Economic Integration
Economic Integration
Rotunda of Galerius, Thessaloniki
European Community's homepage is Europa .
Londinium was established as a town by the Romans seven          years after the invasion (AD 43 under Emperor Claudius) Julius Caesar          found no gold or silver in his failed invasions of Britain in 55 and 54          BC.
After the Gallic war (Battle of Alesia) ended in 52 BC,          Romans built roads to Lutetia (Paris).
Greece was conquered by the Romans in 146 BC, but Greek          culture and its language dominated the Mediterranean world. Per capita          incomes of the regions not conquered by the Romans (Russia, Arabia) are          much lower than others today.
 How large is EU?
In 2005, 10 countries of Central and Eastern Europe          joined.
EU 27 has a population of 502 million people and its territory          stretches from Crete to the arctic circle. (NAFTA has a population of          470 million in 2013.)
GDP of EU is about €16 trillion (as of 2015), slightly          less than US ($18 trillion), due to the falling euro in recent years.          Per capita GDP of EU is about $34,000. ($53,000, US)
Future: Eventually, the EU could grow to include some          Islamic countries such as Turkey.
Croatia joined EU on July 1, 2013. Population = 4 million.
Brexit: UK decided to exit from EU in a referendum in          June 2016. As a result, British Pound fell to the lowest level in 31 years.
 History
The Allies divided up Berlin and Germany in June 1945          before Japan surrendered.
Winston Churchill
"We must build a kind of United States of Europe.          In this way only will hundreds of millions of toilers be able to regain          the simple joys and hopes which make life worth living." (September          19, 1946), University of Zurich
University of Zurich
 Marshall Plan (1945-51). Goals: (i) rebuild Europe,        (ii) remove trade barriers.
WWII may have been inevitable. The German people suffered          much as they were forced to make raparation payments, which caused hyperinflation          between June 1921 and Jan 1924.
Postwar European economic cooperation began with the establishment          of the OEEC (Organization for European Economic Cooperation) in 1948 to          allocate the          Marshall Plan aid (named after George Marshall who was the Secretary          of State, US). Initially $16.5 billion (by 1950, it rose to $44 billion).
Extra aids outside MP: Later Asian countries received $5.9 billion. Total          grant to the world rose to $44 billion (1945-1953).
With OEEC, quotas and payments restrictions were dismantled          among member countries.
The MP (a) allowed Europeans to purchase capital goods          and raw materials to start up industries, (b) helped Europeans to acquire          more reserves ($ and Gold), (c) mandated free trade throughout the region.          This helped the transformation of ECSC into a free trade area.
 ECSC, 1952
The Treaty of Paris established the ECSC (European Coal          and Steel Community) in 1952 which created a common market for coal, steel          and iron ore, covering France, Italy, West Germany, Belgium, Netherlands,          Luxembourg.
EEC and Euratom, 1957
The Treaty of Rome (1957) establishing the EEC was signed        by the same countries and ratified. The treaty set the time table for a        progressive development of a customs union. Also a separate Euratom treaty        was signed to create European Atomic Energy Community.
EFTA, 1960
EFTA (European Free Trade Association) was formed in 1960 by UK, the three Scandinavian countries (Norway, Sweden and Denmark),          Switzerland, Austria and Portugal.
map of Europe, courtesy of Nations          Online
European Community, 1967
  Fusion of the three communities        (EEC, Euratom, ECSC) into a single European Community was established in        1967.
 
 Great Britain, Denmark and        Ireland entered in 1973, Greece (1981), Spain and Portugal (1986).
European Union, 1992
  signed the Treaty on European        Union (1992). a.k.a. Maastricht Treaty. Common Foreign and Security Policy        (CFSP) and Justice and Home Affairs were included. Together with the European        Community, they form three pillars of EU.
 
