The Gene ral COj, 1J\lON MARKET Note: This is an unofficial translation of the main portions of the report on the comnon market prepared by the… [627098]

Information Service
High Authority of
The European Community
for Coal and Steel
Luxembou rg
The Brussels Report
The Gene ral COj, 1J\lON MARKET
Note:
This is an unofficial translation of
the main portions of the report on
the comnon market prepared by the
Intergovernmental Committee on Euro-
pean Integration. This Heport willbe the basis for a treaty- drafting
convention to be held in Brussels
beginning June 26 , 1956June, 1956
Unofficially referred to as the Spaak Report

TiTLE I
THE FUS ION uF i\iJ\RKETS
CHAPTER 1 THE ClS PJi.IS mUON
Section I – The Elimination of Customs Duties within the Common Market
The progressive elimination of customs duties among the member countries
will regulate the timing of all the measures which must lead to the final
realization of a common market.
Just as the common market must affect all economic. activities , so too theelimination of customs duties must progress simultaneously over the- wholerange of production activities.
The simplest solution would have been to provide at regular intervals for
an equal percentage reduction for all customs duties existing in each country.
Because of its rigorous automatic nature this system would not take into
account certain particular sensitive areas of production and there would be a
risk of stimulating in turn a more frequent resort to safeguard clauses. fhe
application of this solution will therefore be limited to the first general
reduction. Later on , Plore flexibility will be introduced into the system.
This flexibility can be achieved by applying the specified rate of the
reduction on the average duty of a group of products rather than on each
individual product. The problem which arises, however , is how to es ~ablishthese groups.
If there existed a well established international classification andstatisticsdr. awn up uniformly on the basis of a common nomenclature the group-ing of products could be made within this framework. The attempts to establish
an international nomenclature are only in their initial stages andstatistic$are based on different nomenclatures. Under these conditions a great deal of
time could be lost in atteolpts at classification , in discussing extreme cases
and ih statistical computations on entirely new bases. The proposed principle
is quite different: that is ,. to classify the products in each country by the
amount of duty which is levied on them.
In applying this principle the products on which a duty of up to 10% islevied are grouped together on the basis of five points per ,group and similarlyif the duty is over 50%; between these two extremes there would be groups
(tranches) of 2! points each since it is within this range that most of the
present customs duties lie.
If average reductions were called for on each category thus established
the system would come up against two objections. Firstly, even the lowest
rates must be reduced while competing industries in question would maintain
provisionally some protection. ~econdly, the incentive would be lost to
reduce duties more drastically in the groups with high duties in order to
delay the reduction of lower duties affecting sensitive products. Consequentlyit is proposed that each Government be permitted in calculating the average
rate of reduction , to link the groups (tranches) defined above in pairs as
they see fit.

– 2 …,
This average reduction of the tariff is determined by weighting the per-
centage of tariff reduction for each product according to the value of imports
of this commodity fronl other member countries of the common market. A refer-
ence period based on one year would have only a purely accidental character.
A fixed reference period is in danger of becoming meaningless at the end of the l2
or 15 years envisaged for the establishment of the market, and it would not permitcountries to adjust their action on the basis of experience gained. It is
thus proposed to calculate the rate of reduction at each stage Ort imports
during the last three years for which statistics are available.
In calculating the average reduction prohi~itive duties have no weightor very insignificant weight. It is necessary, therefore , to find a way
to bring them into the reduction. It is therefore proposed that dutie.
higher than 33- 1/3 percent should undergo in each stage a reduction at least
equal to half of the rate of reduction which laust be applied on an average
in each group.
The starting point of the reduction should be the effective rather than
the scheduled duty rate. Utherwise the system would bel11eaningless since the
objective is to eliminate all the duties. Nor can the base be the duty
applied at the time of the first reduction because this may prompt Governn~nts
to increase the effective duties. It is therefore proposed to take as a b~se
the average duties applied during the years 1953 t 54 and 55 except for exclud-ing frol1l the calculation certain reductions applied during a strictly limited
per iod; (in those cases) the most recent scheduled duty would be taken , if
as a result of international negotiations t it is lower than this Elverage level.
On certain products customs duties are applied as a tax on consumption
rather than as a means of protection. "fhis is the case for fiscal duties.
These duties must be included in the general system of reduction and elimination.
It is up to the Governments to establish or to increase for compensation pur-
poses the spec if ic consumption taxes or excises , which will be .subject in
international trade to the rules of exemption for export and compensation for
import – to the extent that this is not rendered unnecessary by the progressive
harmonization of fiscal legislation.
In the first four year period after the Treaty comes into effect the
rate and timing of the reductions would be determined as follows:
At the end of the first year by 10% , followed by two more reductions by
10% at 18-month intervals so that in the first stage of four years duties
would be reduced by 30%.
In the second stage the two first reductions of IO% will again be made
af ter IS months; a third reduct ion of 10% will be luade at the end of the
eighth year. In the third stage it would be necessary to eliminate the re-
maining 40%.
For the second and third .stages the system could , however , be modified
by proposals of the European Commission which are submitted to a vote in the
ASSel11bly and adopted by a qualified majority of the Council. This procedure
would permit a possible extension of the time periods for the complete
elimination of customs duties within a maximum limit of 15 years. The rule
of unanimity must , in effect , be avoided lest one ;State by its veto power
obstruct the introduction of the flexible formulae envisaged in the Treatyitself.

