Transcript Document
Economic History of
Integration – General Points
Economic “Stuff” at the Core of
Integration
Definitions and Theories
Hierarchy of Degrees of “Union”
Static - Dynamic, Creation - Diversion
Context
Types of European Postwar Economies
Cycles of Postwar Economic Change
Stages and Timelines
Definitions of Integration
Hierarchy of “Union”
Free-trade area
Customs union (CET)
Common market
Economic union
Monetary union
Economic and monetary union
Political/Full union
Definitions (cont’d)
Another way of “reading” Union
Market integration
Of
“goods and services”
Of “factors of production” (labor, capital)
Policy integration
Coordination
of economic policy
Related to Common Market: competition,
regulation, industrial structure
“Macro-economic” and monetary policy
Re-distribution and other social policies
Fixed
currency linkage, or single currency
Theories of Integration
Classic liberal theories of international trade – “freer trade
is in everyone’s interest” (comparative advantage)
Static effects (“today-tomorrow”)
More trade
More goods Lower prices
More “Welfare”
Dynamic or “Restructuring” Effects (“over time”)
Competition and Efficiency – Allocation of Resources
Economies of Scale
Potential “Downside”
Trade Diversion vs. Trade Creation
Need for a “balance sheet” of effects
The Integration Process as a Whole
Neofunctionalism and “spillover”
The Economic Historical
Context of Integration
New Breed of Postwar European Economies
Growth economies: export-led growth
Government-intervention economies
Full-employment goal as priority
Welfare state
Nationalizations (Britain, France): “public sector
economy”
Implications
Huge government budgets
National economic policy
Break with the Past
France: Modernization, Agriculture to Industry
Britain: De-regulation and Privatization (Thatcher)
The Economic Historical
Context (cont’d)
Economic Cycles and Turning Points
Reconstruction and Recovery (1946-52)
Long period of dynamic growth (1952-73)
Crisis, stagnation and inflation (1973-83)
Renewed growth (1984-1990)
Momentary recession and recovery (1990-93)
Key turning points: 1952-58, 1973, 1983-5
Main themes
Dynamic growth of world trade
Global currency regime changes (1972 key date)
Recurring problem of unemployment
The Elements of Economy
International trade
Restrictions: tariffs, quotas, non-tariff barriers (NTBs)
Balance of payments (exports and imports component)
Government and the economy
Budget: taxes and expenditures
Monetary policy: interest rates
Regulation
Currency value
Relation to balance of payments (hence trade)
The “good” and the “bad” of a “strong currency”
Restrictions and their removal (currency convertibility)
Fixed vs. variable “exchange rates”
Bretton Woods (1944 -1972)
Reserve currency, cornerstone currency: $
The Course of Economic
Integration
Role of the Treaties
Establish goals and priorities
Provide mechanisms for achieving goals –
concrete, pointed, precise, or vague
Articulate timelines and deadlines
Initial achievements of the EEC
Customs union (1968)
Common Agricultural Policy (by 1970)
Kennedy Round of GATT – one voice (1963-67)
The Course of Economic
Integration (cont’d-1)
Period of “Eurosclerosis” (1973 – early
1980’s)
Stagnant economies: unemployment as a
leading concern, along with inflation
Proliferation of NTBs
One exception: 1979 Cassis de Dijon
Court of Justice decision
“Mutual
Recognition”
The Course (cont’d-2)
Breakthrough and renewal, 1985-1992
A new approach to removing barriers – the White
Paper of Lord Cockfield (1985): Internal Market
“Spillover”: from Single Market to Single Currency
Grand implications of “the 4 freedoms”: from
economic to political union
The tortuous history of monetary union
The “snake in the tunnel” (1972-4)
EMS, ERM, and the ‘ecu’ (1979)
Maastricht and EMU in 3 stages with deadlines
(timeline): the “euro” by March 2002
European Central Bank
The Course (cont’d-3)
EEC/EU and Global Trade
The “rounds” of GATT (1950-95)
The special relationships
With
West European non-members (EFTA)
With 70 “Associated States” (sub-Saharan
Africa mainly)
WTO (1995 – present)
Record of Some
Achievements
Trade in Goods
1958-72: intra-EEC trade grows more
rapidly than trade with other countries
1972-85: less dynamic intra-EEC trade;
trade with third countries greater among
“the Six” 1972-78 (oil imports)
1985-95: intra-EU trade grows very rapidly
Germany is the largest trade partner, both
as importer and exporter of other EU
goods
Achievements (cont’d)
CAP
A very complex program that is less “free
trade” than “managed trade”
A balance of political interests
By a system of levies, creates:
Funds
to distribute to eligible regions
(supposedly for improving production, but in
fact to support farm interests)
A European Community Budget
Websites
http://img.uoregon.edu/euro410/
Europa
Commission DGs
Curia