The European Union: Economics and Policies

Cover......Page 1
Half-title......Page 3
Title......Page 5
Copyright......Page 6
Dedication......Page 7
Contents......Page 9
Figures......Page 13
Tables......Page 15
Contributors......Page 18
Preface......Page 19
A guide for users......Page 21
Abbreviations......Page 22
1.1 What is economic integration?......Page 31
1.2 Economic integration and WTO rules......Page 33
1.3 The global experience......Page 34
1.4 The EU......Page 45
1.5 The possible gains from economic integration......Page 46
1.6 Areas of enquiry......Page 47
1.7 About this book......Page 48
Appendix 1.1: WTO’s Article XXIV......Page 49
Part I EU history, institutions, legal dimension and basic statistics......Page 51
2.1 A short history of European unity......Page 53
2.1.1 Concrete unity efforts......Page 54
2.1.2 Unity via the back door......Page 60
2.2.1 The EC......Page 61
2.2.2 The single European market......Page 63
2.2.3 The Treaty on European Union......Page 65
2.2.4 The Amsterdam Treaty......Page 66
2.2.5 Nice Treaty......Page 68
2.2.6 A Constitution for the EU?......Page 69
NOTE......Page 71
3 EU institutions......Page 72
3.1 The Commission......Page 73
3.2 The Council......Page 77
3.3 The European Parliament......Page 80
3.4.1 The European Court of Justice......Page 83
3.4.2 The Court of First Instance......Page 85
3.5 The Ombudsman......Page 86
3.6 The European Economic and Social Committee (EESC)......Page 87
3.7 The Committee of the Regions (CoR)......Page 88
3.9 The European Investment Bank (EIB)......Page 89
3.10 Institutional reform......Page 90
4 The legal dimension in EU integration......Page 92
4.1 Actor-interest-based approaches......Page 93
The organization of the work of the European Court of Justice......Page 94
The jurisdiction of the European Court of Justice......Page 96
Explaining the powers of the European Court of Justice......Page 99
4.1.2 The national courts......Page 100
4.1.3 Litigants and other players......Page 103
4.2.1 The symbolic effects of EU law......Page 105
4.2.2 The stabilization of expectations about EU government......Page 107
4.3 Law as the cipher for the legitimacy of the EU......Page 109
4.4 Actor-network theories......Page 110
4.5 Conclusion......Page 111
NOTES......Page 112
5.1 Area and population concerns......Page 114
5.3 Demand......Page 117
5.6 Income/consumption distribution......Page 118
5.7 The statistical tables......Page 119
Part II EU market integration: theory and practice......Page 135
6.1.1 The basic concepts......Page 139
6.1.3 Further contributions......Page 141
6.1.4 General equilibrium analysis......Page 144
6.1.5 Dynamic effects......Page 145
6.1.6 Domestic distortions......Page 147
6.1.7 Terms of trade effects......Page 148
Back to the Cooper–Massell criticism......Page 151
6.2 Customs unions versus free trade areas......Page 154
6.3 Economic unions......Page 155
6.4 Macroeconomics of integration......Page 156
6.7 New theoretical developments......Page 157
6.8 Conclusions......Page 158
7.2 Why ‘the single market’?......Page 160
7.3 The economics of non-tariff barriers......Page 163
7.4 An evolving programme......Page 165
7.4.1 The services market......Page 166
7.4.2 Financial services......Page 167
7.5.1 The extent of integration in the single market......Page 168
7.5.2 The single market and economic performance......Page 169
7.5.3 Empirical research on the single market: Commission studies......Page 170
7.6 Conclusion......Page 172
NOTES......Page 173
8 Factor mobility......Page 174
8.1 Single market......Page 176
8.2 Capital movements......Page 178
8.3 On the determinants of direct investment......Page 179
8.4 Capital movements in Europe......Page 183
8.5 Labour movements......Page 187
8.6 Labour flows in the EU......Page 188
8.7 Capital and labour movements combined......Page 191
NOTES......Page 193
9.2.1 Trade effects......Page 195
9.2.2 Income effects......Page 196
9.2.3 The balance of payments effect......Page 197
9.3 Estimating the trade effects – different approaches......Page 198
i) Simple extrapolation......Page 199
(ii) Changes in the income elasticity of demand for imports......Page 201
iii) Normalizing trade shares......Page 202
Gravity models......Page 203
Analytic models......Page 207
9.3.3 Computable general equilibrium models......Page 209
9.3.4 Summary of the trade effects of integration......Page 210
9.4 The nature of European specialization......Page 211
9.5 Estimating the income effects......Page 213
9.6 Economic growth......Page 216
9.7 Conclusion......Page 218
Part III EU monetary integration......Page 221
10.1 Disentangling the concepts......Page 223
10.2 What is monetary integration?......Page 224
10.3.1 Gains from EMU......Page 226
10.3.2 Losses from EMU......Page 227
10.3.3 Back to OCAs......Page 232
10.3.4 OCA in a nutshell......Page 234
10.4 A ‘popular’ cost approach......Page 235
10.5 A concluding remark......Page 237
11.1 The Werner Report......Page 238