– 3 –
As against this any shortening of the timing of three stages of four
years each , or any modification of the system envisaged which would in
practice have the same effect cannot be applied except by unanimity, since
no State can be obliged against its will to go beyond the commitments to which
it has formally subscribed.
Section 2 – Establishment of a Common External Tariff
The decision to establish a customs union implies the establishment of
a common tariff with respect to third countries. In this case three questions
ar ise :
– the level of this tariff;
– the mechanism by which it is progressively established , starting from
the different tariffs of the member countries;
– the conduct of negotiations by which the tariff can be modified even
before finally achieved , or can evolve after the end of thetransi tional period.
It should be possible to avoid any doctrinal conflict on the desired
level of the duties if each country recognizes the new conditions which are
opened by the prospects of a real common market.
It would be contradictory to establish this common market in the name
of greater productivity which will result for our economies while at the same
time maintaining the previous protective measures. Besides , a high duty is
in any case , excluded by the GATT rules concerning the e. stablishment of acus toms union.
In addition , the fear of an increase in living costs in countries where
the tariff would be increased would not take into account the compensation
resulting from the total elimination of customs duties for important producers
in the common market.
One cannot underestimate the power of negotiation which will help this
powerful group to obtain compensation for the reduction of protection below
the common tariff level that GATT allows it to establish , and to contribute
in this way to the reduction of customs barriers in all international trade.
GATT envisages that the common tariff of a customs union in its general
incidence would not be higher than the various national hriffs \\Thich itreplaces. This formula does not require any spe. cial methoq of calculation.
It requires only that once the common tariff is established tire total duties
levied do not represent a higher percentage of the value of imports of the
customs union than the total amount of the duties charged previously by theStates in relation to their total imports. This does not oblige the union to
calculate the new tariff on the basis of the weighted average on past imports.
Once the common tariff is established and commercial agreements are concluded
on a common basis , there is no reason for imports into the territories of the
different member States to have the same pattern as those resulting from the
different commercial policies and distinct customs tariffs. A comparison of
global consumption would perhaps better reflect the import potential that
each country represents.

– 4 –
Do we want , however , to determine the weighted average on imports them-
selves? Furthermore , is it necessary to decide whether it is desirable to
apply a uniform weighted average on all duties based on global imports from
third countries or to make a weighted average on each commodity based on its
imports.
In the first case , one runs into the paradox of giving imports of raw
materials, which are generally exempt from duties, an important role in
determining the common duty. Should weights be sought for each commodity?
In the absence of a common nomenclature and statistics established within
this frameworlc the required accounting would take many years while a tariff
thus calculated with such difficulty may be entirely distorted. In fact,
even if each national tariff possesses some internal harmony an average
weighted duty for each item may result either in a lower or a higher tariff
according to the relative weight of the imports of the product in questionin low and high tariff countries.
It is necessary therefore to adopt a simple method which avoids useless
statistical exercises while at the same time ensuring an internaL harmony
of the common tariff and its conformity with the GATT regulations.
A solution will be sought by taking the arithmetic average of the
existing duties. However , a tariff resulting from a simple arithmetic
average would be higher than the level which is compatible with the GATT rules
and its internal harmony, particularly as regards raw materials , semi-finished
products and finished products, would not be ensured.
This dual problelll wil! be answered by fixing maximum rates at different
levels for raw materials , semi- finished products and finished products and
by substituting in the calculation of the arithmetic average the maximum rates
for the duties which exceed them.
In cases in which the proposed system does not result in a satisfactory
formula , a solution should ' be sought through negotiation among the member ,states
with the help of proposals of the .2uropean Commission.
For the purpose of calculating the external tariff as well as the re-
duction and elimination of the duties within the common market , the existing
duties are to be defined as tll~ average of the duty rates effectively applied
during 1953 , 54 and 55 or the legal tariff if it is lower, but ignoring purely
temporary reductions.
The common tariff should be put into effect progressively during the tran-
sitional period in ordet to permit a gradual adjustment of the economies of
member ..)tates to the changes in their tariffs with respect to third countries
to prepare the basis fof negotiations with third countries, and to achieve a
parallelism in the establishment of the common tariff and the elimination ofinternal duti,~s.
a) For items on which the unadjusted present duties do not differ by more
than 15% or bj more thin 3 points from their arithmetic average the average
duty is applied wh~n the first reduction of 10'70 on customs duties takes place
within the common TlIarket.
b) For other items each country, in its r elations with third countries
will reduce the difference behveen its own duties and the common tariff bi 30%
at the end of the first four year period , by anoth2t 30% at the end of tIle s2com
period , in order finally to adopt the common tariff at the moment when