Austria, Finland and Sweden joined the European Union (1995).        Norway declined.
euro, 2002
 On January 1, 2002, euro is        circulated in 11 countries.
 Eastern and Central Europe
 On May 1, 2004, 10 additional members join the EU        (The Czech Republic, Estonia, Latvia, Lithuania, Cyprus, Malta, Hungary,        Poland, Slovania and Slovakia
 
Similarly, Japan made a similar attempt in Asia in the          1940s.
Hitler's idea of integration
Imperial War Museum, London
Frank Haushofer (1869 - 1946) advances the theory of          geopolitics, "Lebensraum," (living space) that a race has the          right conquer neighboring regions. (H thought this justified Germany's          invasion of Russia.)
Hitler promised to banish unemployment in four years.          The number of unemployed was cut from 6 million at the beginning of 1933          (when Hitler took power) to 1 million by 1936. This was accomplished by          public works (autobahnen: highways) and rearmament.
Haushofer introduces the idea of axis, and persuades Hitler          to form the axis with Japan.
2. Free Trade Agreement
(i) In the 21st century, military conquests are no longer          feasible, due to the presence of the Nuclear Club.
(ii) Free trade agreements are the only possible means          to achieve economic integration in the modern world.
Gradually, counries become more interconnected through          free trade, eventually becoming an economic union.
Examples: NAFTA, European Union.
 lower tariffs on trade among member countries. e.g. British Commonwealth established tariff preference        scheme in 1932.
 First Stage: FTA
FTA (Free Trade Area): is a group of countries without          any trade restrictions within the area, but each member country retains          its own tariff and quota system on trade with third countries (EFTA).
Industrial FTA: EFTA (exclude agriculture)
Full FTA  
Problem: Nonmembers take advantage of different trade          policies among members. Member countries with lower tariffs get more trade.
Second Stage: Customs Union
CU = FTA + common tariffs and quotas.
CU (Customs Union) is created when a group of countries          removes all restrictions on mutual trade and also adopt a common system          of tariffs and quotas with respect to trade with third countries (EEC          became one in 1968).  
FTA →CU: maybe slow but inevitable (otherwise, nonmembers          take advantage of differing tarffs among member countries)
Problem:
Member countries with low wages or taxes attract          more foreign direct investment (FDI)
.
Third Stage: Common Market
Common Market: A CU becomes a common market with the          removal of all restrictions on the movement of factors.
CM = CU + free factor mobility.
(EEC became a common market in 1992).
CU →Common Market (slow. Common heritage, language          and culture will expedite this process.)
FPE also facilitates the formation of a common market.          This transition to a common market is desirable in order to prevent nonmember          countries from taking advantage of different wages and taxes. Nonmember          countries invest in the countries where taxes and wages are lowest. E.g.,          Japan builds TV factories in Mexico, rather than in the US.
Problem: (1) More difficult to achieve than previous forms          of integration. Common languages, culture and business practices facilitate          the formation of a common market.
(2) Income Tax Rates still differ. Countries with lower          income tax rate get more FDI.
Russia's tax rate = 13% (must stay there 183 days each year), France's          income tax rate = 75% for income above 1M euro.
3' Monetary Union: adopts a single currency together          with a single central bank.  
Fourth Stage: Economic Union
supernational authorities coordinate economic policies.
Economic Union = CM + a single currency, a central bank,          a unified fiscal authority (it should impose limits on sovereign debts.          Philip IV, the Iron King, found it easier to persecute Knights Templar          than to pay the debt, 1307 AD)
E.g., US, Belgium + Luxembourg, 1921.
CM → Economic Union (relatively easy, because of          economic gains from a single currency)
Problem: There should be a sovereign debt limit on each nationial government. When several countries fail to pay          back their debts in full (e.g., Greece, Italy, Spain and Portugal), this          situation jeopardizes the regional currency (i.e., euro in the EU).
political union
(Single constitution. No diplomatic rights for individual          states.)
 Remark
At any point in these stages, an FTA or a CU could expand        its membership. It remains to be seen if two FTAs or CUs will form one large        group. If the current continues, the world will consist of several large        FTAs or CUs. Given enough time, however, they will further integrate to        form large FTAs or CUs, until they form one world FTA.
 
its staff = 15,000
Must be independent of their national governments.
It now has a President. Other Commissioners act like the Secretaries in the US. Each commissoner specializes          in one area (e.g., agriculture and reral development)
Some suggest the name should be changed to European Government. The council appoints Commissioners.
 Language
must reach all of the citizens of the union in their own        languages.
1/5 of the work is in the translation and interpretation services.
 Function
The function of the European Commission roughly corresponds          to one half of US Congress.
The Commission's Role
It initiates          proposals for legislation--3 objectives European interest = what          is best for the Union as a whole, rather than for individual sectors or          countries.
Consultation =          consult as widely as is necessary
Subsidiarity =          the Union takes action only if it becomes more effective than if left          to individual member states.
 
