ABSTRACT
The first attempt to liberalize French trade within the OEEC failed. In the face of an acute payments crisis in the EPU the government took the decision in February 1952 to reimpose all the quantitative restrictions on imports which it had removed between 1949 and 1951 and to extend to all markets the export subsidies which had been applied to the North American market in 1949. The payments crisis seemed to vindicate those who had been opposed to trade liberalization at that time, or indeed at any time. Between 1952 and 1957, when the government took the unexpected and highly controversial decision to sign the Treaty of Rome setting up a common market between France, the Federal Republic of Germany, Italy and the Benelux countries, France remained one of the most protected economies in the OEEC. In spite of the protection France and the whole Franc Area had a deficit on current account for much of this period. Until the Geneva Agreement which formally ended French involvement in the war in Indochina in 1954 American aid, both direct and in the form of offshore purchases, helped France to finance much of this deficit without having recourse to domestic deflation. As a result the economy experienced an unusual period of inflation-free growth between 1953 and 1956. The near cessation of this American aid together with a disastrous harvest in 1956 and an escalation of the conflict in Algeria brought this period of relative stability to an end. In elections in 1956 the centre-right coalition, which had been in power since 1951, was replaced by one dominated by the socialist party. It was this government under Prime Minister Guy Mollet which signed the Treaty of Rome.