– 5 ~
customs duties will be completely e~iminated whhinthe
schedule thus envisaged allows the common nomenclature
for a common tariff, to be put into effect in time ; the
advanced will have to be finished in very short order.common market. The
which is indispensable
work which i~ very far
c) Harmonization of the tariffs , however , must be carried out in advance
in cases where the reduction of internal duties threatens to give . rise to
transhipments because of the divergence froll). the external duties. Whenever
country " A" reduces its internal rates to such an extent that the internal rate
becomes lower than the difference between its own external tariff and the
external tariff applied by Country " , the remaining difference must be shared
by both countries; Country " A" will lower its external tariff and Country "
will increase its tariffs each proportionately to the . difference between the
initial tariffs and the fipal common tariff. (l)
d) A safeguard clause must be envisaged in order to permit certain
countries in particularly delicate cases to postpone either a r€duction or anincrease in tJ)eir tariffs. Its application would require tIle apProval of the
European Comnlission and can only be granted for a limited period and for items
which do not represent for the country in ~!.Ie$tion more than 5% of the value
of imports of such commodities from third coilntries. In such cases , either
certificates of origin , tariff quotas , or agreements regarding re-exporting
should be applied to the extent necessary to avoid transhipments.
If the Commiss ion refuses to agree , the interested State could have re-
course either to the': Council of Ministers or to the Court.
The mechanisms described above define the level of the common tariff
which will be applied in the absence of concessions obtained from third coun-tries. Negotiations with third countries could be undertaken with a COmmon
tariff of this type in ',iew. It should also be noted that , to the extent that
the rules agreed upon among the mel1lber States result in a tariff which is lower
than the limits which the GAiT allows , these duties would not be considered
as consolidated. It is indispensable that the negotiations be conducted in
common: . the European Commission . .ri.ll be resp::msible for them on the basis of
a mandate from the Council. As effective and total application of this common
tariff is approached , it may become necessary to overcome the difficulty which
the unanimity rule imposes in establishing these rules.
(I) Assume that for some product Country " A" has an initial duty of 40%
and Country " B" 10%, so that the remaining internal duty for Country " A" will
no longer make up the difference once it has reached 30% (i.e. a reduction
of 25% from the initial level). Let us suppose that it is reduced to 24%
(i.e. a 40% reduction for this particular item) even before the average re-
duction of 30% is achieved for the tariff as a whole. fhere is a danger of
transhipment , the sum of the duties for movement across Country " " (i. e. lO%
plus 24%) be ing less than the external dut y of "All (which remains at 40%).. The
difference to be made up in 6 points. How should it be divided? Let us
suppose that in applying the rule of the corrected arithmetic average, cal-
culated on the four existing tariffs , the final common tariff for this item
should be establ ~shed at 20%. The external tariff of " A" diverges f rom it by
20 points , and that of " 0" b~' 10 points. " A" must reduce its tariff two times
as much as " s is raised and the new external tariffs will be established
provisionally at 36% for " A" and at 12% for " ti" It may be noted that this
method can be' applied several times and can even be adjusted to variations
in the final future tariff resulting from the neGotiations which are to take
place during the transition period.

~ 6 –
For decisions on the proposals of the European Commission a qualified
majority will be considered adequate after the end of the second stage and
for .changes in the customs duties which do not differ more than 30% or 5 points
from the common basic tariff.
These detailed tariff negotiations are distinct from the overall nego-
tiation which aims at the entry of certain European countries into the common
market or es tablishment of a particularly close association with the Com-
munity. Thes e negotiations , whos:' possible r.~percussions will be such that
the unanimity of Governm~nts is required, should be undertaken as soon as
possible after the entry into force of the treaty.

