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1、The European UnionCurrent State-MembersCurrent State: The European Union (EU) and the Euro-zone: 27members in EU and 15 members in the euro-zone excluding U.K., Sweden and Denmark but including Malta, Cyprus and Slovenia. 27 members are Germany, France, Italy, Belgium, Netherlands, Luxembourg, Irela
2、nd, UK, Denmark, Greece, Portugal, Spain, Austria, Finland, Sweden, Czech Rep., Estonia, Hungary, Poland, Slovenia, Latvia, Lithuania, Slovak Rep., Cyprus, Malta, Bulgaria (2007), Romania (2007).Hence, there are currently 16 European Monetary Union (EMU) members, Denmark and the UK negotiated opt-ou
3、t clauses while Sweden postponed entry into the Euroland. Slovenia adopted the Euro on January 1st, 2007 and Malta and Cyprus on 2008. Slovakia adopted the Euro on January 1st, 2009.3 countries in the pre-accession state: These are Croatia, Turkey and Macedonia.SpainPortugalFranceGermanyEnglandIrela
4、ndSwedenFinlandDenmarkItalyGreeceAustriaBelgiumNetherlandsThe EURO areaHistory of European Union IOrganization for European Economic Cooperation (OEEC) was founded in 1948 to administer US Marshall Plan aid to reconstruct postwar Europe. Europe sought to avoid fascism, Nazism and protectionism and e
5、stablish peace and prosperity through trade kinks. Communism was feared to encroach Europe.The Breakthrough into supranationalism: The Schuman Plan (1950) foresaw limited sectoral integration but on a supranational basis to place war-making sectors of coal and steel under one authority (The High Aut
6、hority).It was an explicitly political proposal but followed a functional approach of economic integration but with wider political objectives.History of European Union IITreaty of Paris (1951)-European Coal and Steel Community (ECSC) founded in 1952 to realize a common market for coal, steel and ir
7、on ore for the six member countries (West Germany, France, Italy, Belgium, the Netherlands and Luxembourg)-Nascent political integration through sectoral integration to avoid another French-German war.“Numero uno” problem at the time was governmental failure. Twice in the 20th century governments fa
8、iled to deliver peace and this led to ruin in Europe. By 1950s, a middle aged man had seen two incredibly destructive wars!WHY EUROPEANCOOPERATION and INTEGRATION?Propelled by a distinctive set of historical circumstances and impulses and motivated by political, economic and security considerations.
9、1. Wish to avoid a repeat of governmental failures culminated in two World Wars in the 20th century and expansionist nationalism (Nazi Germany).2. Economic devastation caused by wartime destruction.3. Emergence of two superpowers, the USA and the Soviet Union with competing economic and political id
10、eologies.4. Division of Europe (East and West) and the need for security from Soviet threat and expansionism.5. Need for rapid development in standards of living and economic performance to establish long-lasting peace and security. Poor economic performance was perceived as providing a climate of p
11、olitical instability conducive to the growth of Fascism and Communism as the extreme ideologies.6. Franco-German reconciliation as the bedrock of stability within Western Europe.History of European Union IIIFailure: The European Defense Community proposed by the Pleven Plan (another French!) failed
12、in the French parliament (1954). The issue was German remilitarization-less need after Korean war. Germany became a member of NATO in 1955 through the intergovernmental Western European Union.DeGaulle and rising French nationalism obstructed a nascent political integration based on a common defense
13、program.The Relaunch: The Messina Conference (1955): Proposals for the creation of a common market beyond the ECSC, a common transport and energy policies. The negotiations proposed a customs union and a commitment to deeper integration. The UK withdrew because of outright opposition to the supranat
14、ional form of integration proposed in Messina.The Suez crisis made economic integration a necessity as it signaled the end of French-British status as global powers. Soviet invasion of Hungary was menacing.History of European Union IV Treaty of Rome formally established the European Economic Communi
15、ty (EEC) and European Atomic Energy Community (EURATOM) in 1957 and the European Community (EC) consisted of ECSC, EEC and EURATOM. In 1967, ECSC and EEC merged with the (EURATOM) to form the European Community (EC)-called the Merger Treaty.Based on “The Community Model” to forge “ an ever closer un
16、ion among the peoples of Europe. Deadline for the removal of interstate tariffs were set at 1969 but achieved in 1968. (Deeper integration towards a common market in 1985 with the Single Market Program.)At this time, the EC was more than a customs union (CU) but less than an economic union (EU): Mor
17、e than a CU because of common policies in coal/steel and agriculture (CAP), attempts to unify transport and energy sectors. But less than an EU with free circulation of goods, services and only to some extent free movement in capital and no common macroeconomic and other sectoral policies. Main noti
