held in 1964 to determine the price of wheat (the first product covered by the CAP).27 Bonn demanded a higher price than all other major EU producers because the average productivity of German farmers was lower. Since this first negotiation in 1964, a ratchet effect has maintained high agricultural prices ever since.
European protectionism had negative consequences, including overproduction, trade tensions (due to the subsidies needed to export this overproduction), and enormous expenditure. On average, Community agricultural prices were higher than world prices (except during certain periods such as the food crisis of the early 1970s). This led to redistribution from consumers and taxpayers to farmers, especially the richest among them, such as grain growers. The CAP regularly gave rise to institutional tensions, and was partly behind the Empty Chair Crisis in 1965. Price fixing led to the ritual agricultural ‘marathon’ of long price negotiations requiring unanimity, against a backdrop of farmer demonstrations. In 1971, farmers interrupted the Ministers of Agriculture Council meeting with their cows. On 23 March 1971, a massive demonstration in Brussels led to the death of the Belgian farmer Adelin Porignaux after he was struck by a tear gas grenade.28
Criticism of the CAP was voiced even within the French government, albeit discreetly, as this policy represented a massive financial transfer to French farmers. The Minister of Economy and Finance Michel Debré (1966–68) criticised the CAP’s financial excesses, while the Minister of Agriculture remained in favour of high prices.29 Advisors to President Giscard d’Estaing (1974–81) stressed that the CAP was less and less favourable towards France, and more and more towards Germany, which had increased its production considerably.30 By 1987 West Germany had become the world’s fourth-largest exporter of agricultural products, behind the US, France, and the Netherlands.31 French and British studies in 1979 confirmed that because France benefited less from the CAP than before, it had become a net contributor to the Community budget (albeit much less than Britain and Germany).32 Giscard d’Estaing advocated cautious reform of the CAP. He supported the Commission’s proposals to reduce milk surpluses, but in a selective manner, focusing the effort primarily on large industrial farms rather than small farmers, as he explained to Commission President Roy Jenkins in 1979:33
-Giscard d’Estaing: We have to tackle this problem [milk overproduction] from both ends. We cannot apply the same treatment to massive, artificial units as to traditional farms. There is no reason to give financial support to purely speculative and artificial production, made primarily from imported raw materials, to the huge soy factories in Northern Europe. On the other hand, we must support normal farming activities.
-Jenkins: It’s hard to define this last category.
-Giscard d’Estaing: These are family farms with a few helpers, using the usual techniques.
-Jenkins: I find it hard to see this principle being applied to sugar; I don’t know any poor beet growers.
Jenkins’s ironic comment clearly illustrates the CAP’s productivist logic favouring large-scale farms, such as French beet producers. Under French President Mitterrand (1981–95), the financial difficulties increased opposition between certain diplomats and experts in the Ministry of Finance, who supported reducing CAP expenditure, and the Minister of Agriculture, who remained on the defensive.34 These developments explain why the French government accepted the reforms of 1984 and 1992, aimed at reducing CAP expenditure all while maintaining its overarching productivist and protectionist architecture.
On the other side of the Rhine, the German Ministry of Agriculture remained strongly committed to high prices in the 1980s.35 This explains Chancellor Schmidt’s contradictory discourse in European forums. While he generally advocated budgetary rigour, he explained to Jenkins and Giscard d’Estaing that he could not accept lower income for German farmers.36 Under Chancellor Kohl, support for high prices expanded, no doubt because the CDU-CSU was more dependent on the rural vote.37 At the German cabinet meeting on 11 May 1983, Finance Minister Stoltenberg, who favoured spending cuts, and Agriculture Minister Kiechle, a defender of German farm incomes, continued to clash.38 At the Council of Agriculture Ministers on 12 June 1985, the German Minister Kiechle even vetoed a cut in grain and rapeseed prices, citing vital interests.39 Surprisingly, it was Germany that revived the veto at a time when consensus was building around abolishing its use in connection with the Single Market. The Milan European Council meeting held a few days later (on 28–29 June 1985) paved the way for the Single European Act of 1986, which curtailed use of the veto.
Far-reaching reform occurred in 1992.40 It was linked both to internal pressure – the need to limit spending and surpluses (for instance 700,000 tonnes of beef went unsold in late 1990) – and an external factor, namely that dismantling the CAP’s protectionist apparatus was a stumbling block in GATT negotiations. The Americans had threatened the Europeans with 200 per cent tariffs on a wide range of products. A note from the Commission acknoweldged that EEC aid to its farmers was 2.5 times higher than US aid to its farmers. However, the average amount of aid for farmers was higher in the US than in the EEC, as US farms were nearly ten times the size of European ones.41 The 1992 Blair House Agreement between the US and the EU broke the deadlock. It was based on a reduction in European export subsidies and price support. In Brussels, the Commissioner for Agriculture, Ray MacSharry of Ireland, transformed price support into a subsidy based on past production and compliance with good practices, including social and (modest) environmental standards. Delors considered promoting a differentiated CAP reform, with the brunt of reform falling on large farms. The UK opposed this approach, being a country of large farms (with Queen Elizabeth II one of the main beneficiaries of the CAP at the time). The story of the CAP is therefore not simply a French–German dispute, but rather one between the large farming lobby, which successfully influenced Agriculture Ministries to secure high prices and protectionism, and other socioeconomic interests.
