Capital Movements and Investment in the European Communities

Abstract

So far, it has been difficult to obtain an exact idea of international capital movements within the European Economic Community (E.E.C.) owing to the lack of accurate statistics permitting comparisons among the various countries. It is, therefore, impracticable to furnish reliable information on the extent to which the organization of the E.E.C. has had had an effect on the capital imports and exports of the partners to the Treaty of Rome, and to forecast what the future will hold in store. However, it may be taken for granted that any intensification of capital transactions within the E.E.C. will conform to the degree in which the functioning of a Common Market in the fullest sense of the word is accomplished, meaning a market characterized by generous freedom of movement in all transactions relating to persons, money, goods, and capital, and by close coordination of national economic and financial policies capable of functioning satisfactorily in difficult situations. Nobody seems to be able to tell exactly to what degree it will be possible to realize this ideal, although past experiences inspire a fair measure of confidence. During the last few years, financial stability has been consolidated even in those countries of the E.E.C. that a few years previously, from the viewpoint of financial policy and capital transactions, had to some extent still been problem children. -Quite generally, considerable progress has been made in removing impediments to competition. In the event that the realization of the Treaty of Rome-in accordance with the spirit as much as the letter-is really accomplished along liberal lines of thought, it should be possible to anticipate a favorable development of the contribution that the countries bound together in the E.E.C. can make towards world-wide capital transactions. Freedom of movement between the E.E.C. and third-party countries must, in the writer's personal view, be looked upon as an essential sequel to a liberal nonprotectionist order within the E.E.C.; it should, in fact, be a matter of course. Again, the fact that the regional structure of foreign trade among the E.E.C. countries, especially in the Federal Republic of Germany and the Benelux countries, is characterized by world-wide interramification-a trend that it is important not merely to maintain, but to strengthen-affords ground for expectations that the progressive interlocking of capital within the Six will not proceed along exclusive lines. There is all the less reason to be apprehensive of the contrary result, since the European Monetary Agreement-in which, in addition to the E.E.C. coun* Vice-President of Board of Directors, Reconstruction Loan Corporation, Frankfurt (Main); Member, Board of Management, Deutsche Bank Aktiengesellschaft, Frankfurt (Main).