18、ons of economic integration Free trade area Eliminates tariffs within the area only. Each country retains its own policy towards non-members.Custom union Add a common external policy to the free trade area.Common marketFactors of production can flow freely within a custom union. Free movement of cap
19、ital, labor and goods/services.Economic unionCommon market with common determination of some structural and macroeconomic policies. Massive extension of the “Community Model” to forge “an ever closer union among the peoples of Europe.”The EEC as a “Customs Union”.Progressive elimination of internal
20、tariffs by 1969- Formation of a free trade area (FTA) for the EEC with the gradual elimination of tariffs, quotas and other barriers to trade among members.Common external tariffs of 15 percent (members average)-the creation of a uniform tariff schedule applicable to the imports from the rest of the
21、 world. The Goal was the formation of a common market (CM): the removal of all barriers to the movement of labor, capital and business enterprises. And coordination of economic policies (a distant goal at the time.)Treaty of Rome (1957)The Adoption of the Common Agricultural Policies (CAP)-French pu
22、shed for this as a tilt of balance against the industrial Germany.It was a vital instrument of Community solidarity and helped restructure the declining Western European agriculture.The creation of an investment fund (European Investment Bank) to channel capital from the more advanced to the less de
23、veloped regions of the community.Tax and social policy harmonization.Coordination of fiscal, monetary and exchange rate policies.Institutionalize the virtuous circle of export-led growth.The elimination of tariffs would create trade (trade creation).The imposition of external tariffs would reduce de
24、pendence from the United States, Soviet Union, etc. (trade diversion).The Treaty of Rome (1957)History of European Union VBritish subservient to American foreign policy, but not France! UK did not apply for EEC until 1961 for several reasons.Hence, despite entrenched protectionism in the French indu
25、stry, France agreed to economic integration through common trade policies and a customs union in the Treaty of Rome but made common agricultural policy (CAP) a sine qua non for signing the Treaty. common agricultural policy (CAP)- a condition insisted by DeGaulle for signing the Treaty.France oppose
26、d US domination both in foreign policy and international monetary policy (Bretton Woods(1944) with a fixed exchange rate regime with dollar as the reserve currency convertible to gold.).History of European UnionVIEuropean Free Trade Association (EFTA) started in 1960 for those not willing to move to
27、 degree of integration in the Treaty of Rome (UK, Norway, Denmark, Sweden, Austria, Finland(1961), Iceland (1970), Portugal and Switzerland.) No threat to national sovereignty!EFTA would allow the UK to set its own external tariffs, maintain its special relationship with the Commonwealth countries a
28、nd avoid participation in the common agricultural program (CAP) of the Rome Treaty (1957) which would raise the cost of imported food stuff for UK. Also, the UK did not want to relinquish national power, a precondition of the Schuman Plan and preferred a free trade area.A Note: Since 1994, the Europ
29、ean Economic Area (EEA) allows free movement of people, products, services and capital in the EU and EFTA. EFTA today consists of Iceland, Liechtenstein, Switzerland and Norway. Except Switzerland, the rest is part of the European Unions Internal Market EEA (1994). Switzerland, opted to conclude bil
30、ateral agreements with the EU. BRITISH ENTRY For UK under MacMillan-merits of entry.-Special Anglo-American relationship was becoming less important (Macmillan-Kennedy meeting in 1962).-UK risked political isolation by remaining outside the EEC.-Rapid growth in the EEC market and lack of any free tr
31、ade links with EFTA.-However, UK had missed the boat! Suspicious of UK entry, DeGaulle vetoed twice (1963, and 1967) the British requests for membership for fear that this would dilute the EEC into a free trade area and make it subservient to American foreign policy interests. Only after DeGaulle, P
32、ompidou allowed it to join as a counterweight to Germanys inevitable future political and economic domination in the Community (1973 British, Irish and Danish entry).History of European Union VIIA climate of consolidation and challenge: Between Progress and Conflict in the era of DeGaulle (1958-1969
33、)DeGaulles attempt to reestablish the prestige of the French state by strengthening the French grandeur. Primacy of EU Law over national law established in the 1960s reinforcing the supranationalism of the EEC Paradoxically, this was also a period of resurgence in national interests. DeGaulle believ
34、ed that an equitable transatlantic was impossible as long as Western Europe remained subservient to the US. This was one of the major reasons why he vetoed British entry twice! France was against the supremacy of the US in foreign affairs.DeGaulles concept of a “Europe of the nation-states” bluntly
35、emphasized intergovernmentalism and epitomized hostility to supranationalism. Against some stateless construction, (“quelque construction apatride”). Fouchet Plan of political cooperation failed in 1962, and later, in 1963, bilateral Treaty between Germany and France on permanent cooperation failed.