– 7 –
Intergovernmental Committee created b,
the Messina C0.11ference
Brussels , April 23, 1956
ANNEX
Summary of the Proposals Concernin~ the Common Market in the Report to the
Ministers of Forei~n Affairs
Title I
The Fusion of Markets
CHAPTER I – The Cus toms Union
Elimination of customs duties within the common market.
1. The starting point for the reduction is the average duty levied (per~u)
during the years 1953 , 54 and 55 or the scheduled duty (inscrit) if it islower. The first reduction will be applied across the board on .!l11 commodi-
ties. The following reductions will be applied to the average for groups of
commodities.
2. Commodities are grouped according to the duties levied on them by
intervals (tranches) of 5 points for duties up to 10% and above 50% , and by
intervals of 2i points for duties between lO% and 50%. Any two of these
groups can be linked together at the choice of the Governments.
3. The average reduction applied to the groups thus established by uniting
two intervals is calculated by weighting the percentage of reductiQn on each
tariff position (poste) by the value of corresponding imports from other
Community countries during the three last years for which statistical in-
formation is available.
4. During the firs t s ta~e reductions take place ini Hally a t the end of the
first year , and thereafter at l8 month intervals; during the second stage
they again take place at l8 month intervals and at the end of the eigbJb.h~ -year. There remains 40% to be eliminated before the end of the transitional
period.
5. j\iiodifications in the system envisaged will require unanimous approval of
the Council of Ninisters if it is a question of reducing the time periods.
In other cases and on the proposal of the European CommisS ion a majority of
2/3 of the Council will suffice. However , the delays can be extended only
for three years so that the transitional period will end after a maximum of
15 years.
6. After the fifteenth year certain temporary derogations can still be pro-
posed if they are recognized as necessary to prevent f1mdamental and persist-
ent troubles in the economies of the member States. These derogations would
COme into play only within the limits fixed in the Treaty and with the agree-
ment of the common institutions.

– 8 –
II.Establishment of a Common External Tariff
A. The system for the establishment of a common external tariff willbbet~he
following:
1. The starting point for the calculation of the tariff is based either on
the average of the duties levied during the years 1953- 1954 and 1955 or on
the scheduled duty rate if it is lower.
2. The tariff positions c1assified in three categories according to a nomen-
clature already agreed upon , will be brought down to certain maximum levels
which will differ for raw materials, semi- finished products and finished
products.
3. The level of the external tariff will1'be esta-biishad on the basis '4Jf an
ari thmentic average of the duties levied on each product , after the high
tariffs have been brought below the maxima envisaged for each category.
4. In order to achieve the level thus de fined the following schedule will be
applied:
a) On items where the present unadjusted duties are not more than 15% above
or below or more than three points away from their arithrnentic average thi$
average will be applied when the first decrease of 10% is made on customs
duties within the Common market.
b) On other items at the end of the first stage of four years each country,
in its relations with third countries , will reduce by 30% the difference be-
tween its own duties and the level of the corresponding duties of the common
tariff. A second reduction of 30% of the difference will be made at the end
of the second stage of four years.
c) The application of the common tariff itself will take place at latest at
the time when customs duties are completely eliminated within the common market.
d) Advance actions will have to be taken in haunonizing the national tariffs
with the common (external) tariff whenever the reducti6.n of. irtternal duties
threatens to bring about transhipments , b~cause of the difference froill. the
external duties.
e) If the mechanisms proposed above do not permit a satisfactory formula to
be determined in certain cases , a solution will have to be sought through
negotia tions among the l~mber States , and facilitated by proposals of the
European Commission.
The European Commission will be able to grant a country the benefit of . a safe-
guard clause for a limited period and for tariff positions not exceeding 5% of
its imports from third countries. If this (safeguard) should not be granted,
the interested State would be able to have recourse either to the Council of
Ministers Or the Court.
NCf;oi;i.:;;tionG \-lith TIJi;:d Countrieo
It is the common tariff defined above which will be applied towards third
countries , except for concessions obtained from them by negotiations.
1he European Commission will make proposals and conduct tariff negotiations
wi th third countries under a mandate approved unanimously by the Council.

– 9 …
However . beginning with the ninth year a qualified lnajori ty will be sufficient
to modify duties which do net differ by more than 30% or 5 points from the
common basic tariff.
Negotiatiol)s for the establishment of associations between the Community and
third countries will take place as soon as possible after the Treaty Comesinto effect . on the basis of proposals of the European Commission approved
uft~nimously by the Council of Ministers.
CHAPTER 2 – ~UO.fAS
Section 1 … Import Controls
Th.:! methods used by the OEEC for the elimination of quotas will continue to
be employed until the date of the first lowering of customs duties carried
out within the framework of the Treaty.
The liberalization already accomplished through application of – the standards
of the OEEC will be consolidated among the Six who will endeavor in addition
to maintain the liberalization agreed to beyond these standards.
The liberalizatiun which has been consolida.ed among the Six could be reopened
only in cases where the Treaty itself would authorize the operation of a safe…
guard clause after liberalization.
After the first lowering of customs duties. the new mechanism proposed for the
'":ommunity will be as follows:
l. All bilateral quotas open to one partner on imports from ott~rs will be
added together in order to establish global quotas. by comr:lOdity, open to
all the producers of the CO!l1fIlunity
2. These global quotas will be increased each year on the order of 20% above
the preceding year. As a result of being progressivel V increased , they
should become inoperative . not later than a year before the time that the
customs duties themselves are to be eliminated.
3. The starting point for an increase of the very small or non-existing qu9tas
will be , at the choice of each interested titate , either 1% of the national
production it! question or imports corresponding to the average of the
Co!1Ullunity for the w:oduct in question.
4. When the quota takes the form of a purchasing monopoly (governmental Or
business) , the. proposed system will be replaced by proposals of the
European Commission concerning the adaptation of the existing organizations
which ~1Ti1l have either to disappear , be adapted to the common market or
where necessary, be replaced by a common organization in such a way as to
eliminate progressively the discriminations among the different suppliers
of the common market. This procedure will be applied equally to fiscal
monopolies.
Section 2 Export Controls
During the first four-year period and after consultation with the European
Commission certain export controls or export taxes having a similar effect
could be maintained among the member State. s but they must be eliminated at the
end of the fourth year

