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European Union: Basic Facts

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Title: European Union: Basic Facts


1
European Union Basic Facts
  • Jan Fidrmuc
  • Brunel University

2
History
  • 1951 European Coal and Steel Community
  • 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)
  • 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

3
History
  • 1960 European Free Trade Association (EFTA)
  • 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

4
Non-overlapping circles 1960-1973
IS
EFTA-7
NL
D
B
L
N
FIN
S
F
I
DK
UK
EEC-6
IRL
A
P
CH
E
GR
5
History
  • 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
  • Integration with EEC more attractive than EFTA
  • 1973 1st enlargement (UK, DK and IE)
  • Staying out even less attractive
  • 1973 Free trade area between EEC EFTA

6
Market Size (GDP) EEC vs EFTA, 1960-70.
7
Concentric circles from 1973
8
History
  • Non-tariff barriers to trade despite customs
    union
  • Technical standards and regulations, capital
    controls, rules for public procurement, border
    formalities, etc.
  • Single European Act of 1987
  • 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

9
History
  • Domino Effect II
  • Deeper integration in the EEC strengthened the
    incentive to join
  • This incentive rose with further enlargements

10
History
  • 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
  • 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

11
History
  • Attempts at reform of EU institutions
  • Motivation streamlining decision making before
    further enlargements
  • Amsterdam Treaty (1997) minor changes
  • Nice Treaty (2001)
  • Paved way for enlargement by assigning new votes
    for EU members and candidate countries
  • Failed to implement significant reform of
    institutions

12
History
  • 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

13
History
  • 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
  • 2nd vote due on 2 Oct 2009

14
Founder Countries of EEC
1958
15
1st enlargement 1973
1973
1958
16
2nd Enlargement 1981
1973
1958
1981
17
3rd Enlargement 1986
1973
1958
1986
1981
18
4th Enlargement 1995
1995
1973
1958
1986
1981
19
5th Enlargement 2004
1995
1973
2004
1958
Cyprus
1986
Malta
1981
20
6th Enlargement 2007
1995
1973
2004
1958
2007
Cyprus
1986
Malta
1981
21
Facts Population
22
Facts Income per capita
23
Facts Size of Economies
24
Elements of EU Integration
  • Free trade in goods
  • No tariffs, quotas or any other barriers to trade
  • Common trade policy vis-à-vis ROW
  • Undistorted competition
  • State aid regulated by Commission and
    anti-competitive 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

25
Elements of EU Integration
  • Unrestricted trade in services
  • 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
  • Free movement of workers (not people)
  • Free movement of capital (but many loopholes
    initially, until Single Market implemented)

26
Elements of EU Integration
  • Exchange rate and macroeconomic policy
    coordination
  • Matter of common interest but only informal
    coordination
  • Common agricultural policy (CAP)
  • Set up only in 1962
  • Social policies
  • No explicit coordination
  • Exception equal pay and prohibition of
    labor-market discrimination

27
Elements of EU Integration
  • Single currency
  • First (failed) attempts in 1970
  • Maastricht Treaty commitment to common EU-wide
    currency
  • Opt-outs for UK and Denmark

28
Institutions
  • European Council
  • 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

29
Institutions
  • Council of Ministers
  • Representatives at ministerial level from each
    Member State minister for the relevant area, e.g
    finance ministers on budget issues
  • EUs main decision-making body
  • Two main decision-making rules
  • 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)

30
Institutions
  • European Commission (EU government)
  • 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
  • May be amended
  • Commissioners not intended as national
    representatives but in charge of specific area of
    EU policy

31
Institutions
  • European Parliament
  • 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

32
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33
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34
Institutions
  • EC Law
  • Autonomous Independent of national law
  • Directly applicable has the force of law in
    member states
  • Supranational EC law takes precedence over
    national law

35
Institutions
  • EC Law Sources
  • Primary legislation EU Treaties
  • Secondary legislation (EU Law) Regulations,
    decisions, directives, recommendations and
    opinions
  • Case law ECJ decisions

36
Institutions
  • European Court of Justice
  • 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

37
The Budget Expenditure (2009)
38
Evolution of Spending Priorities
39
Evolution of Spending, Level
40
Evolution of Spending, Level
41
Funding of EU Budget
  • EUs budget must balance every year.
  • Financing sources four main types
  • 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)

42
Evolution of Funding Sources
43
Contribution vs GDP
44
Funding of EU Budget
  • Members contributions approximately 1 of GDP
    regardless of per-capita income.
  • EU contributions not progressive
  • 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
  • Not perfectly so
  • E.g. Ireland.

45
Net Contribution by Member
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