36、 A punch in the stomach for France: Germany refrained from siding with France against NATO and the US. By 1968, the EEC was a duty-free zone but intra-community trade was far from free due to the existence of non-tariff barriers to trade.History of European Union VIIIA climate of consolidation and c
37、hallenge (1958-1969)“Empty Chair Crisis” 1. Hallstein (1st President of the European Commission) wished to create “self-financing” or “own sources” EEC budget autonomous of the national budgets. 2. the 1966 introduction of the qualified majority voting in the Council of Ministers. Both of these were
38、 perceived as a major threat to national sovereignty and a reinforcement of supranationalism by DeGaulle. Hence, France withdrew from the meetings of the Council of Ministers from June 1965 to January 1966 until the adoption of the Luxembourg Compromise.The compromise was: On matters of “vital natio
39、nal interest” to one or more member states, unanimity would be required. This meant the integration would be dictated by the pace of the most reluctant member state. A change in the ethos from Community spirit to a calculated, selfish and pragmatic cost-benefit attitude of the member states.This slo
40、wed down the decision making process and brought a decline in supranationalism till the 1980s. Revival would take place only after the departure of DeGaulles resignation in 1969.History of European Union IXCommissions President Hallstein: “The notion of Economic and Political Union was closer to tha
41、t of a Political Union, federation or a confederation, than to the notion of a customs union. Practically identical, in fact, to a political union, it would have to include a European political power, a Community budget, and integrated system of central banks. All these would require profound change
42、s for which the member states were not ready.”History of European Union XThe First enlargement and the Hague Summit (1969)A joint initiative of Brandt and Pompidou symbolizing the optimism of the post-De Gaulle era. Barre plan (1968) formed the basis of the summit.Idea of creating an economic and mo
43、netary union for the first time. Greater monetary solidarity needed (Widely uneven economic performances of the member states in the late 1960s and early 1970s.) The Werner Report (1970):First blueprint for a single currency, stages of economic and monetary union with a single currency were laid out
44、 (by 1980!), a large dose of centralization of policies, monetary and fiscal.Pompidou allowed British entry to limit German potential to displace France as the center of gravity in the EC. British accession could bolster French leadership as a bulwark against German economic and political resurgence
45、. Germany: “an economy in search of a political purpose.”French devaluation and the strength of Mark-threatening the economic balance of power between the two “core” countries. The oil price shocks, economic recession, bloated CAP and recalcitrant British severely tested EC solidarity. Yet, the EC s
46、urvived the 1970s- the decade of “Eurosclerosis.”History of European Union XIThe Decade of Eurosclerosis (1973-1983)- “German Ostpolitik”-normalization of relations with Eastern Europe. Goal: reunification, unachievable without the collapse of the Soviet Union. But by agreeing to a single currency (
47、Werner Report), Brandt of Germany demonstrated that it did not ask for supremacy in Europe. Balancing of aspirations towards East Germany “with a renewed dynamism in West Europe.” - Enlargement in 1973, creation of a more financially independent Community achieved through “own sources” consisting of
48、 custom duties, agricultural levies and a % of VAT tax.History of European Union XIIThe Decade of Eurosclerosis (1973-1983) and Post-1973 Blues.- Failure of monetary integration and failure of deeper trade integration.- Break-down of the Bretton Woods Exchange Rate System (1958-1971).- Community in
49、a Flux: Euro-pessimism due to 1) Failure of monetary integration, and 2) failure of deeper trade integration.- Major differences in economic performances and policies and general level of stagnation, failure to develop a common energy policy towards Arab countries and failure to develop common set o
50、f economic policies to deal with the stagflation which wrecked the possibility of a common monetary union by 1980 despite the projection of the Werner Report (1970).- Resurgence of protectionism-took the form of non-tariff barriers mostly directed against Japan and NICs, especially in agriculture an
51、d textiles.- Increasing recourse to government aid, and technical barriers to trade were key elements of this new tide of protectionism due to strong social resistance to economic adjustment. “Creation of national champions.”History of European UnionXIIIEarly 1970s: Monetary developments.The Collaps
52、e of the Bretton Woods and the suspension of the convertibility of dollar against gold announced by Nixon in 1971 along with restrictive trade measures.The Smithsonian talks of December 1971 sought to repair the regime and called for action among the Six for closer coordination of economic policies.
