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Since the creation of the EU half a century ago, Europe has enjoyed the longest period of peace in its history.
EU enlargement has helped overcome the division of Europe contributing to peace, prosperity, and stability across the continent. A single market and a common currency conditions for companies and consumers.
27
Member States
Shared values: liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law. Largest economic body in the world A unique institution Member States voluntarily cede national sovereignty in many areas to carry out common policies and governance. Not a super-state to replace existing states, nor just an organization for international cooperation. Worlds largest & most open market for goods and commodities from developing countries.
490
million
30
55
In the aftermath of World War II, the aim was to secure peace among Europes victorious and vanquished nations and bring them together as equals, cooperating within shared institutions. Based on a plan by French statesman Jean Monnet and Foreign Minister Robert Schuman (to German Chancellor Adenauer) Six founding countries Belgium, the Federal Republic of Germany, France, Italy, Luxembourg and the Netherlands signed a treaty to run heavy industries (coal and steel) under common management to make war not only unthinkable but materially impossible
Jean Monnet and other leaders with the first European ingot of steel
Treaty of Rome
The six founding countries expanded cooperation to other economic sectors, creating the European Economic Community (EEC) or common market.
Signing of the Treaty of Rome
As a result, people, goods, services, and capital today move freely across the Union. Britain left out, formed EFTA instead EURATOM: shared nuclear energy research 1960s: Common Agricultural Policy
End of Cold War (1989-91) and Maastricht Treaty (1991/3) Three pillar structure (left): Euro & economic Policies, CFSP and Justice & Home Affairs Extension of Qualified Majority Voting, European citizenship
Supported & represented by ~25,000 Eurocrats in Brussels & the world, divided into departments called Directorates-General
Reduction to 2/3 planned in 2014 The Commission is supposed to represent the interests of the EU, not the member states. Thus they arent supposed to receive instructions from their home country European Commission President Jos Manuel Barroso Does no directly control taxation, policy or armed forces Occasional problems with corruption: The EU parliament can force the entire Commission to resign through a vote of no confidence. Almost did in 1999 with Santer Commission, which, instead, resigned en masse.
Implements them
Prepares EU Budget Acts with complete political independance Acts as guardian of treaties
Responds to inquiries from national courts about the meaning or validity of a particular piece of EU law
General Court (Court of First Instance before 2009) screens issues before they come to Court of Justice
The uro
The euro Europe's new single currency - represents the consolidation and culmination of European economic integration. Its introduction on January 1, 1999, marked the final phase of Economic and Monetary Union (EMU), a three-stage process that was launched in 1990 as EU member states prepared for the 1992 single market. With German reunification 1990, EMU presents opportunity to tie a unified Germany to the EU/EC by creating common bandwidth of currency fluctuations & deciding which countries can take part (by 1998) (Stage 1) - single currency instead of common currency! Jan 1, 1999 =launch of currency at $ 1.18 and ECB creation (Stage 2)
Egy pt
Sudan
Ethiopia
COMESA
My anmar
ASEAN
Malay sia
Malay sia
Indonesia
Canada
United States
Mexico
Venezuela Colombia
Peru Brazil
RTAs in America
NAFTA CARICOM CACM ANDEAN MERCOSUR (3) (13) (5) (5) (4)
Bolivia
Arg entina
1995
1999
Membership
EMU
Pay less for units consumed at old price; measure of this = area A.
A = Price drop times old consumption. Gain surplus on the new units consumed (those from c* to c); measure of this = area B. Total Consumer surplus: A+B
Get more for units sold at old price; measure of this = area A.
A = Price rise times old production. Gain surplus on the new units sold (those from q* to q). Measure of this = area B. B= sum of all new gaps between marginal cost and price.
demand
supply
pC+t pB+t pC pB imports before customs union imports after customs union q0 q1 q3 q4
tariff tariff
quantity
-/-
net gain; possible loss increase consumer surplus decrease government revenue
supply
Trade diversion
pB+t pC+t pB pC imports before customs union imports after customs union q0 q1 q3 q4
tariff tariff
quantity
The smaller the difference between the price which emerges from the customs union and the price which could be had from importing from the most efficient producer who by definition is a 3rd country.
K moves easier than L (transport and cultural costs). So not a full equalization
Factor mobility can also lead to depressed areas within the CU
The ECJ ruled that Germany could not ban the importing of Cassis de Dijon on the grounds that it did not conform to German rules governing the sale of alcohol
It meant mutual recognition of each others rules and regulations 1979: the introduction of the European Monetary System (EMS): link currencies to prevent large fluctations among exchange rates early 1980s Lack of global competitiveness Lack of progress towards higher level of integration 1985 - The Commissions White Paper Completing the Internal Market contained the legislative blueprint for completing the single market by end 1992
Article 13:
The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provision of this Treaty
Restructuring effect: Reorganisation of industrial sectors and individual companies as a result of greater competition
Still: Large variation in average prices: for consumer goods 15.2% around mean
Note: (a) low estimate (b) high estimate based on Cecchini (1988) and Emerson (1988)
Prices (%)
- 6.1
Employment
(millions) + 1.8
External Balance
(%) of GDP + 1.0
Time scale 6 + years from full implementation of programme (1.1.93) Estimates subject to a margin of error +/- 30%
Upper limit
Lower limit
Belgium/Luxembourg Slovakia Czech Republic Intra-EU trade and openness Netherlands Estonia Degree of asymmetry of shocks Hungary Slovenia A. Degree of Openness: Ireland Large differences in openness of EU countries with Lithuania Austria the rest of the Union Latvia For countries with a small degree of openness Denmark (UK and Greece), it is less clear that they belong Poland to an optimal currency area with the rest of the Germany EU Sweden Malta Cost-benefit analysis is likely to show net benefits of being in EMU for Benelux, and small Finland Portugal central European countries France Italy Spain United Kingdom Cyprus Greece
66,7 58,9 54,1 51,1 45,6 43,7 37,3 34,7 30,1 28,1 24,6 23,1 23,1 22,0 21,2 21,0 19,1 16,6 13,7 12,2 12,0 9,8 6,1 4,0
not to exceed by more than 1.5 per cent the average of the three lowest rates among EU countries.
2. Long-term interest rate: not to exceed by more than 2 per cent the average interest rate in the three lowest-inflation countries. 3. ERM membership: at least two years in ERM without being forced to devalue. 4. Budget deficit: deficit less than 3 per cent of GDP. 5. Public debt: debt less than 60 per cent of GDP (or diminishing and approaching 60% at satisfactory pace) Note: Fulfilment of criteria was observed on 1997 performance for decision in 1998. The convergence criteria give little regard to standard OCA arguments
Problem No. 1:
a few years of budgetary discipline do not guarantee long-term discipline excessive deficit procedure once in euro area
If Articles 101 and 102 are violated, a firm may end up paying fines amounting up to 10% of its annual turnover. The Commission imposed fines for anticompetitive behavior totaling almost $2 billion