5.2.2 Airbus and Ariane: Isolated Success
In the post-war period, the high cost of developing new jet aircraft and rockets prompted small and medium-sized countries to pursue international cooperation. This was the only solution for pooling costs and securing a larger domestic market to launch the product, but it requires sharing the production process among various contributors, which can prove inefficient. This is the ‘fair return’ principle, according to which sums invested in an international programme must be returned to the country of origin in the form of industrial activity. In addition, every country strives to maintain strategic military production on its soil.
The first major European programme to launch a commercial aircraft ultimately failed. In 1962, London and Paris signed an intergovernmental agreement to produce the first supersonic commercial aircraft, the Concorde, which made its maiden flight in 1969. It was an aesthetic and technical success but a commercial failure, since the programme was dominated by an approach emphasising political prestige and technological demonstration (it was the first passenger aircraft to fly above Mach 2, and to have a fly-by-wire flight control system) rather than financial profitability.42 External events such as the oil crisis, new US environmental standards, US protectionism, and the crashes of the Tupolev Tu-144 (a Soviet equivalent of the Concorde) admittedly affected sales, but the programme’s architecture was also to blame.
In contrast, Airbus, which was born of a working group set up in 1965, pursued a commercial approach from the outset: airlines were consulted regarding future demand, industrial leadership was unified, technological innovation was restricted, and the role of governments in operational management was limited.43 The project was initially French–German–British, but the latter left the consortium in 1969 when industrial leadership was awarded to Paris. The British returned in 1978, when Spain’s Casa also joined the consortium. The industrial process was shared mainly between these four countries, with final assembly in Toulouse. The project enjoyed strong political support, although it incurred losses during its first two decades. British archives reveal that the British were well aware of the programme’s high cost when they rejoined in 1978.44 They were reassured by the fact that all governments opposed the Commission’s efforts to penetrate the sector since the 1970s.45 At the time sales of the first Airbus (A300, maiden flight in 1972) began to increase, with forty aircraft sold by 1980, which is to say the same number as its direct competitor, the McDonnell Douglas DC10, but still well below Boeing’s figures.
Building on this success, the French government proposed developing a range of aircraft by launching the smaller A320, but West Germany was reluctant, as Lufthansa had already chosen the Boeing 737. This is where political power came into play, for in February 1984 Kohl finally agreed to finance the programme after intense lobbying by Mitterrand.46 The debates remained complicated even in 1989, for within the liberal FDP party, Minister of Foreign Affairs Hans-Dietrich Genscher and former Minister of the Economy Martin Bangemann had to defend Airbus’s political and industrial interest against colleagues sceptical about the project’s high cost.47 More generally, the German state played an important role in supporting the rebirth of the German aeronautics industry, after the ban on aircraft production from 1945 to 1955. Bonn subsidised the industry and backed mergers, such as the one that created MBB in 1969, and the one between MBB and Daimler in 1988. The German industrial base was smaller than its French and British counterparts due to the aforementioned ban. Airbus played an important role in this quest for rebirth.48
Surprisingly, subsidies to Airbus were justified even from a free market perspective. In 1987, the American economists Richard Baldwin and Paul Krugman argued that without subsidies, it would have been impossible to enter a market with such high development costs, especially as Boeing’s competitors Lockheed and McDonnell Douglas had abandoned the market for the largest aircraft by the mid-1980s.49 Without Airbus there would have been less competition, and hence higher costs for aircraft and consumers.
Airbus turned an operating profit in 1991. A 1992 agreement with the US limited Airbus subsidies to reimbursable grants of up to 33 per cent of programme development costs. This advantage was not perceived as being undue, since Boeing benefited from funding from the Pentagon and NASA, in addition to various indirect subsidies. Negotiations between the Americans and Europeans were conducted by the European Commission, which played the role of honest broker not only between France (always slightly more protectionist) and its partners, but also between Airbus countries (Britain, France, Germany, Spain) and non-Airbus countries (in particular Italy), which did not want to antagonise the US.50 Despite being purely intergovernmental at the start, Airbus was later included under the EU umbrella.
The Airbus approach was emulated in the space sector. The imperative was also to create a profitable business in an expanding sector (satellite communications), and to provide participating countries with autonomous capacity for action in a strategic field that the American ally wanted to reserve for itself. In 1967 the French and German industries agreed to build the telecommunications satellite Symphonie. Since no reliable European launcher existed at the time, the two countries had to use American rockets, but NASA insisted on only launching a research satellite rather than one for commercial retransmission.51
The creation of an independent European space agency divided the Europeans. Some West Germans were tempted by the American proposal to participate in the Apollo programme, which had already taken the Americans to the moon. France, on the other hand, argued for strategic independence. In the end the European Space Agency was created in 1975, with ten European countries (including Switzerland and Sweden). As with Airbus, the Community was not involved in this effort. France played a leading role thanks to its experience with the nuclear-tipped missile programme, and its launch sites in French Guyana near the equator, from where it costs less to launch a satellite, since it reaches orbit more quickly. The French company Aérospatiale was the primary contractor for the Ariane programme, and the first Ariane rocket was launched in 1979. As with Airbus, a commercial approach was favoured from the outset, with the creation of the limited company Arianespace for marketing purposes. Commercial operations started in 1984. The difficulties experienced by the American shuttle, coupled with the dramatic explosion of the Challenger shuttle in 1986, allowed Ariane to establish itself as a commercial success.