Guardian of the Treaty of Rome
(i) ensures that Union legislation is correctly applied by          member states.
(ii) The commission can fine individuals, firms, and organizations          for infringing the Treaty law. One group of firms was fined ECU 248 million.
Manager and Negotiator of Union policies
(i) manages EC's finances and budgets (about €140 billion in 2010)
(ii) negotiate trade and cooperation agreements with other          countries or group of countries.
 Accountability
The full Commission has to be approved by the European          Parliament. Commission represents EC, not member countries. Commission          reports to Parliament annually.
It is not clear who makes executive decisions.
Needs to be restructured into upper and lower houses          in lieu of Senate and the House of Representatives.
 Remark
European Council comprises heads of states        + own President + President of the European Commission.
 aka Consilium/council
Each minister represents his/her own national          government (28 ministers).
In this sense, United Nations, as currently organized,          is like EU's council of ministers.
(In the future, if it is to be properly run, United Nations          should be supported by World Court and World Parliament. Without these          two organizations, there are no checks and balance in the United Nations,          which was established as the political complement to GATT and IMF after          WWII.)  
Presidency: from July 1, 1995, rotates every six months          in a sequence (not alphabetically). arrange and preside over all meetings.
 
Meeting places = meeting alternates in three cities (Strassbourg,          Luxembourg, Brussels)
Turnout in 2009 was about 43%.
 Legislative Power
European Parliament, Belgium
Originally, the Treaty of Rome of 1957 gave the Parliament          only a consulting role. But its role has gradually expanded. Today the          legislative power is equally shared by the Council and the Parliament.
consultation procedure: requires an opinion from the Parliament          before a proposal can be adopted.
cooperation procedure:          allows Parliament to improve a proposed legislation by amendment.
co-decision procedure:          shares decision making power equally between the Parliament and the Council.
Budgetary power
The European Parliament approvess the Union's budget          each year. It sometimes rejects a budget, when its wishes are not adequately          respected. It also monitors spending.
draws members from individual countries.
 
Parliament has the right to remove the Commission, (which        requires 2/3 majority).
 
Advocates General provide the judges with impartial opinion          on assigned cases.
They are independent of member states.
Grand Chamber of 15 judges (very rare now),
or Chamber of 3 or 5 judges, depending on cases.
 
 The judges elect the President of the Court (3 years).
 Duty
The law correctly interprets Treaties of the European          Union (Maastricht treaty). Court of Justice worked alone until 1988, now          focuses on the task of interpreting Community law.
e.g., Union law supersedes national          laws. (e.g., Van Gend en Loos case)
Court of First Instance (with 28 judges)
aka General Court.
Created in 1988.  Its work is limited to the competition          rules and to hearing cases against the community          institutions. It also has its President.
Procedure
direct actions are brought          by the Commission, other Community institutions or by a member state. Cases brought by individuals or companies challenging the legality of a Community          act are taken to the Court of First Instance.
preliminary rulings by courts in the member states. Court of Justice is          not a court of appeal. National courts decide the case while observing          the principles of Community law.
After the hearing, the advocate          general delivers an independent opinion in open court. But it is          not binding, and is not always followed by the Court.
The judges arrive at their view in closed discussion,          and then delivers their judgment in open court.
The Court has the sole power to decide whether the actions          of the Commissions and Council are constitutional. The court's judgments          are binding throughout the community upon all individuals, business          firms, national governments and other Community institutions.
For more information, see Europa document on Institutions          of the European Union .This page provides direct links to various institutions          of the European Union.