Interesting Market History

January 1958: European Economic Community Founded

The European Economic Community (EEC) helped unite a continent—and fostered Britain’s “semi-detached” relationship with the rest of Europe.

On January 1, 1958, Belgium, France, Italy, Luxembourg, the Netherlands and West Germany formed the European Economic Community (EEC). This would pave the way for today’s European Union—and would nurture Britain’s on-again, off-again relationship with the rest of Europe.

The EEC’s main intent: Use trade and economic collaboration to prevent a renewed European conflict following World War II. The theory was that countries united by trade were less likely to be divided by war. To that end, the EEC created common price levels and removed tariffs within the group.

Britain, however, declined to join the EEC at inception. Reporters asked former Prime Minister Clement Attlee in 1957 whether Britain was part of Europe or not. “We’re semi-detached,” Attlee replied—a clairvoyant statement that would epitomize Britain’s relationship with Europe for the next sixty years.

“We’re semi-detached.”
Former Prime Minister Clement Attlee, on Britain’s relationship with Europe in 1957.

Source: Wikimedia Commons

Britain preferred trade with its Commonwealth, a network of mostly former British colonies and protectorates. The common language, legal heritage and governmental structures made Commonwealth ties seemingly more valuable than those with continental Europe.

Trade surged among the six founding EEC nations, quadrupling between 1958 and 1968. Meanwhile, Britain’s Commonwealth trade became increasingly inadequate as the economic links with its former colonies eroded. So an economically stagnant Britain twice applied for EEC membership in the 1960s, vetoed by France both times.

Britain eventually tied the knot with Europe, securing EEC membership in January 1973. The honeymoon lasted only two years. In 1975, Britain’s Labour Party drew up a referendum on EEC membership. But Britons voted to remain by a two-thirds majority.

Formally created in 1993, the European Union first absorbed the EEC and eventually dissolved it in 2009. Even as part of the EU, Britain found ways to stay semi-detached, opting out of several key EU treaty provisions such as the common currency, the free-travel zone and certain criminal justice provisions.

By 2016, semi-detached wasn’t detached enough for many Britons. A new referendum introduced the world to the term “Brexit,” which will likely culminate—on January 31, 2020—with Britain’s formal departure from the EU. This will kick off a transitionary period to negotiate new trade arrangements with the EU.