A European comparison helps to better grasp the successes of Airbus and Ariane.52 The ESA was created after the failure of numerous European space cooperation projects in the 1960s, notably ESLO and ELDO. On the aeronautical front, two other European passenger jets made their first flight in 1971, around the same time as the A300: the Mercure and the VFW-Fokker 614. The Mercure was a 150-seat aircraft produced by a consortium led by France’s Dassault, and included companies from Belgium, Spain, Italy, Switzerland, and Canada. The VFW-Fokker 614 was a 40-seater built by the German VFW and the Dutch Fokker. Fewer than twenty of each were sold, making them commercial failures.
The Europeans were always eager to cooperate with the Americans, even in Paris. In 1974, the French state-owned Snecma created CFM, a joint venture with General Electric to produce jet engines, with considerable commercial success. That same year, France launched a major programme to build nuclear power plants based on American Westinghouse technology. In computer technology, France had launched a European partnership called Unidata in 1971 to compete with IBM, via cooperation with the German company Siemens, and the Dutch company Philips. It proved to be such an industrial failure that French President Giscard d’Estaing, a liberal concerned with sound financial management, put an end to it in 1974. Most European electronics companies were not particularly interested in a purely European venture, as they had strong links with leading US companies.
The failure of these programmes demonstrates both the exceptional industrial success of Airbus and the ESA, as well as the difficulty of replicating their approach. These two European ventures share a number of common features: they involved a new sector, in which none of the European countries had a dominant position, thereby requiring high development costs; they were developed on an intergovernmental basis, with strong and steady state financial support, along with unified industrial and commercial management; they involved only a select number of countries, thereby limiting the problem of fair return, and facilitating the emergence of political leadership, often French or French–German.
5.2.3 Paradoxical Failure in Energy
Energy is a sector where successful European cooperation was logical, as the continent’s energy resources are unevenly distributed, and often based in coal or hydrocarbon basins straddling several countries. Moreover, energy was at the foundation of the European Communities, with the European Coal and Steel Community in 1951, and Euratom in 1957.
Paradoxically, no common energy policy emerged. When the High Authority of the ECSC tried to obtain a declaration of manifest crisis to manage the Belgian coal crisis in 1959, member states refused.53 Managing the decline of the coal industry remained a national effort. It combined subsidies to attract alternative industries such as car manufacturing to coalmining areas (Opel opened a factory in Bochum in 1962, Renault in Douai in 1970), as well as aid for worker retraining and early retirement for miners.
Regarding nuclear energy, high hopes had been placed in Euratom, which in 1956–57 was considered more important than the EEC by many Frenchmen, especially Jean Monnet. At the time oil shortages threatened France and Great Britain after the Suez fiasco (1956), but the low price of oil in the 1960s and a lack of interest from de Gaulle limited Euratom to research activities.
The 1973 and 1979 oil crises put European cooperation back on the agenda, this time in the oil sector.54 Reactions nevertheless remained purely national: France supported Euro-Arab dialogue, and did not participate in the International Energy Agency created in 1974, while the UK and the Netherlands concentrated on exploiting their oil and gas deposits in the North Sea.55 This discovery prompted Norway to remain outside the Community, even though it had been admitted in 1972. When the topic of coordinating oil policy was raised at the Council by France in 1976 and Germany in 1980, London and The Hague refused to commit.56 Hydrocarbons were managed by national policies supporting national oil companies (the majors), and bilateral agreements between producer countries and a consumer country, with no European dimension.
National paths diverged. West Germany strove to make the most of its extensive coal resources, and applied unsuccessfully for EC aid for coal production. Throughout the 1980s, Bonn continued to pay close attention to the coal issue, as miners remained numerous and influential, particularly in the SPD. In contrast, France, which lacked such natural resources, embarked on a fast-track nuclear power programme in 1974, becoming the world’s second-largest producer of nuclear electricity. Equally lacking in abundant energy resources, Italy followed the nuclear option for a time, until a referendum after the 1986 Chernobyl Accident halted the nuclear programme. Nuclear energy actually represented much more than a source of electricity. As Gabrielle Hecht has shown, from the 1960s onwards nuclear power was an essential element of a modern, ambitious French identity, which was contrasted in public discourse with backward-looking Vichy France.57 The French civil and nuclear programme enjoyed enduring support as part of a newly assertive France after the humiliating defeat of 1940. One particularly sad episode is illuminating: in 1985 the Rainbow Warrior, a Greenpeace ship, embarked on a campaign to monitor French nuclear testing in the Pacific. The French secret service wanted to sink it without causing any casualties, so they placed two bombs in the ship when it was docked in Auckland, New Zealand: a first small bomb to warn the crew, and a second one to sink the ship. After the first bomb exploded, a photographer rushed to retrieve his equipment and was subsequently killed. The French spies were arrested, and the government was forced to make amends. However, surveys of the French population showed that while 78 per cent condemned the disastrous operation, 60 per cent supported the French nuclear testing programme. Greenpeace was forced to close its French office for a few years due to a lack of membership!58 A certain Europeanisation of energy policy later took hold from the late 1980s onwards due to the growing impact of environmental and competition regulations (see Chapters 3 and 4), albeit without an industrial dimension.
