No Victors, No Vanquished

By Hunter R. Clark

West European leaders rekindle the fire of unity

When the leaders of the ten nations that constitute the European Community gathered last week at the Palais de Fontainebleau outside Paris, they knew that the outcome of their two-day summit might either launch the political and economic revival of Western Europe or set the seal on its decline. For five years, the question of how to deal with Britain's demand for a cut in its disproportionate contribution to the Community's common budget had all but paralyzed its ability to act on other pressing matters. Among them: the Community's chronic funding difficulties, its unfinished task of dismantling the remaining trade and investment barriers to a true common market, and the challenge of narrowing the technological gap between Western Europe on the one hand and Japan and the U.S. on the other.

Even more important, perhaps, was the problem of how to rekindle enthusiasm for the post-World War II dream of a united and cohesive Western Europe capable of assuming a superpower's role in world affairs. The low voter turnout for last month's European parliamentary elections had sent the leaders an unmistakable message: support for that ideal among many citizens is flagging. Moreover, election gains by splinter parties of the left and right heralded a growing popular discontent with politics as usual.

These pressures combined to produce a summit that broke the logjam on Britain's demands. The compromise that was worked out was a diplomatic sleight of hand that saved face for both British Prime Minister Margaret Thatcher and French President Francois Mitterrand, who had taken personal charge of the effort to end the deadlock. Said a French spokesman: "There are no victors or vanquished." While other difficulties still remain, Mitterrand, the host of the summit, who was wrapping up his six-month term as Community president, was confident enough to proclaim: "The way has been cleared for us to go ahead with a whole series of new policies."

In Washington, Reagan Administration officials voiced approval. Historically, the U.S. has supported the Common Market, as long as backing it does not cause American industry to lose out to subsidized European competition. Underlying this is the notion that fiscal coordination makes Europe a stronger economic entity and thus a stronger trading partner for American business. A Washington official noted that the Administration is working hard to allay European fears of a U.S. tilt toward Asia. He declared, "By and large, our trade relationship with Europe is the most important one we have."

Britain's dispute with the Community goes back to its entry in 1973. When Thatcher came to power in 1979, she promptly began demanding what she called "my money." At issue was the Community's lavish agricultural subsidies to members. These outlays still run well ahead of revenues, largely because governments are constantly under pressure from farm lobbies not to cut back. Because Britain's agricultural system is so limited, the country was receiving fewer subsidies than other member states. As a result, Britain, one of the Community's poorest members in terms of per capita income, was contributing more to the $21.3 billion budget than any other nation except West Germany. Each member's contribution is based mainly on the country's receipts from the value-added tax, a type of sales tax. Thatcher argued that Britain paid 21% of the Community's revenues but got back only 13% in the form of grants and subsidies. All the other members, with the exception of West Germany, received as much as or more than they paid in.

At first the Community's inability to reach a compromise with Thatcher was attributed to British ambivalence about being a member to begin with. Thatcher has done little to sell her country on the positive side of Community membership, such as the grants and subsidies Britain has received for highway improvement, job-training programs and aid to depressed areas. The opposition Labor Party, in its 1983 general election manifesto, pledged to pull Britain out of the Community. Many Britons have made it a scape goat for the country's economic ills: a recent Gallup poll showed that only 33% of Britons consider membership "a good thing." Nevertheless, domestic politics had much to do with why Thatcher changed her stand. Her handling of the 17-week-old coal miners' strike, which has produced violence on a scale rarely seen in Britain, has contributed to a growing perception of the Prime Minister as stubborn and intractable.

Under the terms of the summit accord, Britain will be reimbursed a flat $800 million this year and in following years will recover two-thirds of its net annual contribution (the difference between the country's payments and Community benefits). No one seems to be able to say exactly how much all this adds up to, but it will probably turn out to be less than the $1.3 billion that Thatcher originally requested. Still, the formula is sufficiently ambiguous to create the impression that neither side lost. Thatcher insisted, how ever, that any future revenue increase must include another favorable deal for Britain.

Other agreements announced after the summit include a timetable for concluding the entry of Spain and Portugal in 1986, simplified customs procedures, and a general system of equivalence for university diplomas to enable trained specialists to move more freely among the Community's technologically lagging industries. Mitterrand mentioned the possibility of a European space station and even a European flag, passport and anthem. All are part of a program that, in French Finance Minister Jacques Delors's words, "has awakened the sleeping beauty that was Europe."

-- By Hunter R. Clark.

-- Reported by Bonnie Angelo and Lawrence Malkin/Fontainebleau

With reporting by Bonnie Angelo, Lawrence Malkin