53、Basle Agreement (April 1972), the Six hatched the “Snake”- a regimen to keep EC currency fluctuations within 2% ( 1%) margin inside the “tunnel” against the dollar ( 2.25%) established during the Smithsonian talks.History of European UnionXIVEarly 1970s: Political DevelopmentsNixons frustration with
54、 the ECs foreign policy measures: lifting of oil embargo in return for EC support for Arab cause. The US bitterly resented ECs unwillingness to relieve pressure on the dollar and share more of the expense of keeping troops the US overseas. Kissengers legendary question: “Who speaks for Europe?” in 1
55、973.His calls for a coordinated Western response exposed deep transatlantic tensions and considerable disarray in the EC.History of European UnionXVPost-1973 Blues.1973 British entry along with Denmark and IrelandHelmut Schmidt and Giscard DEstaing- New Chancellor of Germany and President of France
56、in 1974. Both spoke the languages of Economics and English! Non-tariff barriers, protectionism and stagflation in the EC impeded the emergence of a single market, an objective cherished by both leaders.Dubious benefit of CAP and The British Budgetary Question: BBQ or “the Bloody British Question”: B
57、ritain paid too much into the EC budget, it imported far more agricultural products and industrial goods from outside the EC. A net contributor to the budget like Germany.Britain demanded CAP reform, protection of Commonwealth interests and retention of Parliamentary sovereignty.In 1975, discussions
58、 on the size of the Britains refund (Dublin agreement) for an acceptable rebate flopped. The issue would be settled only in 1984 when Thatcher aggressively demanded: “We want our money back!” after 15 summits!Only after the BBQ was resolved in 1984, the EC gained momentum.Another important decision:
59、 Direct election of the European Parliament by 1979 and holding of regular summits known as European Councils! (attended by heads of state and government).History of European UnionXVITurning the Corner (1979-1984)- A sense of alarm and urgency. Conviction that the EC was under serious threat of disi
60、ntegration.CAP out of control, BBQ, a paralyzed decision making process etc. BUT favorable developments in the following areas:Accession Treaty with Greece in 1979.Launch of the EMS (European Monetary System).Deregulation and Liberalization sweeping Europe from the USIncreasing Cooperation between t
61、he Commission and the leading EC industrialists to boost competitiveness, esp. in high-tech sector.Growing business interests in the realization of the Single Market (to be completed by 1992).Direct elections of EP (Both Britain and France feared it would undermine national supremacy).History of Eur
62、opean UnionXIINorway was to join in 1995 but its citizens rejected membership via a referendum (as they did in 1973) Twice! Switzerlands decision to stay out of the EEA stalled negotiations over EU membership. Euro-pessimism, 1975-1986Political shocks:Luxembourg Compromise (1966) + enlargement leads
63、 to decision-making jam.Economic shocks:Bretton Woods falls apart, 1971-1973.Failed monetary integration schemes (except within DM bloc).1973 and 1979 oil shocks with stagflation.Failure of Deeper Trade Integration.Growing cost of Common Agricultural Policy creates frictions over budget.Bright spots
64、 Democracy in Spain, Portugal and GreeceGreece joins in 1981Spain and Portugal join in 1986 after long a difficult accession talksEMS set up in 1979 works wellBudget Treaties1979 Cassis de Dijon decision built on 1974 Dassonville rulingChallenged validity of national rules that introduce non-tariff
65、barriers to trade.Mutual Recognition Principle introduced.Deeper circles: single market programme Mutual recognition as threat to national regulatory control; race to bottom?How to put member govt back in charge?Delors launches completion of the internal market with Single European Actcreate an area
66、 without internal frontiers in which the free movement of goods, persons, services and capital is ensured. Important institutional changes, especially move to majority voting on Single Market issues.Mutual recognition is disciplined by minimum harmonisationMore efficient decision making procedures a
67、llow agreement on min. standards “New Approach” Directives.Single Market Programme, EC92Basic elementsGoods Trade Liberalisation Streamlining or elimination of border formalities, Harmonisation of VAT rates within wide bandsLiberalisation of government procurementHarmonisation and mutual recognition