To conclude, protectionism was organised on a European level for certain sectors, ranging from agriculture and traditional manufacturing (Chapter 6) to Airbus, but no overall European protectionist approach emerged, let alone European industrial policy. On the contrary, it was in taming national protectionism that European integration was the most active.
5.3 The European Quest to Tame National Protectionism
Since European integration has depended on the creation of a Common Market (Chapter 3), it has always been important to ensure a level playing field. Yet all of the continent’s states, including those that consider themselves paragons of free trade, such as the UK and West Germany, intervened massively to support their industries during the Cold War; the risk of protectionist tit-for-tat was quite real. European policy subsequently endeavoured to tame national protectionism, thereby complicating the emergence of a European industrial policy.
5.3.1 The Omnipresence of Industrial Policy in Europe (1945–80)
Western Europe was marked by widespread industrial policies between 1945 and 1980, in an effort to rebuild the continent and catch up with the US. This policy took various forms, adapting to social and institutional structures (centralised in France and the UK, more federal in Germany).
French industrial policy was, in the words of Vivien Schmidt, characterised by ‘formulating heroic policies, announced with great fanfare’ by the government.59 State interventionism was part of the Colbertist heritage, as well as a modern industrial response to the agrarian and dictatorial Vichy regime. Most politicians and civil servants were convinced that they had to shake up a business world seen as ‘Malthusian’ (in other words too timid and France-centric), to use the expression of the time referring to the British economist Thomas Malthus, who in the context of a stagnant economy advocated birth restrictions. After 1945, this dirigisme was expressed through the nationalisation of numerous companies in strategic sectors, control over credit (many banks were public or semi-public), and indicative planning. Chronologically, French industrial policy experienced two peaks: reconstruction with the Monnet Plan (1946–52), and the revival of planning and industrial policy under the de Gaulle and Pompidou presidencies (1959–74), revolving around the twin imperatives of modernisation and international competitiveness. Major high-tech projects were launched by the government in IT (the Plan Calcul in 1966 and Unidata, both failures), energy (with nuclear power plants), and transport (Concorde and Airbus, followed by the high-speed train TGV in the 1970s).
In 1974 the new liberal president, Giscard d’Estaing, initially considered curtailing support for ‘lame ducks’, but the oil shocks forced him to revert to dirigisme. The 1979 oil crisis further increased state aid to industry, despite the concerns privately expressed by Giscard d’Estaing and his prime minister Raymond Barre regarding the ineffectiveness of those subsidies.60 President Mitterrand’s industrial policy between 1981 and 1984 was even more dirigiste, since it launched a second wave of nationalisation, followed by a massive injection of public funding. At the time, public sector employment accounted for over 10 per cent of total employment. The state reconfigured and recapitalised these nationalised groups. According to Vivien Schmidt, between 1982 and 1984, the five largest groups received ‘ten times more capital than private shareholders had provided them in the eight years between 1974 and 1981’.61 Paradoxically, the nationalisations of the socialist and communist governments helped restructure and even save part of French capitalism.