– 10 –
In relatiDns with third countries and wi thin the framework authorized by
GATT, export controls for the duration of the transitional period will remain
under the responsibility of each of the States to the extent that there is
in practice , a certain autonomy in the commercial policy of the member States.
At the end of the last stage, export restrictions wil* be subject to the common
commercial policy of the Co~~unity vis-a-vis third countries.
CHAPTER 3 – SERVICES
At the moment when the Treaty comes into force a stand-still agreement
wil1 be applied consolidating the pertinent rules of liberaHzation adopted by
the member countries within the framework of the OEEC and the GATT.
The Treaty itself will specify the principles and rules of procedure bind-
ing the member States:
during the first two stages (8 years) the European Commission will make
proposals for the modifica:tion of existing national regulations concerning
services and the elaboration of a common regulation. The proposals of
the Commission should
1. in the first instance deal with services directly connected with the
costs of production and facilitating the free circulation of goods;
2. see to it that national regulations. as long as they are maintainedare applied without di$efi~inati5non th~ basis of r~sidence andnationality;
3. determine to what extent the national regulations correspond or not to
the requirements of public order
The proposals of the Commission will be submitted to a vote by the
Assembly. In order to put them into effect a unanimous approval of the
Council will be required up to the end of the second stage , and thereaftera qualif iedmajor i ty.
At the end of the transitional period, the rules proposed by the European
Commission . should be uniform. Only certain national rules can be main-
tained which , on the proposal of the Commission , are adopted by a qualified
majority of the Council of Ministers.
Transport Services
On proposals of the European Commission put forward during the transitional
period and to be put into effect on the same conditions as those indicated for
services in general, discriminations on the basis of nationality should be
eliminated in such a way that at the end of the last stage, all the nationals
of member States will be assured the right to furnish and accept freely trans-
portation services over the territory of th~ member .::itates as a whole.

… 11 …
CHAPTER 4 – AGRICULfURE
A. – Establishment of the Common Market for Agriculture
a) Transitional Measures
Agricultural products will be included in the groups established
for the reduction of customs duties.
The general rule for enlarging quotas will , in principle f besupplied to agricultural products. If this is not possible , a system
for stopping imports , wllicQ is linked to the level of selling prices,
can be used for particularly sensitive agricultural products.
For certain products for which the market is organized on a
national basis, trade will at first be increased through contractual
commitments which should be replaced by a common organization at the
end of the transitional period.
The general system for the establishment of a common external
tariff will be applied to agricultural products. The quotas vis-a-vis
third countries should be progressively harmonized 'until a common
commercial policy is established.
The progressive elimination of the regulations which are destined
to disappear , or the progressive establishment of a COmmon organization
which would replace them will result from the elaboration of certain
standards which the differing regulations will have to approach
concurrently or to which the new rules , to be adopted in common , will
conf orm.
b) Definitive Arrangements
Products for which a common organization of the market would be
justified will be chosen during the transition period. The common
organization of the market for these products will be prepared by the
establishment of a provisional balance sheet on resources and markets
which will incluc:e the stabilizing mechanisms that will eventually benecessary.
For products which are not under a common organization the market
within the Community will be free. Protection with respect to third
countries will be assured by customs duties in preference to quotas
which would be seasonal rather than permanent.
In the exceptional case in which a .national economy is both so
limited and so little diversified that it cannot get rid of fundamental
and persistent troubles affecting the agricultural sector , special
solutions would have to be applied in order to complement , if necessary
the stabilizing mechanisms envisaged above.
B. – The Common Market for Agriculture and Third Countries
The comtTlon market for agriculture cannot be an entity protected against
the outside world , while aligning its prices on marginal internal producticn.

