The entry of Spain and Portugal
into the European economic Community,
by Guy Longueville.
The third extension of the European Community to include Spain and Portugal seems to have been motivated in the main by political considerations: on the one hand the need to extend Europe to the south European countries and on the other Europe's promise to both States that they would be eligible for membership as soon as they restored democracy.
For it appears that the economic advantages are not obvrious for any of the contractive parties.
While the two newcomers to the Community gradually closed the gap separating them from the other members, thus facilitating their membership, it appears that the gap between these two Iberian states and the Eec countries with regard to production, investment and standard of living, which narrowed progressively from 1960 to 1974, has since remained constant. During the ten-years transition phase the uneven customs barriers will oblige Spain and Portugal/to make a great effortto streamline their economies and become more competitive if they do not want their trade relations with the Common Market countries to continue deteriorating as they did quite sharply in the year period following membership. The resulting slowdown in economic growth, however, will scarcely be compatible with a decrease in the unemployment rate in Spain and a narrowing of the development gap within the enlarged Community.
The medium-term unification of the market of the twelve member States could accelerate a sectorial reshuffle within the Eec, mainly in industry, where price pressures demand maximum efficiency, unlike in agriculture, where local production has a part to play even if it is not particularly efficient. The tendency for intra-European specialization of activities, which reached Spain and Portugal in the 1970s, seems likely to increase in the future, with a risk of increased hierarchization between these two economies: as Spain gradually develops its poles of competitivity, Portugal would be limited to low-cost labour-intensive areas.
The membership stakes are therefore higherfor Portugal, a late-developing country with limited possibilities of expansion, than for Spain, whose economic modernization potential is an important asset even if certain inequalities are inevitable.
From the Community's point of view, this third enlargement looks likely to increase agricultural surpluses and pressures on the Community budget. What is more, the harmonization of development in the member States, the similar standards of living, the balanced conditions of competition and the complementary nature of products in different areas, which all encouraged an institutional advance towards greater Community integration, may well suffer from this latest enlargement as they doubtless did in the previous two cases of Community enlargement. So if we want to avoid the emergence of a two-speed institutional Europe in answer to the obstacles thrown up by different levels of development, Community solidarity, which has already been shown towards Greece and Portugal should nonetheless be further reinforced, which means among other things a redistribution by the wealthier Common Market countries in favour of the poorer members.
JEL: 121
The reorientation of the british tax system (1979-1986), by Jean-Jacques Santini. A number of studies carried out in the United Kingdom in the 1970s seemed to indicate that the British tax system led to distortions in resource allocation which were prejudicial to the operations of the economic system. In the light of these findings, when Mrs Thatcher's government came to power in 1979 it immediately brought in a tax reform policy. The measures included in this policy, which were numerous and often far- reaching, affected taxes on households as well as company taxation. The study presented here describes the various measures complemented and attempts to judge their possible impact on the British economic system. Although it is still difficult to draw up a conclusive report on the results of this tax reform policy (which is not yet complete, several of the projected reforms having not yet been implemented, and which includes structural alterations which are slow to alter behaviour), three conclusions seem to stand out: the réorientation of the fiscal system since 1979 has been a major one, as can be seen from the change in the spread of taxation over households and companies on the one hand and the respective weight of direct and indirect taxation on the other; the short-term impact of the reforms introduced has sometimes been quite marked, whether positive (as in the case of the investment tax reform carried out between 1984 and 1986) or negative (the increase in direct taxation introduced in 1979); generally speaking, the British tax system seems better oriented now than in 1979 with regard to the achievement of economic policy objectives: the incentive to work has been increased, financial savings should progress and be better oriented towards productive investment, the quality of investment should improve and employment should be encouraged. JEL: 321
