Economic History of Integration General Points

1
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

2
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

3
Definitions (contd)

• 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

4
Theories of Integration

• Classic liberal theories of international trade
  freer trade is in everyones 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

5
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)

6
The Economic Historical Context (contd)

• 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

7
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

8
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)

9
The Course of Economic Integration (contd-1)

• Period of Eurosclerosis (1973 early 1980s)
• 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

10
The Course (contd-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

11
The Course (contd-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)

12
Record of SomeAchievements

• 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

13
Achievements (contd)

• 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

14
Websites

• http//img.uoregon.edu/euro410/
• Europa
• Commission DGs
• Curia