11.2 The EMS......Page 239
11.2.1 The success of the EMS......Page 241
11.3 The Delors Report and the Maastricht Treaty......Page 242
11.4 The transition to EMU......Page 246
11.5 The decision over membership of EMU......Page 251
11.5.1 The UK......Page 253
11.6 Conclusions......Page 254
NOTES......Page 255
12.1 The Eurosystem and the euro......Page 257
12.1.1 The monetary policy of the Eurosystem......Page 259
12.2 The coordination of fiscal and other macroeconomic policies......Page 260
12.2.1 The coordination processes for macroeconomic policies......Page 261
12.2.2 The Stability and Growth Pact and the Excessive Deficit Procedure......Page 262
12.2.3 Policy coordination......Page 265
12.3 Completing EMU......Page 266
12.3.1 Enlargement......Page 267
NOTES......Page 268
Part IV The single European market: policy integration......Page 269
13.2 The rationale for EU competition policy......Page 271
13.3 General overview of the legal framework......Page 274
13.4.1 The cartel prohibition......Page 277
13.4.3 Merger control......Page 278
13.4.4 Public undertakings......Page 279
13.4.5 State aid......Page 280
13.5 Enforcement......Page 281
13.6 The public turn......Page 284
13.7 Rationalization......Page 286
13.8 Modernization......Page 287
13.9 Conclusion......Page 289
NOTE......Page 290
14.2 What is industrial and competitiveness policy?......Page 291
14.3 Industrial and competitiveness policy: theory and evidence......Page 292
14.3.4 Industrial agglomerations......Page 293
14.3.5 Research and development......Page 294
14.3.6 Entrepreneurship: small and medium-sized enterprises......Page 295
14.3.8 An evaluation of ICP theory and evidence......Page 296
14.4 The control of state aid......Page 297
14.5.2 European subsidies to research and technological development......Page 300
14.5.3 Non-EU technological cooperation......Page 302
14.5.4 Research and technology policy: an assessment......Page 303
14.6.1 Reasons for economic reform......Page 304
14.6.2 The development of the Lisbon Agenda......Page 305
14.6.3 The Outcomes of the Lisbon Agenda......Page 306
14.6.4 Assessing the Lisbon process......Page 307
14.6.5 A radical view of the Lisbon agenda......Page 308
NOTES......Page 309
15.1 Why is tax harmonization necessary?......Page 311
15.3 The EU’s experience of tax harmonization......Page 312
15.3.1 From the EEC Treaty (1958) to the internal market (1985)......Page 313
15.3.2 From the internal market to the single market......Page 314
15.4.1 Value added tax......Page 315
15.4.2 Excise duties......Page 318
15.4.3 Corporation tax......Page 321
15.5 Conclusion......Page 326
16.1 Introduction......Page 328
16.2 The European transport system......Page 329
16.3 The initial development of a CTP......Page 330
16.4 The CTP and other aspects of policy from the 1990s......Page 334
16.4.2 Railways......Page 336
16.4.3 Inland waterway transport......Page 337
16.4.4 Maritime transport......Page 338
16.4.5 Air transport policy......Page 339
16.5 The 2004 enlargement......Page 340
16.6 Conclusions......Page 343
17.1 Introduction......Page 344
17.2 The golden years (mostly)......Page 345
17.3 Oil shocks and afterwards......Page 346
17.4 Demand and supply: the status quo......Page 348
17.5.1 Internal energy market......Page 349
17.5.2 The environment......Page 353
17.5.3 Security......Page 354
NOTES......Page 358
18.1 Background......Page 360
18.2.1 Externalities......Page 362
18.2.2 Control of pollution by regulations or taxes......Page 365
18.2.3 Competitiveness and pollution policy......Page 368
18.2.4 Tradeable permits and the EU position on global warming......Page 369
18.3.2 Thresholds and standards......Page 372
18.3.3 Emission versus ambient standards......Page 374
18.4 Conclusions......Page 376
NOTES......Page 377
Part V EU budget and structural policies......Page 381
19 The general budget......Page 383
19.1 The economic theory of the state......Page 384
19.2 Fiscal federalism......Page 385
19.3 The EU and fiscal federalism......Page 386
19.4 Budget rules and procedure......Page 388
19.5 EU budget revenue......Page 389
19.6 EU budget expenditure......Page 392
19.6.1 CAP guarantee expenditure......Page 393
19.6.2 Structural policy expenditure......Page 394
19.6.5 Administration......Page 395
19.7 Net contributions to the EU budget......Page 396
19.8 The EU budget and EMU35......Page 398
19.9 The EU budget and enlargement......Page 399
NOTES......Page 401
20.1 General background......Page 403
20.2 The problems of agriculture......Page 404
20.2.2 Agricultural income......Page 405
20.2.3 Efficiency in agriculture......Page 406
20.2.4 Stability of markets......Page 408
20.2.6 Environmental concerns......Page 409
20.3 Objectives of the CAP......Page 410
20.4.1 The foundation of the CAP: a crucial policy failure4......Page 411
20.4.3 The main players in European agricultural policy......Page 412
The role of the Council......Page 413
