(20.2 percent); France, 1964 and 1968 (18.0 percent); Germany, 1964 and 1965 (21.2 percent); Italy, 1961 (23.4 percent); and the Netherlands, 1966 (24.7 percent). As can be seen from Tables 7 and 8, the change in the U.S. share was unevenly distributed among major commodity groups. There was a large increase in beverages and tobacco with smaller increases (in order of magnitude) recorded for food and live animals, miscellaneous manufactured articles, machinery and transport equipment, and manufactured goods classified chiefly by material. There were slight declines in the U.S. share of chemicals and inedible crude materials and large decreases for mineral fuels and lubricants and animal and vegetable fats and oils. U.S. exports to the EC, both in absolute and market-share terms, were aided-as they were in the case of EFTA though to a lesser extent-by the fact that in a number of agricultural and industrial items tariff preferences among EC members were of little importance given the unavailability of directly competitive items within the EC.

U.S.-EC Agricultural Trade

The EC's common agricultural policies have adversely affected exports of some U.S. products to the Community and to third country markets. These policies consist of supporting domestic prices at uneconomic levels without limitation on production while insulating the resulting domestic price structure from the world market through import levies and export subsidies. The result has been a dramatic increase in EC production of, internal trade in, and export to third countries of agricultural commodities.

U.S. agricultural exports to the Community have grown at a considerably slower rate than have commercial agricultural exports to other countries. 1960 represents a fairly representative year for U.S. agricultural exports and is before the EC's variable import levies were first imposed on July 30, 1962. In 1970, U.S. agricultural exports to the Community amounted to nearly $1.6 billion, an increase of about 40 percent over the 1960 figure. U.S. commercial agricultural exports to other countries amounted to nearly $4.7 billion in 1970, more than double the 1960 figure. In 1970, U.S. agricultural exports to the EC amounted to about a quarter of total U.S. commercial farm exports; in 1960, they were about a third.

The formation of the EC has resulted in a shift in trade patterns which favors intra-EC trade at the expense of imports from nonmember countries. Intra-EC trade as a percentage of total agricultural imports by the Community rose from 17.5 percent in 1960 to 36.4 percent in 1970. The U.S. share declined from 12.9 percent to 10.7 percent. In this period, intra-EC trade rose about 300 percent compared with a 57 percent rise in imports from the United States and a 44 percent increase from all other sources. In absolute terms, intra-EC

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trade rose over $4.5 billion compared with a $652 million increase in imports from the United States and $2.7 billion from all other sources. In view of the substantial increase in EC production in most areas of agriculture, it is evident that the extremely sharp rise in intra-EC trade has displaced imports from the United States and third countries.

Tables 9, 10 and 11 provide data on U.S. agricultural exports to the EC and the world.

The Community applies variable levies on its imports of grains, rice, poultry, eggs, beef, pork, dairy products, sugar, olive oil, and commodities processed from base products such as cereals. At the beginning of the 1971-72 marketing season, variable levies for key grain commodities were as follows: durum wheat about 75 percent ad valorem; other wheat 95 percent; corn nearly 70 percent; and barley (the major feed grain grown in the Community), 50 percent (as a percentage of lowest adjusted c.i.f. price).

EC variable levies held the rise in U.S. exports to the EC of affected commodities to a modest 25 percent from the beginning of the 1960's to 1970 compared with about a 60 percent gain for commodities not subject to variable levies. Increases in shipments of feedgrains contributed most to the modest gain in variable levy items over this period. The gain in exports of U.S. feedgrains would have been substantially larger if EC policies hadn't encouraged a sharp expansion in production of feed grains and surplus wheat eventually used as feed. U.S. exports of other variable levy items such as poultry, lard, rye, dairy products, and beef and veal fell off. Soybeans and soybean meal have been the major U.S. non-variable levy commodities shipped to the EC. Soybeans and soybean meal move readily into the Community under duty-free bindings obtained from the Community during the Dillon Round negotiations in 1960-1961. U.S. exports of these commodities to the Community in 1970 reached $629 million, an increase of $490 million from 1960 and $30 million more than the total increase for all U.S. agricultural exports to the Community.

U.S. agricultural exports in traditional markets other than the Community have been confronted with heavily subsidized EC competition. Examples of EC subsidized competition include: poultry in Austria, Greece, and Switzerland, feedgrains in the United Kingdom (from French denatured wheat), corn in Spain, lard in the United Kingdom, tomato products in Canada, and wheat flour in several Caribbean countries. In some instances the United States has had to resort to export subsidization itself to restore its share of markets lost to this subsidized competition.

• Grains (including wheat flour), poultry, and pork became subject to variable levies on July 30, 1962; rice, on September 1, 1964; and beef and dairy products, on November 1, 1964.

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Regional Trade Groups, Economic Growth, and Trade Diversion

Two (offsetting) factors may affect third country trade when a regional trade group such as the EC or EFTA is established. First, there may be a tendency for intra-area trade to displace imports from non-members. There is no clear evidence, however, except for some agricultural products subject to variable levies, on the effect which the growth in intra-EC and intra-EFTA trade has had on imports from the United States. The U.S. share of EFTA imports, including intra-trade, has in fact increased since 1958 while it has declined in the EC. According to one private study, the share of imports from non-members in apparent consumption of manufactures in the EC has risen since 1958. As previously indicated, the increase in intra-EC trade appears to have displaced domestic production rather than imports from non-members.

Second, the resulting larger and (partial) economic integration may accelerate the rate of economic growth in member states, which should (at least in the EC and EFTA) benefit U.S. exports since there is a close correlation between changes in Gross National Product and changes in imports. There is, however, no conclusive evidence which would indicate that economic integration has resulted in significantly accelerated rates of economic growth in the EC. Lawrence Krause's 1968 study for the Brookings Institution estimates the growth rate effect of economic integration on the EC member states (in the aggregate) at a plus .2 percent per annum. A more recent (1970) study by the British National Institute concludes that "calculations of . . . relative rates of growth still provide no substantial evidence that countries of the Community have become ... . faster growing by reason of their membership." Although EC growth rates (see Table 12) were considerably higher than those in the rest of Western Europe and North America in 1950-58, the gap was narrowed during 1958-69 as the aggregate EC growth rate was unchanged while that of other countries accelerated. Individual country growth rates were higher for smaller economic units (Belgium and the Netherlands) than for larger economic units (especially Germany). The difference, if any, attributable solely to economic integration cannot be measured with certainty and will vary from country to country. In the case of EFTA, the composite growth rate was one percent per annum higher after the formation of EFTA than before. It is difficult to ascertain whether the shift resulted from the establishment of EFTA.

7 European Economic Integration and the United States.

8 National Institute Economic Review, November 1970.

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