Business: Competition Goes Global

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It was by no means immune to outside economic forces; its stock markets fell in sympathy with Wall Street and rose on Wall Street's rebound. But. with a confidence born of its growing strength and unity, the Common Market last year did more to shape the emerging world market than any other force. From all over the globe, importunate ambassadors and chiefs of state flew into Brussels to impress on Walter Hallstein. German-born president of the Common Market Executive, the damage that they feared the Market's prospective single tariff wall would do to their national economies. In response the Marketeers began to work out special arrangements for such genuine hardship cases as Greece. Israel and Turkey. But when President Kennedy offended Belgium by raising tariffs on carpets and glass, the Common Market retaliated by raising duties on the products of three U.S. industries noted for their protectionism: chemicals, paints and textiles. To protect European farmers, who are far less efficient than European manufacturers, the Marketeers stiffened their agricultural tariffs to discourage a wide array of imports—and shrugged off the protests of U.S. Agriculture Secretary Orville Freeman.

The Sincerest Flattery. Outsiders responded to the spectacular growth of the Europeans with envy or fury. Nikita Khrushchev called the Common Market nations aggressive agents of imperialism, while simultaneously urging his tattered satellites to emulate them. Britain agonized over the stiff conditions the Marketeers set as the price of British admission to their club, and as a result found its businessmen nervously postponing modernization and expansion plans. So eager was Spain's Francisco Franco to make his nation's application for admission to the Market palatable that he issued sweeping new decrees rescinding many of his government's rigid controls over the Spanish economy. In Latin America. Africa, the Arab world and Southeast Asia, underdeveloped nations talked of starting little "common markets'' of their own. In the U.S.. Detroit's Henry Ford II summed up: "In the years ahead. U.S. business will find its biggest opportunities and toughest challenges in Europe's Common Market."

The Big Spenders. Europe's fastest expanding markets now are for consumer goods—appliances, clothes, convenience foods—which batten on fatter paychecks. In 1962 wages and fringes climbed 10% to 15% in Germany, France and Italy, and though the European worker is still paid only half as much on average as his American counterpart, he is getting to be quite a spender and customer. This year for the first time, private consumption grew faster than capital investment in the Common Market.

How deeply the U.S. can penetrate this market will depend upon how smoothly Europe and the U.S. manage the integration of their economies. And this in turn depends heavily upon whether Britain finally gets into the market. A key clause in the U.S. Trade Expansion Act permits the President to abolish tariffs entirely only on products for which the U.S. and the Common Market between them account for 80% of world trade. With Britain in the Common Market, there would be 15 such areas, ranging from cos metics and organic chemicals to soap and cars. With Britain out, the list shrinks to two—airplanes and shortening.