The role of the Commission......Page 414
The principle of ‘preference for agricultural products’......Page 415
20.4.5 The allocation of competence between member countries and the EC......Page 416
Foreign trade restrictions......Page 417
The budget constraint......Page 418
20.5 The market organizations of the CAP......Page 419
Variable levies and specific import tariffs......Page 420
Ad valorem tariff rates......Page 422
20.5.3 Export regulations......Page 423
Intervention purchases......Page 425
Direct payments......Page 426
Production quotas......Page 428
Consumption subsidies......Page 429
Grain market regime......Page 430
Market regime for sugar......Page 432
20.6 Rural development policy......Page 433
20.8 Conclusion......Page 437
NOTES......Page 439
21.1 Introduction......Page 441
21.2 Background......Page 442
21.3 Policy objectives......Page 444
21.4 Policy process......Page 446
21.5 Reform of the CFP?......Page 447
21.6 Conclusion......Page 449
NOTES......Page 450
22.1 The case for an EU regional policy......Page 451
22.1.2 The ‘financial targeting’ argument......Page 452
22.1.5 The ‘effects of other EU policies’ argument......Page 453
22.2 The effects of integration on EU regional disparities......Page 454
22.3.1 The origins of modern EU regional policy: the reforms of 1989, 1994 and 1999......Page 460
22.3.2 EU regional policy since 2000......Page 461
Institutional capacity and corruption......Page 467
The underfunding of regional policy......Page 468
22.4.3 Attaining the Lisbon Agenda objectives......Page 469
NOTE......Page 470
23.1 Introduction......Page 471
23.2 The Treaty of Rome......Page 472
23.3 The Single European Act and the Social Charter......Page 473
23.4 The development of social policy......Page 474
23.5 The Treaty of Union and its perspectives......Page 475
23.6 Employment policy......Page 476
23.7 The development of the European Employment Strategy......Page 477
23.8 Employment performance: economic theory and evidence......Page 479
23.8.1 Labour market flexibility......Page 480
23.8.2 Persistence and unemployment......Page 482
23.9.2 The open method of coordination......Page 483
23.9.3 The EES process......Page 484
23.9.4 The EES and employment policy......Page 487
23.10.1 Employment rates in the EU......Page 488
23.10.2 Employment and economic growth in the EU......Page 492
23.10.3 Unemployment in the EU......Page 493
23.10.4 The natural rate of unemployment......Page 497
23.11 Conclusion......Page 498
NOTES......Page 499
Part VI EU external relations......Page 501
24 EU external trade policy......Page 503
24.1.1 The structure of EU trade......Page 504
24.1.3 External trade and economic specialization: high-tech industries and low-skilled workers......Page 506
24.2.2 Instruments of the CCP......Page 509
Non-tariff barriers......Page 510
Regulatory barriers......Page 511
24.2.3 Regional trade agreements......Page 512
24.3.1 Developing countries......Page 514
24.3.3 Japan......Page 516
24.4 Trade policy in a globalizing world......Page 517
24.4.1 Trade and intellectual property rights......Page 518
24.4.3 Trade and the environment......Page 519
24.4.4 Trade and labour standards......Page 520
24.5 Conclusions......Page 521
NOTES......Page 523
25 The EU and the developing world......Page 524
25.1 Trade policy......Page 526
25.1.1 The Generalized System of Preferences......Page 527
25.1.2 Relations with the ACP states......Page 529
25.1.3 Relations with the Mediterranean and the Middle East......Page 531
25.1.4 Relations with Asia and Latin America......Page 532
25.1.5 Evaluation of EU trade policy towards developing countries......Page 533
25.2 Development cooperation......Page 534
25.2.1 EU development co-operation principles......Page 536
25.2.2 Aid volumes and trends......Page 538
25.2.3 The Cotonou Agreement and the European Development Fund......Page 540
25.2.4 Management of EU development assistance......Page 541
Coherence......Page 543
25.3 Conclusions......Page 544
Part VII The enlargement, success and future of the EU......Page 547
26 Enlargement......Page 549
26.1 The process of enlargement......Page 551
26.2 Deciding on a wider membership......Page 554
26.3.1 Budgetary costs......Page 557
26.3.2 The movement of labour......Page 559
26.3.3 The manageability of economic institutions......Page 560
26.4 Coping without enlargement......Page 562
26.5 Concluding remarks......Page 563
NOTES......Page 564
27.1 The aims set for 1969......Page 565
27.2 The aims set for the period from 1969 to the early 1980s......Page 566
27.3 The aims set for the period from the mid-1980s to the present......Page 570
27.4 Conclusion......Page 571
28.1 The vision of the founding fathers......Page 572
28.2.1 The vision of political leaders: the 1980s and 1990s......Page 573
The ‘immediate’ leaders......Page 575
The current leaders......Page 580
28.3 Conclusion......Page 581
References......Page 582
Author index......Page 614
Subject index......Page 620