By contrast, West Germany offered a contrasting example of an unstated but equally effective industrial policy. The German government’s archives are enlightening in this respect. The term Industriepolitik is used in a 1976 document from the German Ministry of Economics, which stresses that even if this expression is not used, Germany did intervene a great deal, as proven by a long list of interventions in the economy.62 European surveys show that the level of state aid and the role of the nationalised sector were comparable in Germany and France before the major socialist reforms of 1981.63 In 1980, a British study comparing industrial policy in the electronics industry estimated that the programmes created in West Germany and France in the 1970s were equivalent in terms of public funding.64
West Germany’s industrial policy had two major differences compared to that of France.65 Firstly, while direct intervention was permitted in certain sectors (such as the 1968 law on adapting coal mines), most measures were more discreet, taking the form of tax subsidies, support for research and development, or merger incentives (notably in the aeronautics industry). The second difference was the much weaker role played by the central government, to the benefit of the German states (the Länder) and banks, especially the regional banks (Landesbanken) that provided long-term financing often backed by public guarantees.66 Trade unions were also much more influential and sensitive to the need for international competitiveness than their British or French counterparts.67
The crisis of the 1970s gave rise to debates within the government coalition, between the Social Democrats of the SPD and the Liberals of the FDP, regarding the advisability of launching a policy to support high-tech sectors. While the FDP Minister of Economics Friedrichs maintained an orthodox line of limited support for companies, the State Secretary to the German Minister for Research and Technology, the Social Democrat Volker Hauff, was in favour of much more active support for high-tech investment, in line with the book he published with the academic Fritz Scharpf in 1975.68 The controversy widened in 1977 as Otto Schlecht, State Secretary at the Ministry of Economics, and Hans Tietmeyer, a senior official at the Ministry of Economics (and future president of the Bundesbank), defended the orthodox liberal line against the more proactive SPD Minister of Research and Technology, Hans Matthöfer.69 In 1977 the Schmidt government ultimately decided to launch a massive high-tech investment programme.70 Matthöfer, who became Minister of Finance in 1978, sought to use the public sector to pursue industrial policy objectives.71
German opponents to industrial policy launched a counter-offensive. In July 1979, Tietmeyer called for a Subventionsordnungsgesetz (Law on the Order of Subsidies) to regulate state aid in Germany.72 The very same year, the Land (State) of North Rhine-Westphalia (which encompasses the Ruhr region) discussed adopting a ‘framework law for economic aid’, which Tietmeyer described as ‘bureaucratic’.73 In contrast, Lower Saxony’s Economics Minister Birgit Breuel was in favour of greater restrictions over aid, especially to bring it in line with the principles of ‘ordnungspolitik’.74 Breuel was a close associate of Minister-President Ernst Albrecht, himself a pioneer in developing EU competition policy in the 1960s (and father of current Commission President Ursula von der Leyen).75 The debate was rekindled in July 1982 by the Minister of Economics, the neoliberal FDP Otto Graf Lambsdorff, who was determined to limit both the ‘exuberant’ subsidies of the Länder and their ‘mutual rivalry’, which produced a subsidy race incompatible with the ‘social market economy’.76 The aim was to increase transparency and control, and eliminate subsidies designed solely to safeguard unprofitable jobs. Once again the Länder were divided between Lower Saxony, which favoured binding legislation, and those supporting aid for employment purposes, including North Rhine-Westphalia (for coal and steel), along with Bremen and Hamburg (for shipbuilding).
The debate took a political turn with the famous Lambsdorff paper of 9 September 1982, which called for limiting the government’s involvement in the economy in addition to Entbürokratisiereung (debureaucratisation).77 It played a role in the fall of the Schmidt government a few weeks later, which was replaced by the Kohl government, with Tietmeyer as State Secretary for Finance. West Germany then embarked on a policy of gradual liberalisation, but Bonn remained vigilant when it came to strategic sectors. The government willingly encouraged the merger of Daimler-Benz and MBB in 1988, against the advice of its competition authorities. Foreign takeovers were still hampered by the peculiar structure of German capitalism.
The majority of European countries were situated somewhere between these two poles of France and West Germany. Italy followed the French dirigiste model.78 The UK had taken a similar path to France in 1945, but to a lesser extent; there was no indicative planning, and trade unions were more powerful. As in France, the early 1970s saw an abortive attempt at a liberal turnaround under Prime Minister Edward Heath. When Labour returned to power in 1974, London reinforced its industrial policy in response to the crisis, with the introduction of sectoral dialogue involving unions. Two companies in difficulty were nationalised in 1977, British Leyland and British Shipbuilders, which accounted for the majority of car and shipbuilding companies respectively. But as the crisis persisted, relations between the government and unions soured, leading to the Winter of Discontent protests of 1978–79.
In 1979 Margaret Thatcher came to power and imposed a radical break with the past. Initially, the change was slower in industrial policy than in the macroeconomic sphere, where the Iron Lady pursued a policy of radical austerity.79 State aid to ailing industry continued during the first three years, while the privatisation and liberalisation movement got off to a slow start, taking off only with the privatisation of British Telecom in 1984.80 A more selective industrial policy was gradually put in place, concentrating credit on high-tech companies to the detriment of ‘lame ducks’.81 Large public companies were entrusted to energetic managers, who imposed painful industrial restructuring.82 Thatcher passed laws gradually restricting union power in 1980, 1982, and 1984, before successfully confronting coal miners head-on in 1984–85, followed by print workers in 1986 (Wapping Dispute). Thatcher’s reform heralded a new era of declining neomercantilist policies.
5.3.2 Decline of National Industrial Policies and Liberal Europeanisation (1980s)
From the 1980s onwards, industrial policies began to weaken in Western Europe for three reasons. Firstly, neoliberal ideas gained ground. They theorised the inefficiency of public intervention (Virginia School, second Chicago school, monetarism), reinforced by the discrediting of the Soviet system. Second, industrial policies were expensive, and financial constraints increased in Europe with the crisis of the 1970s, as demonstrated by the IMF’s interventions in the UK in 1976 and Italy in 1977, and by the French financial crisis in 1983 (Chapter 7). While some state-owned companies were associated with modernisation, particularly in France (SNCF with the TGV, EDF with nuclear power plants), in other countries they were increasingly criticised when managers and employees were hired due to their political connections rather than their competence.83 This led to the disillusioned testimony of the Belgian Social Democratic leader Karel van Miert in his memoirs: ‘In the days of the RTT [Régie des Télégraphes et Téléphone] monopoly in Belgium, getting a telephone connection was a favour … unless you knew someone who had a long arm: if you had a political or trade union connection.’84 The final reason was technical progress, which overturned old monopolies and oligopolies. In 1945, state intervention was necessary in sectors such as air transport and telecommunications, because resources and jobs were scarce. In the 1980s, with the multiplication of producers and products, the coordinating role of public authorities was more difficult to maintain.
