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Spain Spain and the European Community
The year 1992 promised to be one of the most momentous
for
Spain in the twentieth century. The Summer Games of the
XXVth
Olympiad were to be held in Barcelona; the five hundredth
anniversary of the discovery of the New World was to be
celebrated in Seville, with an ambitious international
exposition
known as Expo 92; and Madrid had been designated as
Europe's
cultural capital for that year. Moreover, 1992 would mark
the
culmination of a forced march to modernize the country's
economic, social, and financial institutions, because
Spain would
be fully exposed to the bracing winds of unfettered
economic
competition from the members of the EC. By the end of
1992, the
EC's plan to eliminate barriers to trade, employment, and
the
flow of capital across the twelve member states' borders
was to
take effect.
Spain's long adherence to protectionism had been a
major
factor in its technological and economic backwardness. The
Socialist government's commitment to economic
modernization and
to Spain's integration into the European economic
mainstream thus
represented a historic landmark. The end of authoritarian
rule in
1975 led Spain to embrace a system of political democracy,
but
changes in the economic sphere proved more difficult. In
the
1980s, true economic modernization was only beginning, as
the
Gonzalez government cast Spain's national goals in terms
of
increasing its competitiveness, both within Europe and
around the
world.
The Spanish economy had long functioned on a two-tiered
basis. One part--including most notably the automobile
manufacturing and chemical industries--was technologically
advanced. An even larger part was accustomed to operating
inefficiently, protected from outside competition and
highly
fragmented into a host of small and medium-sized
enterprises that
accounted for as much as 90 percent of Spain's commerce
and
industry. It was in this second economic area that the
brunt of
accelerated change was being felt in the second half of
the
1980s, as many small, inefficient concerns faced the
effects of
free market competition.
Spain had been trying to join, or to align itself with,
the
EC since 1962. The barriers to Spanish membership were
primarily
political, and they reflected varying degrees of European
hostility to the Franco government rather than fear of
economic
competition. Among the members of the EC, only Italy and
France,
with similar agricultural export commodities, had
substantial
economic motives for opposing Spain's entry into the EC.
After long negotiations, which began in 1962, Spain and
the
EC signed a preferential trade agreement in June 1970. The
agreement called for mutual tariff reductions, ranging
from 25 to
60 percent, to be applied gradually over a six-year
period.
Quantitative restrictions for a number of items were eased
under
a special quota system.
At the end of the Franco era, little attention was
given to
Spain's urgent economic problems. Spaniards and their
postFrancoist governments tended to regard membership in the
EC as a
symbolic political act that obtained recognition for
Spain's
return to democracy, rather than as a portentous economic
policy
decision irretrievably linking Spain's economic future
with that
of Europe. The result was that, although Spain had applied
for
membership nearly a quarter of a century earlier, little
national
debate took place prior to the signing of the 1985
accession
agreement, which was concluded only after arduous
negotiations.
The accession agreement called for gradual integration
to be
carried out over a seven-year period, beginning on January
1,
1986. This adjustment transition involved a number of
significant
features. Customs duties were to be phased out as of March
1,
1988, and industrial tariffs on EC goods were to be phased
out on
a reciprocal basis until January 1, 1993. Additional
import
levies, most notably Spain's tax rebate on exports, were
to
disappear upon its entry into the EC. With some
exceptions,
import quotas were to be removed immediately. Quotas on
color
television sets and tractors were to be eliminated by the
end of
1988, and those for chemicals and textiles, by the close
of 1989.
In principle, EC-based companies were free to invest in
Spain. National assistance programs for industrial
projects were
subject to strict EC regulations, but special allowances
were
made for the steel industry, and Spain was allowed to keep
its 60
percent local content rule for automobile manufacturing
until the
end of 1989. Spain became subject to EC antitrust rules
immediately, however.
Spain was obliged to adhere to EC product and consumer
protection standards at once. Like other EC members, Spain
was
required to levy a value-added tax
(VAT--see Glossary),
which was
the EC's principal source of revenue. Spanish workers were
to be
able to circulate freely and seek employment in the EC by
1993.
Phased alignment with the EC's Common Agricultural
Policy
(CAP) was to be completed only in 1996. The Spanish widely
regarded this as a discriminatory action taken by EC
countries to
prevent imports of Spanish tomatoes, olive oil, and wines
until
as late a date as possible. Spain's fishing industry, the
largest
in Western Europe, received the right to fish in most EC
waters,
but its catch was sharply restricted until 1995.
Despite a favorable attitude toward the establishment
of an
eventual EC-wide monetary union in the late 1980s, the
government
was reluctant to commit the peseta to stabilization within
the
European Monetary System (EMS) because of its over-valued
exchange rate. In mid-1988 the Bank of Spain took what was
regarded as a symbolic step toward full membership in the
EMS by
formally accepting the 1979 Basel agreement. By the terms
of the
agreement, EC central banks made 20 percent of their gold
and
foreign currency reserves available to the European
Monetary
Cooperation Fund, against the equivalent in European
Currency Units
(ECUs--see Glossary).
The subject of the peseta's inclusion
in the ECUs, in all likelihood a prerequisite of Spain's
full
participation in the EMS's exchange-rate system, was to be
taken
up in September 1989, when the composition of the next ECU
would
be determined.
The Spanish government sought special treatment for the
peseta, the exchange rate of which was considered
inflated. Such
an arrangement would permit relatively wide margins of
fluctuation similar to those enjoyed by the Italian lira.
The
International Monetary Fund
(IMF--see Glossary) urged
Spain's
early membership in the EMS, and the pressure to reach a
decision
on this EMS question was bound to increase when Spain
assumed the
EC presidency during the first half of 1989.
In the late 1980s, some of the more painful aspects of
Spain's integration into the EC were cushioned by the
country's
expansionary economic boom, the continuing fall in oil
prices, a
sharp reduction in the exchange value of the United States
dollar, and the massive inflow of foreign investment, as
numerous
foreign multinational companies endeavored to participate
in
Spain's expanding consumer market. Observers expected that
Spain's industrial enterprises, especially the more
inefficient
and backward ones, would be absorbed by more modern
domestic and
foreign entrepreneurs or would cease operations. Over the
long
term, however, the Spanish economy was expected to
resemble that
of its more advanced EC counterparts much more closely by
the
year 2000 than it had in the past.
* * *
Although there is a growing literature in Spanish and
in
English on the Spanish economy during the Franco regime
(1939-
75), there is little available in English on the
post-Franco
period, with the notable exception of Ramon Tamames's
classic and
encyclopedic The Spanish Economy. Among the more
useful
books on the Franco period, in English, are Joseph
Harrison's
The Spanish Economy in the Twentieth Century and
Stanley
Payne's The Franco Regime, 1936-1975. For
information and
analysis of industrial, financial, and economic
developments in
more recent years, readers should consult the annual
country
surveys of the OECD and the quarterly Country Report:
Spain and the Country Profile: Spain, both
published
by the Economist Intelligence Unit. The annual reports of
the
Bank of Spain also are particularly useful. Current
statistical
data can be found in the Anuario Estadistica, a
yearbook
issued by the Spanish government's statistics bureau, the
Instituto Nacional de Estadistica. For up-to-date
information on
government and private-sector economic activities,
London's
Financial Times and the Economist provide
some of
the most comprehensive coverage and also publish survey
supplements on various aspects of Spanish economic and
financial
activities. (For further information and complete
citations,
see
Bibliography.)
Data as of December 1988
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