Tough Questions...and Tough Answers

1. Why did the French and then the Dutch decline to ratify the new EU Constitution?

First, it must be pointed out that both of these decisions were made entirely by the people through the method of popular vote. Politicians in both countries, most notably Jacques Chirac, strongly urged voters to approve the referendum, but they obviously declined. BBC news sources indicate that low-income workers and farmers were most likely to vote no.

I have been able to find several reasons that voters turned out in record numbers to vote so solidly:

A) Voters wanted to teach Jacques Chirac a lesson. The new Constitution was one of Chirac's pet projects, and by voting in the way that they did, they demonstrated their dislike for the exceedingly high unemployment rate - currently at 10.2 percent.

B) The French population feels as though they are losing their power in the Union. With the expansion of the community to 25 members last year, each individual countries role becomes smaller and smaller. France, as an extremely nationalistic and founding nation of the EU, resents their loss of power. Voting no was their way up standing up and demanding the attention the believe they rightfully deserve.

C) I do not have the full English text of the new Constitution, but reading it in French has provided me with some ideas about its construction. Nearly every sentence focuses on economic changes within the Union - something the French don't appreciate. The French economy is struggle right now and some French feel as if blurring their borders further will only increase the difficulty that the working class is currently experiencing.

D) Even 50 years later, the French do not forget why the Union was created. It was never meant to be an economic entity - it was a political entity designed to maintain peace between densely packed nations. As further changes are made to the Union to make it more of an economic machine, the French become more and more unlikely to approve these changes.

All of these reasons make sense to me. There's just something inside me that thinks, "You know, that's just like the French." Don't get me wrong - I'm a French major and a love of French culture, but they're well known for their strikes and their protests, and they mean to be taken seriously. They're not the kind of people (collectively) who bow their heads and vote yes because it's best for the 24 other nations in Europe - they will do what's best for themselves, selfish as that may be.

As for the Netherlands, I'm having a harder time understanding their choice to vote no on the referendum. I am unable to read that language, and most of the media reports state that they were simply following the French. I'm unwilling to accept this as a complete explanation, however. Perhaps they were trying to demonstrate their allegiance to France by voting along the same lines. Perhaps they felt the same political and economic pressures that the French do. I suspect that they were emboldened by France's "no" so they made one of their own. If I find more information on this topic I will be sure to report it.

It should be noted that many of the reasons I've stated above involve organization - millions of people do not collectively all feel exactly the same way and vote because of it. I must assume that word of mouth and the media delivered the message that the French people needed to hear to vote the way they did.

2. "So who gains and who loses by dropping tariffs as countries form unions?" - NN

Let me be more clear about what France demanded when they agreed to form the EEC. Here is an exerpt from Pinder's book:

"The ECC was also, thanks to French insistence on surrounding the common market with a common external tariff, able to enter trade negotiations on level terms with the United States; and this demonstrated the potential of the Community to become a major actor in the international system when it has a common instrument with which to conduct an external policy. It was a first step towards satisfying another motive for creating the Community: to restore European influence in the wider world, which had been dissipated by the two great fratricidal wars."

So one sees that in fact no tariffs were dropped between countries, but instead a tariff was erected as a barrier (and negotiation tool) between the US and the European states.

But...well...I guess there had to have been tariffs among European nations prior to the formation of the ECC. Ah...now I see the point of your question.

Prior to the ECC:
Firm A makes widgets in France. Firm B transports widgets from France to Germany. Firm C purchases the widgets. Firm C sells the widgets to Mr. D. Some of the money from Mr. D's purchase is given to the French government by Firm C. Let's work backwards.

Now that tariffs have been removed from between France and Germany, Mr. D doesn't have to pay as much for his French-made widgets. Whereas formerly he may have purchased an American-made widget at a lower price, now the French widgets are cheaper so he buys those instead. He can either buy more widgets, or more of something else, depending on his optimal basket. His quality of life improves because he is able to reach a higher level of utility. Firm C probably is going to do more business. They can now charge less for their widgets, which is going to increase the demand for them. Firm C will probably make more money. Since Firm C is selling more widgets, Firm B will have to be contracted to transport more of them - which means more business, and more profit for them. Firm A will have to produce more widgets to keep up with the expanding demand in Germany. They'll make more money because they're producing more.

Sounds good! Everyone's better off! But who gets hurt?

The French government. Because they're no longer receiving the tariffs from the exported goods, they're not receiving as much income. Further, because French widgets are more likely to be sold in Germany instead of in France, they won't receive any sales tax on them either. And when the government is making enough revenue, the population suffers. Defense spending, education, public works - these services now compete for increasingly scarce resources. Where does the money come from to support these services? Likely in the form of higher income or other taxes for the population of France. So while citizens may benefit because of the increased profits of their employers, they may end up paying a higher tax. Thus, indirectly, the French citizenry might lose out. But their government now has more power in the world arena - when buying goods only made in America, for example, or when going on vacation, they'll get a much better deal.

Who else loses out? The US. Now that Germans are more likely to buy French goods and vice versa, American goods don't sell as frequently there. American companies now face a whole host of problems including cost control, government lobbying, and wage adjustments to continue to support their workers. Economically speaking, the construction of the ECC and then the European Union must have looked like a nightmare to many corporate executives whose companies exported most of their goods to Europe.