~ 12 –
However t it will be protected against abnormal competition from third coun-
t1"ies that employ dumping prices. This is why certain arrangements should
be applied to permit producers of the Community who up to now used low-priced
raw materials to continue to export at competitive prices to thi1"d countries.
C. – Institutional Organization
The European Commission within a period of hl0 years should make pro-
posals for a common policy and organization of the agricultural market.
Furthermore , it should be the body to make the examination which is envisaged
of existing national regulations.
The proposals of the Commission will be submitted to a vote in the
Assembly and should during the first stage t be adopted by a unanimous vote
of the Council of Ministers. Prom the second stage onward a qualified
majority of the Council of Ministers will suffice.

– 13 –
TITLE II
RULES ANI) COi.lt-tON ACTIONS
Chapter I
Rules Concerning Competition
Section 1..Standards Applicable to Enterprises
a) During the transitional period . each state can apply within the common
market its existing anti- dumping legislation or introduce such legislation
which the European COmmission will have to ask to be changed if' it is undulyrestrictive. If the modification is not satisfactorily carried out either
the Commission or any interested State may bring the issue before the Court.
In case of abuses in the application of legislation which is now in effect
enterprises or member states can bring the matter to the Court, with the
European Commission introducing such complaints.
At the end of the transitional period anti-dumping legislation of member
countries of the common market in their relation with third countries should
be unifornl. The Committee can make proposals to this effect.
b) Action against monoo)olies within the common market will be developed in
conformity with the basic rules contained in the treaty. It will be limited
to practices affecting interstate commerce wHich take the form of cartel
organizations (ententes) and monopolies using discriminatory practices
dividing markets , limiting production and controlling the market for aparticular product. On the basis of principles in the treaty the European
Commission will establish the general executive regtllations which w'i 11 be
Submitted to a vote by the Assembly and which can be appealed before the Court.
c) The States , the enterprises and the Committee itself will be able to
make co:l1plaints against infractions of the general rules. The European Com-
mission will try to present , within a fixed period , a compromise solution with
the assistance of a Consultative Committee on cartels and discriminations
which should be created. In case a compromise solution fails (en cas d' echec)the Commission or the States could bring the matter before the Court.
Section 2. Rules Concerning Financial Assistance Granted by the States
The following general principles will be incorporated in the treaty:
1. Financial assistance , no matter in what form it is granted , is incompati-
ble with the common market if it distorts competition and the distribution of
econrnoic activities by favoring certain enterprises or certain types ofproduction.
The following exceptions are allowed:
aM Subsidies to individual consumers and to disinterested institutions
(schools and hospitals) used as instruments of social policy.
b..Subsidies for the development of certain regions.
These two categories of exceptions will be of a continuing type.

– 14 ….
During the transitional period only:
… direct readaptaion aid for certain marginal activities.
– temporary aid to compensate for distortions.
The procedures for intervention will be as follows:
1. A study of the various types of aid will be carried out by the European
Commission which will learn of them – from information submitted by the State
in question – or from inquiriestthat it will make on its O\" n initiative on the request of another . state.
2. After consultation with the Council and under the reserve of recourse to
the Court , the European Commission will decide on the compatibility of the
various forms of financial ass1S:ance with the common market or on the condi…
tions and the time periods in~luded in authorizations. As regards systems of
governmental intervention affecting the general economy of. a country, deci-
sions of the Commission will require unanimity on the part of the Council
during the first stage , \vith a qualified majority thereafter.
Chapter 2
Correction of Distortions and Harmonization of National LeRislation
Section I. Distort ions
The proce. dlure will be the following:
… a study of distortions will be made by the ElUropean Commis. sion in liaison
with the industries concerned and the governments
… if the Commission considers that distortions have a serious effect on the
conditions of competition , it should make proposals to eliminate them
– proposals of the Commission will be adopted only after unanimous approval
by the Council of Ministers during the first four years; after that by a
qualified majority until the end of the l2th year , and finally by a simple
majority afte r that period;
… governments will be obliged only to use their good offices towards their
social partners or recommend appropriate legislation when the correction
of distortions depends either on working conditions freely negotiated
on legislative measures;…
if the proposals of the Commis& on are rejected , it has the right , until
the end of the transitional period, to grant the benefit of a safeguard claus
to industries which are harmed (protecting them in their national markets and
aiding their sales in the rest of the common market and in third countries).
Sect ion 2. Harmonization of Legislation'",
hen the elimination of a distortion calls for the harmonization of legal
regulations in the different countries , the European Commission will propose
the necessary decisions which will be taken only by a unanimous vote of membe
States during the first stage , and by a qualified majority thereafter.
agreement cannot be reached , and if there is a distortion effect , the Commis..
sion will have to grant to the interested State the benefit of a safeguard cl

