Transcript European Union: Basic Facts

European Union:
Basic Facts
Jan Fidrmuc
Brunel University
History
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1951: European Coal and Steel Community
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Motivation: preventing another war in Europe
Coal/steel critical inputs for industry and military
1957 (Treaty of Rome): European Economic
Community (EEC) and European Atomic
Energy Community (Euratom)
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Members: F, D, I, NL, B, LUX
Aims: customs union and CET by 1969
CET set as average of national tariffs; CET
revenue to accrue to European Commission
History
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1960: European Free Trade Association
(EFTA)
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Response to formation of EEC and to threat of
trade discrimination
Members: UK, S, N, DK, P, CH, A
Aim: free-trade area, not customs union
No tariffs or quotas on intra-EFTA trade
But no CET
Agricultural products excluded from liberalization
Non-overlapping circles: 1960-1973
IS
EFTA-7
NL
D
B
F
L
N
FIN
S
I
DK
UK
EEC-6
IRL
A
P
CH
E
GR
History
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Domino Effect:
Customs union  intra-EEC trade rose
Imports from non-EEC Europe stagnant
GDP of EEC6 double that of EFTA7
EEC6: faster growth than EFTA7
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1973: 1st enlargement (UK, DK and IE)
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Integration with EEC more attractive than EFTA
Staying out even less attractive
1973: Free trade area between EEC & EFTA
Market Size (GDP): EEC vs EFTA, 1960-70.
600
500
EEC6
EFTA
$ billions
400
300
200
100
0
1961 1962 1963 1964 1965 1966 1967 1968 1969 1970
Concentric circles: from 1973
IS
FIN
N
DK
IRL
NL
UK B
D
F
I
S
L
EEC-9
A
CH
EFTA-6
P
E
GR
History
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Non-tariff barriers to trade despite customs
union
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Technical standards and regulations, capital
controls, rules for public procurement, border
formalities, etc.
Single European Act of 1987
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To create "an area without internal frontiers in
which the free movement of goods, persons,
services and capital is ensured".
Single Market Programme effective from 1992
Decision making: QMV instead of unanimity
History
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Domino Effect II:
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Deeper integration in the EEC strengthened the
incentive to join
This incentive rose with further enlargements
History
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1992: Maastricht Treaty
EEC  European Union (EU)
Monetary union and ECB by 1999
Single currency by 2002
‘Three pillar’ structure: division of power
between national governments and EU
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1st: Economics: Single Market, Competition Policy,
Common Agricultural Policy, EMU/ECB
2nd: Security and Foreign Policy
3rd: Justice and Home Affairs
EC law applies to 1st pillar
History
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Attempts at reform of EU institutions
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Motivation: streamlining decision making before
further enlargements
Amsterdam Treaty (1997): minor changes
Nice Treaty (2001)
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Paved way for enlargement by assigning new
votes for EU members and candidate countries
Failed to implement significant reform of
institutions
History
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Constitutional Treaty (2004)
Reformed QMV with expanded application
Introduced President and Foreign Minister
Reduced European Commission to 15
members
EU would become a legal entity
Rejected in referenda in France and the
Netherlands in 2005
History
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Lisbon Treaty (2007)
Reforms QMV and expands its application
Introduces President and High
Representative for Foreign Affairs
Reduced European Commission to 18
members
EU to become a legal entity
Rejected in referendum in Ireland in 2008
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2nd vote due on 2 Oct 2009
Founder Countries of EEC
1958
1st enlargement: 1973
1973
1958
2nd Enlargement: 1981
1973
1958
1981
3rd Enlargement: 1986
1973
1958
1986
1981
4th Enlargement: 1995
1995
1973
1958
1986
1981
5th Enlargement: 2004
1995
1973
2004
1958
Cyprus
1986
1981
Malta
6th Enlargement: 2007
1995
1973
2004
1958
2007
Cyprus
1986
1981
Malta
Facts: Population
Facts: Income per capita
Facts: Size of Economies
Elements of EU Integration
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Free trade in goods
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No tariffs, quotas or any other barriers to trade
Common trade policy vis-à-vis ROW
Undistorted competition
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State aid regulated by Commission and anticompetitive behaviour regulated by Commission
Approximation of laws (i.e. harmonisation)
Taxes: weak restrictions aimed at preventing
subsidies via lower tax rates for some firms; no
explicit harmonisation
Elements of EU Integration
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Unrestricted trade in services
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Single European Act, 2006 EU Services Directive
Some barriers persist (e.g. banking regulation
may raise barriers to foreign banks)
Labour and capital market integration
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Free movement of workers (not people)
