The integration imperative

1. The integration imperative Theory and practice

2. What is economic integration?

3. Types of integration – Tinbergen • Negative integration: • Removal of discriminatory restrictions on movement across borders such as tariffs and quotas • Positive integration: • Modification of existing policies and institutions, often by common policies, to enable transnational markets to function more effectively

4. Integration combines parts to make a whole • Economic integration based on removal of barriers that limit flow of goods, services, capital, labour and communication across borders • Integration is a process

5. Stages of integration: free trade area • Not followed by EU • Tariff and quota free trade among member states • No positive integration • Persistence of non-tariff barriers between states • Retention of national tariffs against rest of the world • Problems of trade deflection (goods from third countries enter via member state with lowest tariff) overcome by rules of origin

6. Stages of integration: customs union • EU built customs union by 1968 • No tariff quotas among member states • Common external tariff overcomes trade deflection problems • Some positive integration • Some common policies, especially regarding trade with third countries

7. Stages of integration: common/single/internal market • Launched in mid-1980s in Europe with view to completion by 1992 – but an ongoing process • Customs union but enhanced by free movement of factors of production – goods, services, capital labour • More positive integration • Fuller development of common policies such as competition and regional policies

8. Stages of integration: economic and monetary union • Partially achieved in Europe • Enhanced economic co-ordination and fiscal transfers • More intense positive integration • Removal of remaining obstacles to factor mobility • Limits on independence of member states • Single currency and monetary policy • More centralised supranational power, perhaps in a federal context

9. Business opportunities and challenges from integration • Greater intensity of domestic competition • More opportunities in foreign markets • More diverse sourcing possible • Stimulus to product innovation • Restructuring of production and distribution • Cost and price pressure • Economies of scale • Specialisation • Greater price transparency • Rationalisation of product lines • Networking opportunities • Financing opportunities through integrated financial markets

10. The origins, evolution and objectives of the European Union

11. Concepts/ideas • Federalism • a form of government in which power is divided between central and regional authorities – e.g. US federal government and states; Germany and its länder • concerned with the process of achieving political union within a Federal structure

12. Concepts/ideas • Functionalism The linking of authority to a specific activity – transport, competition regulation – thereby breaking the link between authority and national boundaries • Neo-functionalism Functional and political spillover

13. Immediate post-1945: several Europes • Central and Eastern Europe – Soviet satellites until 1989–91 • Western Europe • EEC → EU (expanding) • EFTA (contracting) • The rest? CONVERGENCE?

14. EEC → EU:a growing membership (1) • 1957: France, Germany, Italy, Holland, Belgium, Luxembourg • 1973: UK, Denmark, Irish Republic • 1981: Greece • 1986: Spain, Portugal • 1995: Finland, Austria and Sweden

15. EEC → EU:a growing membership (2) • 2004: Cyprus, Estonia, Lithuania, Hungary, Latvia, Malta, Poland, Slovakia, Slovenia, Czech Republic • 2007: Bulgaria, Romania • 2013: Croatia • In the wings? Albania, Turkey, FYROM, Serbia, Montenegro • Iceland suspended negotiations

16. Why did European co-operation flourish after 1945? • To prevent recurrence of previous mistakes • to open economies to trade and co-operation • protectionism of 1920s and 1930s regarded as root cause of instability → growth of pre-war Fascism • to include a defeated Germany in post-war reconstruction • reconciliation of France and Germany regarded as essential pre-requisite of peace in Western Europe • to avoid excesses of nationalism and the nation state system

17. (continued) • Economicreconstruction • To rectify economic dislocation caused by wartime destruction • Political/security reasons • i.e. the emergence of two superpowers with competing political and economic ideologies • to provide a bulwark against Communism Conclusion: Western security and defence should be based on economic reconstruction and well-being European integration was motivated by economic, political and security reasons

18. Measures to promote post-war integration • Intergovernmental organisations that did not challenge national sovereignty • 1948 Council of Europe • 1948 OEEC (now OECD) • Created to administer Marshall Aid (US financial assistance to aid economic reconstruction of post-war Europe) • 1948 NATO • Provided security framework within which economic integration could flourish

19. European coal and steel community • 1951 – economic organisation with strong political undertones • France, Germany, Italy and BENELUX (customs union founded in 1948) • Franco-German reconciliation • National sovereignty sacrificed to achieve common goals: • common market for coal and steel • envisaged as step one of neo-functionalist spillover • Creation of supra-national institutions such as High Authority and Court of Justice

