Western Europe's Economic Might Is Key To Stability in the East

By , Oxford.

WHEN the European Community's internal market was formally completed on the first day of the new year, yet another state in Eastern Europe fell apart. The death of Czechoslovakia is the latest signal that the EC, preoccupied with its own domestic policy, is badly botching its relations with the East. War in the Balkans has shown us the EC's military impotence. But the dissolution of Czechoslovakia is evidence of another problem: Even when the EC's economic power gives it the opportunity to make a real di fference, it chooses not to.

A common view within the EC is that primitive nationalism made the end of Czechoslovakia inevitable, and that there was little the Community could have done. The disaster has only reinforced the common prejudice that the EC's Eastern neighbors are still far from "Europe." On the contrary, Czechoslovakia has split not because its citizens are so different from those of the EC countries, but because they are so similar: They believe in democracy and vote on economics. Economic problems, exacerbated by EC p rotectionism, are the root cause of the dissolution of Czechoslovakia.

The EC seems not to appreciate that its extremely protectionist trade policy favored instability in Czechoslovakia. Czechoslovakia, like Poland and Hungary, signed "association agreements" with the EC in December of 1991. The agreements lay the heaviest tariffs on agriculture, steel, and textiles - the goods in which the Eastern countries enjoy a comparative advantage. In Slovakia, for example, the association agreement choked off the possibility of increased agricultural trade to the West just as Easter n trade links were broken and Slovakia's heavy industry lost its guaranteed markets.

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The ensuing depression opened the way for the election of Vladimir Meciar, a communist-turned-nationalist and the man most responsible for the breakup of Czechoslovakia, as Slovakia's prime minister. Mr. Meciar ran primarily on economic issues, and exit polls showed that he won most of his votes by his promise to stand up to Prague and slow reform. By contributing to the country's economic woes, the EC must share some of the blame for the end of a federation that has been democratic for the entirety of i ts independent history.

The end of Czechoslovakia is a tragedy that could foretell many others. The division of the country and its assets will likely turn out to be far more painful economically then expected, thus setting the stage for the next round of ethnic conflict in east-central Europe. Meciar is already blaming Slovakia's economic problems on its large Hungarian minority and tempting Hungary to intervene by his threats of ethnic discrimination.

The lesson: whether democracy favors reactionary nationalism or progressive pluralism depends largely on the economy. Citizens of the new democracies of Eastern Europe, whose incomes are about five times lower than in the EC, are living through a period of real depression that would test even West European democracies. As the dissolution of Czechoslovakia (and the election of communists in Lithuania and Romania) has shown, parties wait in the wings, ready to exploit economic suffering by promising to slo w the reforms which cause it. When that fails, such parties are inevitably thrown back to nationalism and to the search for scapegoats.

Preventive medicine is always easiest. The best tonic for the region's fragile democracies is a measure of economic prosperity, which depends upon the opening of EC markets. According to a comparison with League of Nations data, trade last year between Poland, Czechoslovakia, Hungary and Western Europe is now at only one-fifth of 1928 levels. There is great potential in the East for much higher export earnings, which can be turned into the investment needed to make reform work.

But 1928 is a warning as well. After the Great Depression began the following year, West Europeans protected their agriculture, helping lead the East to economic ruin and dependence upon Nazi Germany. This time round the East is suffering its depression alone, and the rich West is once again manning the protectionist walls. Loans are little more than a salve to the conscience if the EC refuses to buy the goods they finance.

The EC should offer to renegotiate the association agreements on the basis of substantially freer trade, especially in the admittedly touchy areas of agriculture, textiles, and steel, all aimed at halting the politics of bitterness in the East, not least in the new Slovakia. Such a move would renew the idea of a return to Europe, an idea which serves as a goal for the region's reformers. The example of the EC's prosperity is the light at the end of the tunnel for citizens who must bear the pain of reform . Such a change in EC policy, then, would not only ease this pain, it would restore the EC as an example of free markets.

Freer trade is also in the direct interest of the EC itself. On the economic side, freer trade with Poland, Hungary, Slovakia, and the Czech Republic will supply cheaper goods to the EC, enrich a new market of 60 million consumers, and prevent the East from becoming a long-term aid burden.

Politically, freer trade would help resolve one of the most divisive issues among EC members: whether the Community should be "deepened" (by moving closer to political union) or "broadened" (by admitting new members). The protectionist association agreements worsen this conflict by encouraging the East Europeans to press for full membership before they are ready, because membership has become the only path to the free trade they need. Freer trade would thus delay Eastern demands for membership, and foste r the prosperity that will make these countries more suitable applicants in the long run. That would give the EC time to deepen, and a real chance to broaden as well.

Whether the new democracies in Eastern Europe will be a problem or a opportunity depends largely on the approach the EC chooses. It is time for the EC to set aside its passivity and use its economic power to help the East Europeans help themselves.

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