.,.. 15 .,..
Even if th~ existing disparities should not imply any distortion , it would ~e
ne.cessary for the Governments to make a special effort to harmonize progressively
the national regimes affecting the equality of salaries for men and women, the
length of the work week and the length of paid holidays.
In the three fields enumerated above , the procedure for harmonization and for
applying the safeguard clauses previously envisaged will have to be applied ini.
tially upon the entry into operation of the common market , i.e., in coordination
with the application of the different measures which the COmmon market implies.
Chapte r 3
Transport Rates and Policy
Section 1. Transport Hates
Discriminations which , for the same routes and for the same merchandise, result
in different prices and conditions according to the country of origin or desti-
nation of products will be eliminated at the end of the first stage.
Taxes for clearing frontiers should disappear through governmental efforts to
elimina te the expenses to which they correspond.
The establishment of progressive international through-rates based on total dis-
tance will take place when it is necessary for the operation of the common market.
The harmonization of rates between the same means of transport from one country to
another "dll be resolved by the application of the general rules established fortheelilllination of distortions.
Sect-ion 2. Transport Policy
In order to prepare a common policy for transport a " transport account of each na-
tion" will be established by a group of transport and national revenue experts in
order to bring into relief the expenditures directly borne by the transporter
and also the charges borne by the Community.
The transport rates will be published.
Subsidized rates (tarifs de soutien) will be d~alt with in conjunction with the
general subsidy and investment problems.
The European Commission will undertake the necessary studies to develop pro-
posals Or opinions on the investment programs envisaged.
A separate institution will not be created for transport questions but a
Transport Division will be included within the European Commission.

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Chapter 4
Balance of Payments
The Problem of Payments Equilibrium and Mutual Assistance.
The obligations undertaken in the framework of the International Monetary
Fund, the GATT , and the OEEC bind the Six States that are members of them.
The Six States , in order to assure equilibrium in the balance of
payments;
will establish a closer cooperation among their central banks,
2) will give the European Commission the right to grant safeguard
clauses and to propose mutual assistance in order to avoid the possibility
that, in spite of the rules of the IJI. , devaluations might take place with
the sole aim of extracting competitive advantages; and in order to prevent
the maintenance or the re-establishment of restrictions and blocks in the
way of the common expansion.
The combination of mutual assistance and safeguard clauses will operate
under the following conditions:
Mutual assistance will be based on mechanisms , such as those of the
EPU and the IMF , but will he able to take complementary forms as the common
market develops.
Transitional period
The European Commission should propose that member states grant mutual
assistance to partners who are in difficulty by specifying the methods to
be employed (credits , increased quotas , increased imports by temporary reduc-
tions of customs duties).
If there is no unanimous agreement of the Councilor if agreement is
not given individually by a sufficient number of members for the assistance
to be effective , the European Commission should authorize the State in diffi-
culty to introduce protective measures which can be prevented only by a
qualified major ity of the Council.
The Final Per iad
A ~tate in difficulty will be able to re~s tablish quotas vis-a-vis
third countries only in conformity with its international obligations and
after consultation with the European Commission. fhe Commission will pre-
sent the alternativ2s to the other member States: either to take the
necessary measures to prevent the restrictions from being applied against
them, or to grant credits , to the extent that the common commercial policy
does not suffice to resolve these problems.
Within the common market there is reason to think that the evolution
of the general system of payments will enable these difficulties to be
surmounted. The granting of credits , proposed by the European Commission
and decided by a simple majority of the Council , will permit the definitiverenunciation of the safeguard clauses.
In all cases mutual assistance or protective measures will be authorized
only if the interested member State makes an effort to remedy the situation.
The Committee may also make remedial proposals after studying the ~j tuation.

– 17 –
II.Unification of Commercial Policy.
Besides the establishment of a common external tariff , the States must
employ a commerci(J.l policy which will be that of the Community as a whole\,rhen the co.mmon market has been firmly established. ~Hthin this framework the
European Commission , acting in liaison with the Council of Ministers , willplaya role notably in matters concerning anti- dumping measures , protective
quotas, encouragem2nt of exports , and short- term (governmental) interven-tions , ~1ich must also be on a common basis.
In addition tn this common commercial policy a harmonious approach
(attitude convergente) will be develo.ped in international monetary relations"
TITLE III
Developl;~ent and Full Utili7ation of Europcan Resources
Chapter I
The Investment Fund
Sec tion Objective
Acting in caoperation with the other internatianal financial institutions,
the fund will have the objective af participating in the financing of:
Projects af a Eurapean character and interest whase magnitude and nature
do. nat lend themselves to the financing available in each Stateseparately. " The European interest" will be determined by the number
of States interested or participating in a praject and by the favorable
apinian of the competent Eurapean institutian. The extent af the
fund I s participation will be in praportian to " the European interest"
which is recognized in the prajects;
Less favored regions and notably regianal develapment plans faragriculture;
Reconversion of enterprises by opening up credit possibilities far
them which psycholagical factars in the market might jeopardize. This
is why it is necessary to have a . division endowed with certain resources
within the arganization of the fund itself.
Sectian 2. Resources and Organization
The basic resources and credit of the Fund will be abtained thraugh
an initial capital endo"t\lIl1ent af about one billion dallars to. be subscribed
by the States, only 25% of which will be paid up.
During the first five years the States will agree to make supplementary
contributions up to. the tatal af their share, as an increase in the registered
capital.
A firm annual ceiling will be set for these contributions. They will be
called , up to. the amaunts agreed in advance , anly to the extent necessary to.
supplement the resources that the Fund will abtain from the capital markets.
Within these limits an . annual cantributian is required (de droit) up to the
value af 5% of the subscribed capital; can be raised by simplemajarity up
to 7.5% af the capital, and abave that by a qualified majarity.