Developments followed an uneven chronology in Europe, with Thatcher’s UK acting as a pioneer, and Mitterrand’s France as a laggard. Indeed, according to OECD and Commission figures, French state aid to business increased massively between 1981 and 1983, exceeding the European average.85 Prior to this, aid to French and German companies was at roughly the same level, and below that of the UK. Similarly, while before 1981 the weight of the public sector was roughly the same in France and the UK, and considerably lower than in Italy (where the IRI conglomerate employed almost half a million people), the balance changed after the French nationalisations.86 In 1984, even Mitterrand’s France changed course due to financial pressure. At an internal government meeting on industrial policy on 11 January 1984, Mitterrand justified economic layoffs: ‘Why should companies pay employees who are no longer needed?’87 When Communist Minister Marcel Rigout pointed out that ‘the number one problem is employment’, Mitterrand replied: ‘The number one problem is unprofitable companies. There will be no guaranteed jobs with companies that don’t work.’ Finally, on 29 March 1984 the French government switched to a more selective industrial policy in terms of aid.88
Privatisation accelerated everywhere in the mid-1980s – in London in 1984 (British Telecom), in Paris in 1986 (with the return of the centre-right), as well as in Rome (with Alfa Romeo) and with small steps in Kohl’s Germany. In addition to privatisation, measures to promote competition were launched to prevent private monopolies from replacing public ones. Sectors previously managed directly by the government were now guided by the market, with public authorities relegated to the role of neutral regulator. Here too the UK was a pioneer, opening up bus transport to competition in 1980, and telecommunications in 1981 and 1984.
The government kept a role as an arbiter and sometimes as a coordinator. For example, in 1982 Chancellor Schmidt refused to intervene to prevent AEG from filing for bankruptcy, but he did encourage creditors to mobilise, sometimes granting state guarantees on certain loans.89 In 1984, the French state actively intervened to find buyers for the various components of the steelmaker Creusot-Loire and the textile giant Boussac, while granting indirect aid at the same time.90 The French privatisations of 1986–87 preserved public influence, as the French state created ‘hard cores’ of stable French shareholders, and placed former senior civil servants in management positions at public companies. British privatisations, on the other hand, often led to foreign takeovers, because the government was less drawn to neomercantilism.
The role of the Community expanded with the creation of the Single Market and the expansion of competition policy, notably in regulating state aid and liberalising new sectors (Chapter 3).
5.3.3 European Neomercantilist Temptation and Minimal Industrial Policy
European industrial policy was an old project: it was broached during the 1949 Westminster conference of the European Movement.91 The 1951 ECSC entrusted the High Authority with numerous prerogatives in this area, but member states did not allow it to use them. In 1967, the debate was revived when the French journalist Jean-Jacques Servan-Schreiber published his famous book entitled The American Challenge.92 It began with an exhortation to react to the American offensive: ‘War, for it is a war, is not being waged with dollars, oil, tons of steel or even modern machines, but with creative imagination and organisational talent.’ It denounced the danger of American hegemony in high-tech sectors (aeronautics, aerospace, electronics, and computers), and called for a European response. Written with the collaboration of Michel Albert, at the time a French civil servant at the Commission (in charge of various Community industrial policy projects), it called for developing a federal Community industrial policy, with the creation of European companies and the joint definition of major industrial programmes.93
The various projects launched between 1965 and 1974 by the most proactive players – the French, Italian, and British governments and the Commission, often without effective coordination between them – came to nothing.94 In Paris, the Gaullist government was eager to promote European industrial cooperation on an intergovernmental basis. In early 1965, it initiated an effort in Brussels to coordinate national scientific and technical research policies, as well as to create a European company statute that would facilitate European mergers. This effort was scuttled by the Empty Chair Crisis triggered by de Gaulle. In 1966, Italian Foreign Minister Amintore Fanfani proposed a Technological Marshall Plan based on transatlantic cooperation, while in 1966 British Prime Minister Harold Wilson launched the idea of a European Technological Community. Underscoring Britain’s lead over the continent in a number of high-tech fields, Wilson wanted to demonstrate that enlarging the EEC to include the UK would bring new, tangible benefits to member countries. De Gaulle’s second rejection of Britain’s application in 1967 interrupted these reflections. At the same time, French and Italian commissioners in charge of industrial policy mobilised in Brussels, first under the guidance of Robert Marjolin of France (1958–67), and then under the Italians Guido Colonna di Paliano (1967–70) and Altiero Spinelli (1970–76). In 1974 the fiery federalist Spinelli challenged his president, the cautious François-Xavier Ortoli, to propose an integrated industrial policy: ‘I’m also sending you a photocopy of Schuman’s speech, which shows how a statesman who really wants to do something expresses himself.’95 This anecdote serves as eloquent testimony to Spinelli’s style, the reluctance of member states, and the caution of President Ortoli, a French Gaullist. Only European projects of an intergovernmental nature, such as Airbus or the ESA, managed to endure.