20. Towards the European Economic Community (EEC) • 1955 Messina Conference • 1956 Spaak Report proposes • Common market • Nuclear energy community • 1957 Treaty of Rome (Signatories: France, Germany, Italy and BENELUX) 3 communities: • ECSC • European Economic Community (EEC) • European Atomic Energy Community (EURATOM)

21. The UK position • Participated in Spaak Committee until 1955 BUT • Wanted a loose free trade area • Withdraws after the ‘6’ indicate they want closer ties • RESULT: European Free Trade Area (EFTA) created in 1960

22. 1957 Treaty of Rome • A strong economic orientation, stressing economic integration based on economic liberalism (not the CAP) • Aims: • establish a common market – to stimulate internal free trade • ‘ever closer union’ • economic and social progress • constant improvement of living and working conditions • No agreement on political objectives

23. First two decades • 1960s • Failed British applications • ‘Empty chair’ crisis and Luxembourg compromise • Customs union complete • Relaunch of integration • 1970s • First enlargement • Limited successes e.g. ERDF • Few signs of further integration • First attempt at single currency failed

24. Early 1980s – Eurosclerosis • Integration paralysis – budget and CAP dominant issues • Concern about Europe’s competitiveness • Above plus international economic crisis → pressure for change • Single market campaign overcame integration paralysis • start of policy activism • 1985 Single Market White Paper • 1987 Single European Act – institutional reform

25. The Single European market • 1985 White Paper with nearly 300 measures to establish the SEM • 1986 Portugal and Spain become new members • 1987 Single European Act – first Treaty reform • Institutional reform to facilitate passage of SEM measures • SEM • removed technical, physical and fiscal barriers to trade • EC policy into new areas – e.g. environment, R&D • Existing policies strengthened to support SEM – e.g. competition policy

26. Controversy • Late 1980s – re-emergence of EMU idea • 1993 Maastricht Treaty • foreign and security and justice and home affairs pillars • institutional reform and subsidiarity • timetable and conditions for EMU • Union citizenship • extension of competences • opt-outs • Ratification problems

27. Maastricht problems • Very ambitious – ahead of public opinion • Fears of loss of national sovereignty and identity and rise of European super-state • Complex, technocratic and incomprehensible • End of Cold War and CEE transformation • German unification • Timing – recession • Currency crises

28. Post-Maastricht • Lower profile for integration but some successes • 1995 enlargement – Austria, Finland, Sweden • Increasing preparations for Eastern enlargement • May 1, 1999 – Amsterdam Treaty in force • 1999 – decision to proceed with EMU

29. Amsterdam Treaty • Employment Chapter • Anti-discrimination • Schengen into Treaty • Social Chapter into Treaty • Some strengthening of European Parliament • Some disappointments on institutional reform

30. Treaty of Nice – in force 2007 • Expressly to prepare for enlargement • Number of Commissioners • Weighting of votes in Council • National veto • Charter of Fundamental Rights • ‘Flexible integration’ – at least 8 countries able to co-operate more closely • Ratification delayed by ‘no’ in Irish referendum – overturned in 2nd vote

31. Post-Nice • Dissatisfaction with limited achievements of Amsterdam and Nice → convention on the Future of Europe and eventually to the Draft Constitutional Treaty • Fierce opposition – fears of ‘European Super State’ • 2005: Constitution fell after ‘no’ votes in French and Dutch referenda • Back to the drawing board

32. Lisbon Treaty – in force 2009 • Retained many features of constitution but not referred to as constitution • Less fierce opposition and, despite Irish ‘no’ (overturned in 2nd referendum), ratification relatively trouble-free

33. Main features of Lisbon Treaty • Clarifies exclusive competences of EU; competences shared with member states and supporting competences • Charter of Fundamental Rights given legal force • EU citizens given rights to petition the Commission • Extension of EP powers and national parliaments given formal powers to challenge EU legislative proposals • Member states given rights to negotiate exit from EU • New voting procedures in the Council • Posts of President of the Council and the High Representative for Foreign Affairs and Security Policy created

34. Challenges for the EU? • The survival of EMU – response to crises? • More enlargement – especially Turkish challenge • International challenges and obligations – economic and political • Popular support declining – evidence for this in many EU member states • Diverging visions of Europe