Transcript Mikroekonomie I.

European Union
International integration
Three pillars
Ing. Tomáš Siviček, PhD.
Lecture 2 – Content:
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Theoretical approaches to international integration:
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free trade areas,
customs union,
common market,
internal market,
economic union,
monetary union,
political union.
The three pillars as defined in Maastricht mix of
supranational and inter-governmental forms of European
integration.
Source
• R.BALDWIN, Ch. WYPLOSZ: The
Economics of the European
Integration; Chapter 2
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Economic integration in the EU
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EU is more integrated than Switzerland
EEC as a first step of a gradual process into a
unified economic area.
Economic integration as a means of achieving the
„finalité politique“.
The Treaty of Rome (1957)
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Treaty Establishing the European Economic Community
Treaty Establishing the European Community (since 1993 –
Maastricht)
Treaty on the Functioning of the European Union (Lisbon
Treaty)
A fountainhead of EU economic integration
Economic integration in the EU
Goals of the Treaty of Rome:
 Common market;
 Elimination of ALL trade barriers (free trade area)
 Common customs tariffs, common commercial policy (customs
union)
 Freedoms of movement –person, capital, services
 Competition - institution
 Common policy – agriculture, transport
 Coordination of policies
 Approximation of laws
 European Social Fund
 EIB
 Association of the overseas countries
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The first stages
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free trade areas
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Liberalisation of trade
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Individual external tariffs
EFTA, NAFTA, CEFTA, AFTA
customs union
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Liberalisation of trade
Common commercial policy
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Elimination of tariff barriers and quotas among members
External trade policy decided in common
Common external tariff
common market
Unified economic area
What is it?
 Firms/consumers – have equal opportunities to sell/buy goods
throughout the area
 Owners of capital and labour – are free to employ their resources.
Common trade policy
 To prevent „trade deflection“
Undistorted competition
 State aid prohibited: Unsubsidised firms at a disadvantage.
 Anti-compatitive behaviour: restrictive business practices, abuse of
a dominant position; „cartels“; nationality of suppliers.
 Approximation of Laws: product standards and regulations; in favour
of national firms.
 Taxes: Commission ONLY considers how to harmonise taxes.
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Unified economic area
Unrestricted trade in services
 Prudential regulation of qualification vs. protectionist restriction
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System for the recognition of professional education and training
(1992); mutual trust; exceptions
Labour and capital market integration
 Dicrimination based on nationality – hiring, firing, pay, working
conditions; free travel in search of work
 Right of establishment
 All restriction on capital flows shall be abolished (FDI, bonds,
interest, profits).
 Loophole – restrictions;
 1980s – Single European Act, Maastrich Treaty
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Unified economic area
Exchange rate and macroeconomic coordination
 Seed of euro, Stability Pact, ECB.
 Fixed exchange rates regime – as a norm
 Risk of balance of payments crisis leading to tariffs, quotas,
competitive devaluations.
Common policy in agriculture
 Different treatment – political reasons.
 Importance of the sector – 1/5 of workers
 Importance and difference of national policies among nations –
interventionist policies
 Different competitiveness
 Goals, principles, 2-y deadline. The CAP - 1962
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Ommitted integration: social policy
and taxes
Social policy – social harmonisation
 Politically sensitive
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Political equilibrium vs. undue interference
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Different opinions – government competencies (types); it touches
citizens’ lives
Difficult to exchange concessions.
Upward or downward harmonisation
Economic argumentation
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Does European economic integration demand harmonisation of social
policy?
Harmonise-before-liberalising school
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No-need-to-harmonise school
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Differences = „unfair“ advantage
Wages and social policies – reflection of productivity and social preferences.
Convergence of policies as nations get richer
Ommitted integration: social policy
and taxes
Tax policy
 Directly touches lives – outcome of a political
compromise
 Weak language: Commission shall consider in
what way the policy can be harmonised in the
interest of the Common market.
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Argument – not necessary for broadly applied
taxes.
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Commission - > Council - > unanimity
Turnover taxes, excise duties, indirect taxation...
If a tax applies only to a specific sector – it may be viewed
as unfair. (general vs. specific distinction)
Additions and changes
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„Economic Good life“
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Lisbon Treaty – good life more generally.
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High level of employment, gender equality, competitiveness
and convergence, protection and improvement of the quality
of the environment, rising standards of living
Coordination + Policies – visa+immigration, social cohesion,
environmental, industrial competitiveness, R&D, transEuropean networks, development, health protection,
consumer protection, energy, civil protection...
Cultural diversity, peace, security, sustainable
development...
Quantifying European economic
integration
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„work in progress“
DFFM index:
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Customs union formation: 1958-68
Europessimism: 1973-86
Single Market: 1986-92
Economic and Monetary Union: 1993-2001
Quantifying European economic
integration
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Source: Baldwin, p. 59
EU structure: 3 pillars
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Up to the Maastricht Treaty (1992) – integration subject to the
supranational decision making procedure (ToR).
Supranationality created problems
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Federalists vs. intergovernmentalists (vanguards and
doubters): extension of integration vs. too much integration;
community method vs. creeping competences.
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Integration outside of the EU structure
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ToR + EU Court’s ability to interpret the ToR = unlimited transfers of
national sovereignty to the EU level
due to differences between vanguards and doubters
Schengen Accord: 1985 – 5 members signed
Prüm Treaty on police cooperation – 7 members (2005)
Problems addressed by the Maastricht Treaty
Maastricht and the 3 pillars
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3 pillar structure = line between supranational and
intergovernmental policy areas
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1. pillar = deep integration under the ToR
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2. pillar = foreign and defence matters
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Intergovernmental cooperation
Solving the problems
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Intergovernmental cooperaation
3. pillar = police, justice, other „home affairs“
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Subject to supranationality
Closer cooperation under roof – without forcing others to
join: it helped in further discussion of closer integration
The three pillars
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1. pillar = European Community (formaly: EEC;
European Communities)
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Majority of EU activity
Customs union; Internal Market (4 freedoms);
Single Market Programme (harmonisation – healthe, safety,
environmental standards and regulations)
Competition policy and control of state aids
CAP; structural policy
Based on the Treaty of Rome
EMU – Based on the Maastricht Treaty
The three pillars
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Ways of supranationality
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Commission can propose new laws binding to all
members (after passing in CoM and EP)
Commission has direct executive authority –
competition policy
Ruling of the European Court of Justice can alter
laws, rules and practicies in member states.
The three pillars
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2. and 3. pillars – unanimity
2. pillar = Common Foreign and Security Policy
3. pillar = Justice and Home Affairs
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Schengen Agreement
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Britain: opt-out
Coordination of asylum and immigration policies
EU citizenship
Europeanisation = need for additional integration (transfer of
pension schemes, divorces)
Shifting to the 1. pillar: Amsterdam and Nice
The three pillars
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Amsterdam Treaty – „area of freedom, security and
justice“ (AFSJ)
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Cooperating agencies:
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Asylum, immigration and judical cooperation in civil matters
moved to the 1. pillar
3. pillar – police cooperation and judical cooperation in
criminal matters
2.+3. pillar JHA = AFSJ
Europol (police)
Eurojust (prosecutors)
Frontex (border officials)
Schengen Information System
The three pillars
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Source: Baldwin, p. 62