In 1983, a new American challenge emerged with the relaunch of the arms race under US President Ronald Reagan with the Strategic Defence Initiative (SDI). Nicknamed ‘Star Wars’, in reference to the trilogy by George Lucas released between 1977 and 1983, it sought to create a shield against the USSR’s nuclear missiles by using new technologies, with one of the avenues being the development of laser-armed satellites.
This new American challenge provoked a European reaction, initially on an intellectual level with the Ball–Albert report of 1984 commissioned by the European Parliament.96 A former co-author of the 1967 American Challenge, Michel Albert wrote the report’s most neomercantilist chapters. It echoed the ideas of The American Challenge, but with a slightly less federal approach. Albert emphasised the importance of the Single Market, envisaged from a neomercantilist perspective with the creation of sectoral agencies defining European standards and rationalising industrial cooperation, along with reciprocity in trade.
France’s position, however, remained ambiguous.97 Centre-right governments (1958–81) opposed any industrial policy out of hostility to the delegation of sovereignty. When the Socialists returned to power in 1981, their first reflections on international cooperation in industrial policy were aired not within the Community, but during the 1982 G7 summit in Versailles.98 From 1983 onwards, the pro-European fringe of the French government prevailed (Foreign Minister Claude Cheysson, a former European Commissioner, and Elisabeth Guigou, an advisor to François Mitterrand). They recognised the failure of both the purely national route and the purely global one (with discussions stalled at the G7). They drew inspiration from Albert’s report to issue a French memorandum calling for a European industrial policy in September 1983. It advocated for standardisation, agreements between European firms, and developing European research policy and infrastructure. It called for European preference in public procurement for high-technology, which meant discriminating against non-EC companies, American and Japanese firms in particular. Moreover, following a long-standing French tradition of opposition towards the Commission meddling in industrial affairs, it called for agencies of variable geometry to be created outside the EC framework, with a shifting number of countries. The aim was to duplicate the success of Airbus, namely by circumventing a potential veto by a Community member such as the UK, and by limiting the Commission’s role.
Finally, a minimalist industrial policy emerged in Brussels in 1984 with the creation of the ESPRIT programme (European Strategic Programme for Research and Development in Information Technology), which allocated 1.5 billion ECU (half of which was provided by the EEC) over five years for IT and communication research. The aim was to create profitable high-tech products and impose a European standard. Even Bonn and London supported this highly targeted industrial policy, whose funding was provisional, and limited to the pre-competitive sector.99 Counter-intuitively, Thatcher strongly supported this initiative against her sceptical technology minister.100 ESPRIT, like Airbus, was cited as an example in the 1984 British memorandum entitled ‘Europe: The Future’.101 London also actively supported the European standardisation effort, particularly in mobile telephony (Chapter 6).102
When the US offered to involve Europeans in the SDI, Paris counter-attacked by proposing an intergovernmental European scheme outside the Community. It was named Eureka, after the Greek interjection (‘I discovered (it)’) attributed to Archimedes in his bath. It was meant to promote European cooperation between companies in research and development, but outside the Community framework.103 The Commission could participate, but only as a member. In discussions with his Italian and German counterparts just before the Milan European Council, Mitterrand’s advisor Attali insisted that Eureka must not be discussed in depth within the framework of the EEC.104 This intergovernmental approach met with approval from Thatcher, who supported Eureka.105 She explicitly asked her administration to produce notes supporting Eureka just before the Milan European Council.106 Thanks to London’s backing, the project was launched after a key meeting in Paris on 17 July 1985. It brought together seventeen countries, plus the Commission. The organisation largely escaped its French public sponsors, despite the involvement of French companies.107 The Eureka project appears to have been partly a political stunt designed to undercut the Americans; the venture was planned by the French presidency and diplomats, and not by the Ministry of Industry.108 The latter was more focused on responding to Jacques Delors’s industrial policy proposals to the European Commission, but it was soon forced to abandon this task.
In Brussels, Delors looked unfavourably on this attempt to promote a non-EC industrial Europe.109 He wanted to go further than the ESPRIT programme. As early as the spring of 1985, he made Community industrial policy one of his priorities, along with the Single Market.110 In the spirit of The American Challenge, he proposed EC aid to encourage European companies to cooperate, as well as to fund European infrastructure (notably pan-European transport and communications networks) and industrial projects. This idea goes back a long way. In the interwar years, the Director General of the ILO, Albert Thomas of France, proposed a European plan to build a pan-European communications infrastructure to boost the economy, without success.111
Delors’s ambitions met with opposition from liberal states, led by Germany and the UK, in addition to intergovernmental scepticism in France. In the end, the pan-European infrastructure was rather limited: the Single Market fostered a massive increase in transport by car and plane, but not by train, due to a lack of international connections (with exceptions such as the Channel tunnel, opened in 1994, but without public subsidies, as Thatcher had insisted on a purely private partnership).