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CHAPTER 2..
READ~TA: ION
A readaptation fund is established, financed by the contributions of
member States , calculated in proportion to the total salaries and legal or
conventional charges or contributions which ensure coverage of the social
security benefits.. In this calculation it will be necessary, however, to
exclude wages and social charges of the sectors which come under the special
readaptation sys tern of the EC6C.
Without asking proof that unemployment is the consequence of the
establishment of the common market and on the co~dition that member States
themselves begin to undertake the necessary expenditures, the Fund would
offer to provide up to 50% of the expenses in certain cases and for certain
purposes agreed to in advance.
In cases of
– total shut-down of an enterprise
– partial shut-down through definite abandonment of certain manufacturing,
– reduction of employment affecting at least 10% of the working force and
at least ten employed persons
The Fund will participate in covering:
– resettlement payments if workers change their residence
– expenses for re-training of workers if they change their jobs.
In cases where an enterprise during its reconversion period reduces or
lays off temporarily all or part of its labor force the Fund '\7ill share
in assistance permitting that enterprise to pay vlorkers ,.,hile they are
waiting to be employed again under a program – for such reconversion and
its financing ..
vlhich has been transmitted by the interested government
and approved by ~he European Commission.
In case enterprises are being shut down by stages the Fund will partici-
pate in the financial assistance agreed upon for salary payments if a
plan of re-employment in other enterprises is . submitted and if the sche-
dule indicates that re-employment cannot be progressive. The Commission
will present proposals which must be approved by a qualified majority
in the Council.
Workers affected by these gradual lay-offs will in any event have the
right only to the same allowances as in the case of closing of a plant
or reduction of employment.
The European Commission can take executive decisions, s.ubmitted to a vote
in the Assembly, specifying the conditions far distributing the aid
envisaged , especially in cases of reduction of employment.

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CHAPTER 3 – FREE MOVEr1ENT OF LABOR
Each State will increase annually the number of workers from other
member States which it will allotV to be employed.
The basis for the increase will be:
– either the average for the last three years of the number of new
workers admitted in each country from other countries of the Community;
– or one percent of the total number of wage earners for those countries
which have in the past employed only a small number of foreign workers.
The .rate at which the number of workers is increased can be slower tothe extent that the base is large in a particular country: a scale
reconciling these two jactors should be established.
The European Commission will decide on the necessary protection measures
in order . to avoid an inflow of labor witch would be dan6erous for . the
standard of livir..g or . employment of tVorkers in certain specified indus-tries , without affecting the rights acquired by foreign workers.
Access of foreign workers to all jobs will be ensured by the progressive
shortening for all occupations of the waiting period of five years applied
by the countries of the OEEC before permitting a foreign worker to take
on a job.
The European Commission will propose to the States measures for the
progressive elimination of all discriminatory regulations (legal, admin-istrative , or administrative practices) which , on the basis of nationality,
reserve more favorable treatment for nationals than that accorded
foreigners with regard to access to an independent profession or the
practice of that profession.
This principle will also apply to regulations concernin~entry and
residence without prejudice to provisions governing public order and safety.
CHAPTER 4 – FREE MOVEMENT OJ! CAPITAL
Transfers tied to commodity transactions , to exchange of services and to
free circulation of labor ~vhich are distinct from the free exchange ofcapital , must be liberalized at least at the same rate as the elimination
of quantitative restrictions. This problem is actually resolved by the
rules of the European Payments Union which will have to be consolidated
among member States.
The States agree at the end of the transitional period to establish amor.g
themselves the free movem9nt cf capital – ~vhich embraces the unrestricted
right of nationals of member States to obtain , to transfer , and to use
capital obtained within the Community anywhere in the common market
and including the right to create new enterprises, to acquire shares in
existing enterprises and to participate in their management.
As soon as possible , the European Commission ~vill make proposals to
establish the free circulation of capital. These proposals ~vill be sub-
mitted to a vote of the Assembly and their adoption will require during
the first four- year period the agreement of each State on matters of
concern to it , and thereafter a qualified majority of the Council.