1. European Union | |
The Roman world |
European Community's homepage is Europa. Many settlements originated in Europe as Roman garrisons. For example, Londinium was established as a settlement by the Romans after the invasion (AD 47 under Emperor Claudius) Julius Caesar had found no gold or silver in his failed invasions of Britain in 55 and 54 BC. After the Gallic wars (Battle of Alesia) ended in 52 BC, Romans built roads to Lutetia (Paris). Literally, "All roads lead to Rome." (50,000 miles of stone-paved roads) Greece was conquered by the Romans in 146 BC, but the Greek culture and its language dominated the Mediterranean world. In the early stage of development, military conquests resulted in economic integration, i.e., a large free trade area. Some tariffs existed; vicesima (1/20 = 5%), was borrowed from Greece. Today, such military conquests would be disastrous. Per capita incomes of the regions not conquered by the Romans (e.g., Russia, Arabia) are much lower than others. In Russia, Prince Vladimir of Kiev was baptized in 988. Around 860 AD, two brothers, Cyril and Methodius, were sent to the Slavs as missionaries. Subsequently, their disciples developed the Cyrillic alphabet. |
How large is the EU? | In 2005, 10 countries of Central and Eastern Europe joined. EU 27 has a population of 477 million people and its territory stretches from Crete to the arctic circle. (USMCA has a population of 470 million in 2013.) UK = 67 million GDP of EU is about €18.8 trillion (2018), slightly less than US ($18 trillion), due to the falling euro in recent years. Per capita GDP of EU and the US are about $39,000 and $70,000 in 2021) Future: Eventually, the EU could grow to include some Muslim 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, the British Pound fell to the lowest level in 31 years. |
History
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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
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Marshall Plan (1945-51). Goals: (i) rebuild Europe, (ii) remove trade barriers. |
WWII may have been inevitable. The German people had to pay 130 billion gold marks (US $33 billion) but printed Reichmarks, as they were forced to make raparation payments, which caused the hyperinflation between Jan 1921 and November 1923. (RM/$ = 65 marks rose to 1 trillion marks.) 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, the MP was $13.5 billion, most of which was a grant. It was largely replaced by the Mutual Security Act (1951-1961) with annual authorizations = $7.5 billion = 5% of GDP. Extra aids outside MP: Later Asian countries received $5.9 billion. Total grant to the world rose to $44 billion (1945-1953). This should be recorded to our credit indicating US willingness to help other nations. With OEEC, quotas and payments restrictions were dismantled among member countries. The MP (a) allowed Europeans to purchase capital goods and raw materials to start industries, (b) helped Europeans to acquire more reserves ($ and Gold), (c) mandated free trade throughout Europe. 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. |
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 |
On January 1, 2007, Bulgaria and Romania joined the union. On July 1, 2013, Croatia became the 28th member. (pop = 4.4 million) Two major reasons for Brexit, June 2016: Unemployment rate is higher in Southern Europe (20%), reduced Sovereignty, Immigrants. |
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Reaction to the impasse of WTO | Doha round failed in November 2011. Dispute settlement mechanism is well established. Doha Round is a failure. US has not been a leader. Developing countries should play a leading role in the fugure. (Bhagwati) The focus is now on regional agreements. Biden is becoming a nationalist, promoting Trump's America First policy. Financial crisis in Greece, followed by similar debt problems in other European countries (PIIGS). Transatlantic Trade and Investment Partnership (TTIP, under negotiation)
also known as Transatlantic Free Trade Area (TAFTA), exchange of trade
and investment may amount to $.5 trillion (EU→ US and US → EU).