Moreover, European companies were not necessarily seeking European cooperation. For example in 1990–91, the Commission President, in cooperation with the Minister for Industrial Affairs, Martin Bangemann of Germany, prepared an industrial strategy for the electronics industry in conjunction with a number of firms in the sector.112 The plan was to mobilise European funding to encourage companies to work together beyond R&D – by creating an Airbus of semiconductors – and linking this industrial project to a demand for reciprocity in opening up American and Japanese markets. But this project was doomed due to the reluctance of European companies such as Siemens, Bull, and Olivetti, which were allied with American and Japanese firms.
Delors also faced opposition from within the Commission. In 1989, the Competition Commissioner Leon Brittan of the UK used the newly acquired power of merger control (Chapter 3) to wage a neoliberal crusade. In late 1991, Brittan secured a majority at the College of Commissioners against the planned takeover of Canadian aircraft manufacturer De Havilland by the French–Italian company ATR.113 The Commission’s economic reasoning was contested, and not just in France, as the relevant market was defined narrowly, disregarding the presence of other competitors.114 This decision was debated even within the Directorate General for Competition, with pure ordoliberals not necessarily convinced by its economic reasoning.115 Brittan was attacking a symbol of industrial policy, the strengthening of a European champion in a cutting-edge sector (the construction of propeller-driven passenger aircraft). At the College of Commissioners, the Commissioner for Industry Martin Bangemann and President Jacques Delors voted against Brittan or abstained.
In the end, discussions surrounding Community led exclusively to measures accompanying the Single Market Programme (aid for pre-competitive research, standardisation, and ad hoc financing for infrastructure). National industrial policies, which had been prevalent throughout Europe (including West Germany, where it was more discreet), declined in the 1980s without being Europeanised.
5.4 Conclusion
The development of community capitalism at a European level was impossible as national industrial policies dominated, even in supposedly liberal countries such as the UK and West Germany, at least until the early 1980s. An international solution was devised in defence and diplomacy, but it was a North Atlantic (NATO) rather than a European one that ultimately prevailed. As early as 1958, Eisenhower had complained about Europe’s passive reliance on the US umbrella.
European integration was useful in easing the tensions caused by national protectionism and European protectionism in specific fields, mainly agriculture, aeronautics, and aerospace. But it failed in the most strategic areas such as energy, diplomacy, armament, and defence. Airbus and Ariane were developed outside the European Communities. The CAP was a success at first, but it made the Community system more cumbersome. It pitted not just states against each other, but also ministries, with those for finance favouring lower prices, and those for agriculture defending high prices in Paris and Bonn. It also created imbalances between small and large farmers, to the advantage of the latter.
The Europeanisation of industrial policy remained an arduous task for three reasons. First, states did not want to relinquish control over strategic sectors (energy, diplomacy, armament). Second, they insisted on the principle of fair return (receiving a share of the production corresponding to the investment). Third, it was difficult to defend European preference without compromising the US alliance, from both a geopolitical and economic point of view. Companies were not necessarily eager to pursue European cooperation, as demonstrated by French enterprises gravitating towards American partners in spite of the government’s official Colbertism.
The answer to these three dilemmas was found in the Airbus and Ariane programmes. They shared four common features: 1) a new sector in which no European countries had a dominant position, thereby requiring high development costs; 2) a blend of intergovernmental features (interstate projects with no EC intervention) and federal ones (integrated industrial and commercial structure); 3) a limited number of countries, thereby curtailing the problem of fair return and facilitating the emergence of political leadership, often French or French–German; and 4) long-term state support due to the strategic nature of the project, but without interference in management. Even Bonn supported Airbus with massive subsidies for decades, doing so to forge closer ties with France, and because it was deemed strategically important to rebuild its aeronautics industry. This model has proven difficult to reproduce. The book The American Challenge proposed the ideal solution from a technical point of view, even though it was politically unfeasible: federalising all high-tech programmes, thereby eliminating the problem of fair return (as financial costs in one programme could be compensated by gains in another). This would entail a major surrender of sovereignty, as most countries would have to specialise in particular products, thereby abandoning some sectors altogether, and renouncing certain national industries.
The project to transform Europe into a genuine geopolitical power often bore France’s hallmark, and resulted in failed projects – such as the European army with the EDC, French–German–Italian nuclear cooperation, the political Europe of the Fouchet Plan, European industrial policy – as well as genuine achievements such as the CAP, Airbus, and Ariane. Paradoxically, Paris has often supported affirming Europe as a community in the sense of this book’s trilogy, but not affirming the European Community as an organisation. In other words, it has generally favoured an intergovernmental approach (with the exception of the EDC). This was obvious under de Gaulle as well as Mitterrand to a certain extent, as Paris was wary of Delors’s ambitions for a Community industrial policy, preferring intergovernmental approaches such as Eureka.
France was not the only country interested in industrial policy. Britain before Thatcher (and under Thatcher for limited ventures such as Airbus or Eureka) and even Germany pursued active industrial policies. Bonn supported aeronautical cooperation to rebuild its aeronautical industry, and defended high agricultural prices. Both London and Bonn supported the Commission’s defence of Airbus against the US. There were hesitations about the relationship with the US, but these also affected France. The same dilemmas apply to asserting Europe’s power vis-à-vis the outside world.
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