In Discussion Paper No. 1114, Research Fellow André Sapir analyses the debate on the relationship between trade liberalization and the harmonization of social policies in the context of European integration. He first examines the debate that raged prior to the creation of the EEC and during its early years, showing that harmonization of social policies was not imposed in the 1960s and 1970s as a pre-condition for trade liberalization inside the Community. At that time, two elements were crucial in warding off pressures for harmonization: a high degree of homogeneity of economic and social conditions among the six original members of the EEC; and a rapid amelioration of living standards throughout the Community. The second part of the paper examines the demand for harmonizing social policies which have grown in the Community as well as actual measures since the mid-1970s. This new regime corresponds to greater heterogeneity and slower growth inside the Community. Renewed efforts to liberalize intra-EC trade in the mid-1980s also played a significant part in the shift towards harmonization.

Three conclusions emerge from the analysis of the 40-year long debate on the relationship between European integration and the harmonization of social policies. First, the nature and the tenets of the debate have remained almost constant throughout the entire period: the dividing line has always been between the `pessimists' and the `optimists'. Second, the Treaty of Rome clearly sided with the `optimists'. Lastly, in spite of the Social Charter and Maastricht, `social harmonization' remains a distant reality within the European Union.

Trade Liberalization and the Harmonization of Social Policies: Lessons From European Integration
André Sapir

Discussion Paper No. 1114, January 1995 (IT)