Free movement of capital (but many loopholes
initially, until Single Market implemented)
Elements of EU Integration
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Exchange rate and macroeconomic policy
coordination
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Common agricultural policy (CAP)
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Matter of common interest – but only informal
coordination
Set up only in 1962
Social policies
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No explicit coordination
Exception: equal pay and prohibition of labormarket discrimination
Elements of EU Integration
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Single currency
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First (failed) attempts in 1970
Maastricht Treaty: commitment to common EUwide currency
Opt-outs for UK and Denmark
Institutions
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European Council
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Prime minister or president of each EU member
plus the President of the European Commission
Sets broad guidelines for EU policy
Meets at least twice a year (June and December)
No active role in EU law-making: decisions must
be translated into action via Treaty changes or
secondary legislation
Institutions
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Council of Ministers
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Representatives at ministerial level from each
Member State: minister for the relevant area, e.g
finance ministers on budget issues
EU’s main decision-making body
Two main decision-making rules:
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Unanimity (most important issues), e.g. Treaty changes,
enlargement, multi-year budget plan
Qualified majority voting (QMV): most issues (about
80% of all Council decisions)
Institutions
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European Commission (‘EU government’)
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Proposes legislation to the Council & Parliament
Administers and implement EU policies
Monitors and enforces EU law
Represents EU at international negotiations
Nice Treaty: each member one Commissioner
Lisbon Treaty: 2/3 of members get rotating
Commissioners
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May be amended
Commissioners not intended as national
representatives but in charge of specific area of EU
policy
Institutions
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European Parliament
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Oversees EU institutions, especially Commission
Formulates legislation and proposes budget,
together with Council of Ministers and
Commission
785 members (MEPs), directly elected in special
elections every 5 years
Number of MEPs per nation varies with population
but rises less than proportionally
MEPs represent local constituencies, organized
along the left-right dimension, not national lines
Germany
France
Italy
United Kingdom
Spain
Poland
Romania
Netherlands
Belgium
Czech Republic
Greece
Hungary
Portugal
Sweden
Austria
Bulgaria
Finland
Denmark
Slovakia
Ireland
Lithuania
Latvia
Slovenia
Cyprus
Estonia
Luxembourg
Malta
99
78
78
78
54
54
35
27
24
24
24
24
24
19
18
18
14
14
14
13
13
9
7
6
6
6
5
Institutions
EC Law:
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Autonomous: Independent of national law
Directly applicable: has the force of law in
member states
Supranational: EC law takes precedence over
national law
Institutions
EC Law: Sources
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1.
2.
3.
Primary legislation: EU Treaties
Secondary legislation (EU Law): Regulations,
decisions, directives, recommendations and
opinions
Case law: ECJ decisions
Institutions
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European Court of Justice:
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ECJ settles disputes between Member States,
between EU and a Member State, between
different EU institutions, and between individuals
and the EU
Supranational power: ECJ rulings cannot be
overturned by national courts
The Budget: Expenditure (2009)
Evolution of Spending Priorities
1.0
% of Budget
0.8
0.6
Administration
0.4
External
Other Internal
0.2
Cohesion
CAP
0.0
2006
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
1970
1967
1964
1961
1958
Evolution of Spending, Level
Evolution of Spending, Level
Funding of EU Budget
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EU’s budget must balance every year.
Financing sources: four main types:
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Tariff revenue and ‘Agricultural levies’ (tariffs on
agricultural goods)
‘VAT resource’ (in essence 1 per cent value added
tax)
GNP based (tax paid by members based on their
GNP).
Miscellaneous (e.g. taxes paid by EU employees)
Evolution of Funding Sources
100%
Share of total revenue
80%
60%
GNP
VAT
Miscellaneous
Customs Duties
Agricultural Duties
40%
20%
0%
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
Source: “The Community Budget: The facts in figures” European Commission, 2000. Downloadable from
http://eurpoa.eu.int/budget/
Contribution vs GDP
Funding of EU Budget
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Member’s contributions approximately 1% of
GDP regardless of per-capita income.
EU contributions not ‘progressive’
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e.g. richest nation, (L) pays less of its GDP than
the poorest nation (P).
Net contributions more in line with economic
development of countries
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Not perfectly so
E.g. Ireland.
Net Contribution by Member