68、 of technical standards in production, packaging and marketingFactor Trade Liberalisation Removal of all capital controls (!), and deeper capital market integrationLiberalisation of cross-border market-entry policies, Fourth enlargement1994, Austria, Finland, Norway and Sweden admitted (Norwegians a
69、gain vote no).CyprusMalta 1958197319942004197319811981Communisms creeping failure and spectacular collapse By the 1980s, Western European system clearly superior due to the creeping failure of planned economies.Up to 1980s, Soviets thwarted reform efforts (economic & military pressure). Changes in U
70、SSR due to inadequacy economic system. timid pro-market reforms (perestroika). openness (glasnost).Velvet revolutions in CEECs June 1989 Polish labour movement Solidarity forced free parliamentary elections & communists lostMoscow accepted new Polish government. Moscows hands-off approach to the Pol
71、ish election triggered a chain of events.Reformist in Hungarian communist party pressed for democracy & Hungary opened its border with Austria, 1000s East Germans moved to West Germany via Hungary and Austria. Mass protests in East Germany; Wall falls 9th November 1989.End of 1989: democracy in Pola
72、nd, Hungary, Czechoslovakia and East Germany (unification in 1990). USSR collapses1990, Estonia, Latvia and Lithuania declared their independence from the USSR. End of 1991, the Soviet Union itself breaks up.Cold War ends without a shot.Military division of Europe ended.EU reactsThe European Union r
73、eacted swiftly to this geopolitical earthquake by providing emergency aid and loans to the fledgling democracies.Signing of Europe Agreements with newly free nations in Central and Eastern EuropeThese are free trade agreements with promises of deeper integration and some aidFrom Copenhagen to Copenh
74、agenEU says CEECs can join the EU (June 1993).Set out famous Copenhagen criteria for membership.stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and, protection of minorities, the existence of a functioning market economy as well as the capacity to cope
75、 with competitive pressure and market forces within the Union.Copenhagen summit December 2002 says 10 CEECs can join in 2004.5th enlargement in May 2004 German unification and MaastrichtPending 1990 unification of Germany opens door to a grand bargain (Mitterrand, Kohl).Germany gives up DM for Europ
76、ean Monetary Union & East Germany joins the EU without negotiation.Jacques Delors proposes 2nd radical increase in European economic integration. the formation of a monetary union.Idea championed by French President Francois Mitterrand and German Chancellor Helmut Kohl.Maastricht Treaty, signed 1992
77、a monetary union by 1999, single currency by 2002.Also, sets up EUs three pillar structure to reduce EUs competency creep;ERM exchange rate crises, 1992-1994.Preparing for Eastern Enlargement Impending enlargement required EU to reform its institutionsFour tries:Amsterdam Treaty, 1997Nice treaty, 20
78、00draft Constitutional Treaty, 2003Reconsidered by IGC 2003Constitutional Treaty, June 2004.Amsterdam TreatyFailed to reform main institutionsTidied up of the Maastricht TreatyMore social policy, Parliament powers modestly boosted, flexible integration, closer cooperation introduced Amsterdam leftov
79、ersvoting rules in the Council of Ministers, number of Commissioners, Extension of issue covered by majority votingNice TreatyReforms of main institutions agreed, but poorly doneCouncil voting rules highly complex and reduce EUs ability to act with more membersNo important extension of majority voti
80、ngMake shift solution for CommissionersNo reform of decision making in ECBGenerally viewed as a failureMain changes re-visited in draft Constitutional Treaty, 2003Constitutional TreatyImproved decision-making rules for Council of Ministers and slightly more majority voting.Inclusion of Charter of Fu
81、ndamental Rights.Other things where CT not strictly required: Many gestures and tidying up.Moves towards more coherent foreign policy decision making.Many de facto points turned into de jure.Constitutional Treatys ProblemsFrance and Netherlands reject the Constitutional Treaty in referendums in Summer 2005. EU leaders suspend the ratification deadline. Next steps uncertain as of early 2006.