Under negotiation. |
2. Methods of Economic Integration | |
1. Military Conquest Medallion of Alexander the Great |
(i) Alexander the Great started the first European integration. As a result, the Mediterranean world was integrated to form a single economic area, and the Greek become the universal language adopted by traders. Military conquests unwittingly resulted in free trade. Economic integration does not occur until transportation and communication systems are well developed. In the East, at the end of the Warring States period (475 - 221 BC), Qin united these kingdoms, but the Qin Empire lasted only 15 years (221-206 BC). The Han Chinese established the Han Empire in 206 BC. In the West, King Philip II of Macedonia began to conquer the neighboring city states, uniting Greece in 358 BC. Alexander the Great finished the work, conquering most states in the Mediterranean world before his death in 323 BC. However, because of his premature death, actual integration of the Meditrannean world had to wait until the Romans reconquered it. The Romans built roads and knew how to govern the people, but the Europeans spoke Greek throughout the Roman Empire. (ii) Romans also followed the same tactic. (iii) In the 20th century, Benito Mussolini tried in vain to create a new empire in Europe. (e.g., Mare Nostra = Our Sea = Mediterranean Sea) Similarly, Japan made a similar attempt in Asia in the 1940s. |
Hitler's idea of integration
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German hyperinflation: 64RM/$ in January 1921 → 4.2 trillion ReichMark/$ in November 1923 (Prices doubled each month). A German worker used a wheelbarrow to cart off billions of marks. He was robbed; the thieves stole the wheelbarrow but left the piles of cash. Frank Haushofer (1869 - 1946) advances the theory of geopolitics, "Lebensraum," (living space) that a race has the right to conquer neighboring regions. (H thought this justified Germany's invasion of Russia.) In the election campaign in 1933, 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. |
2. Free Trade Agreement
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(i) In the 21st century, military conquests are no longer feasible, due to the presence of the Nuclear Club. (ii) FTAs are the only means to achieve economic integration in the modern world. Gradually, countries become more interconnected through free trade, eventually becoming an economic union. Examples: NAFTA, European Union. |
3. Stages of International Economic Integration (Choi) | |
Autarky: before integration | |
(0) Preferential Trade Agreements | lower tariffs on trade among member countries. e.g. British Commonwealth established tariff preference scheme in 1932. |
First Stage: Free Trade Agreement |
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. Morality of CM may decline. Legal contracts are more frequently broken. European civilization is based on private ownership and contracts. |
3' Monetary Union: adopts a single currency together with a single central bank. |
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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, October 13, 1307 AD) E.g., US, Belgium + Luxembourg, 1921. CM → Economic Union (relatively easy, because of economic gains from a single currency)
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political union (A Single constitution. No diplomatic rights for individual states.) |
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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 trend continues, the world will consist of several large FTAs or CUs. Given enough time, however, they might further integrate to form larger FTAs or CUs, until they include all countries. |
4. Institutions of EU | |
US vs EU | US government consists of three branches: (trias politica) legistilative, executive and judicial branches. In principle, they share equal power and provide checks and balance. In contrast, the EU has four branches. The legislative and executive powers are split among three branches of the EU, excluding the European Court. As more members join, institutions of the European Court will inevitably evolve. Western Europe learned democracy from the Greeks. Pericles established democracy in Athens (died in 429 BC), but Amerian women gained the voting right only in the 1920s. The governing institutions were modeled after the Roman model. |
European Union | 1. European Commission 2. Council of Ministers 3. European Parliament 4. Court of Justice The idea of trias politica (Charles Montesquieu, 1748, a French judge) comes from Roman laws and the British constitutional system (monarch, parliaments, courts). The tripartite system (consuls, senate, and assemblies) has evolved from the Roman system. |
7. European Parliament | |
Members |
Current MEPs(Members of the European Parliament) = 766 seats elected every 5 years. Germany = 99, .... Luxembourg = 6. Meeting places = meeting alternates in three cities (Strassbourg, Luxembourg, Brussels) Turnout in 2009 was about 43%. |
Legislative Power |
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. A Rejection requires an absolute majority of the entire membership. co-decision procedure: shares decision making power equally between the Parliament and the Council. (There are 20 standing committes.) |
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). | |
8. European Court of Justice | |
European Court of Justice (ECJ) |
It started as a court for ECSC (in 1952).
consists of 28 judges and 9 advocates general, who are appointed by member states. term = 6 years 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. |
Effects of Economic Integration |