Chapter 1
Definition of integration
Economic integration can be defined as the elimination of barriers to the
movement of products and factors of production between a group of countries
and the introduction of common policies.
Negative integration: the removal of barriers to trade
Positive integration: introduction of common policies, and building of common
institutions
Stages of integration
Free trade areas:
The member states remove all barriers on trade between themselves but retain
the freedom to implement different commercial policies towards third countries.
Custom unions:
The member states remove all barriers on trade between themselves and
introduce a common external commercial policy towards the rest of the world
Common markets:
These are custom unions, which allow for free factor mobility: freedom of
movement of goods, services, labour and capital.
Economic and monetary union
Includes the following elements: a common market; close co-ordination or
central control of monetary and fiscal policies; a common money or complete
convertibility among national currencies with no possibility of exchange rate
adjustments; and a common authority which acts as a central bank
Political union
Involves a central authority that has supranational powers similar to those of a
nation’s government over various policy areas, and is responsible to a directly
elected central parliament
Subsidiarity
Subsidiarity is the principle that decisions should be taken at the lowest level
that permits effective action. The idea is linked to that of taking decisions ‘as
closely as possible to the citizens’. By limiting action at the EU level to where it is
really necessary, the quality of EU legislation could be improved.
Chapter 3
Lisbon treaty
On 1 December 2009 the Lisbon treaty came into force which encompassed the
following changes:
, A European Council president holding office for two and a half years
renewable once
A new high representative of the Union for Foreign Affairs and Security
Policy
Direct election of the president of the Commission by the European
parliament
‘Double-majority’ voting rule in the council, with 55% of the member
states and 65% of the population necessary to pass a measure by
qualified majority vote.
Extending qualified majority voting to over forty more policy areas
Number of members of EP to be fixed at 751, with a minimum of 6 and a
maximum of 96 per country
Strengthening the national parliaments by giving them the right to raise
objections to proposed EU legislation; reinforcing the principle of
subsidiarity; and increasing their role in responding to new applications for
EU membership
An attempt to list the competences of the EU
The decision-making institutions of the EU
European commission
Made up of one commissioner for each member states. (to ensure that the
concerns of each member states are taken into account). The commissioners at
the head of the Commission are responsible for one or more areas of policy and
are required to act independently of national interest.
The functions of the commission are
To present legislative proposal (involvement at each stage in the EU
legislative process)
To implement decisions
To exercise certain autonomous powers in areas such as competition
policy and trade negotiations
To prepare the annual preliminary draft budget for the EU
To act as guardian of the treaties
To present White and Green papers on specific policy areas (Green paper
= broader, initial ideas; white paper = more guidelines for policy
proposals)
The fact that the commission is not elected and is not directly answerable to the
public is one aspect of the problem of ‘democratic deficit’
The council
The council takes final decisions on legislation jointly with the European
parliament. It is composed of representatives at the ministerial level of each of
the member states.
Main functions:
To pass European laws
, To co-ordinate the broad economic policies of the member states
To conclude international agreements
To approve the budget of the EU
To develop the common foreign and Security policy
To co-ordinate co-operation between national courts and police forces
The European Council
Made up of the heads of state and government together with the president of the
commission. The European council plays an important role in providing overall
political direction to the Union and in resolving problems that have proved
intractable at a lower level.
Lisbon Treaty introduced a European Council president, elected by a qualified
majority of members of the European Council and is not subject to approval by
the EP. It also introduced a High Representative for Foreign Affairs and Security
policy.
Also rotating presidencies of the council. Country holding the presidency has the
power to set the agenda and further policy objectives.
Voting rules in the Council
The Council (also: Council of Ministers) may take decisions by unanimity, simple
majority or qualified majority voting (QMV). The latter one is the most widely
used. More and more policy areas are subject to QMV. In practice there are
usually attempts to reach consensus
European Parliament
Was initially a consultative body, but over the years its powers have increased
and it now legislates jointly with the Council.
It is consulted during the legislative process and is able to use the power
of amendment
It examines the annual work of the Commission and can ask it to put
forward proposals
It has budgetary powers over all types of spending
Grant assent to important agreements with third countries or international
organizations
It has supervisory powers over the work of the commission and monitors
the work of the council
It can investigate alleged contraventions of EU law and appoint an
ombudsman
It’s a forum for discussion
European Court of Justice
Is responsible for interpreting EU law and adjudicating on disputes arising from
the interpretation of the treaties and the legislation based upon them.
, It is composed of one judge from each member state appointed for renewable
terms of six years. It is the highest court to which disputes on EU law can be
taken.
The court of auditors
The collection and spending of EU funds is subject to external control by the
Court of Auditors; it’s authority extends to all institutions and has one member
from each member state elected for a renewable six-year term.
Decision-making procedures
These are the consultation procedure, the co-operation procedure, the co-
decision procedure and the assent procedure
Flexibility or enhanced co-operation
Due to the widening membership of the EU and hence growing diversity,
flexibility or differentiated integration allows those countries that are willing
and/or able to do so to proceed faster in some areas of integration.
Enhanced co-operation = group of member states move ahead while remaining
within the EU framework
Chapter 4
Main arguments in favour of free trade
Trade can be mutually beneficial thanks to the specialization of production
Absolute advantage
If one country is more efficient in the production of one good, and less efficient in
the production of another, then each country should specialize in the production
of the good for which it has an absolute advantage
Comparative advantage
Even when one country is less efficient in the production of both goods there is a
basis for mutually beneficial trade.
Even if one country has an absolute disadvantage in the production of both
goods, it should specialize in the production and export of the good where its
absolute disadvantage is smaller and import the product where its absolute
disadvantage is greater. The country with an absolute advantage in the
production in both goods should specialize in the production and export of the
product where its absolute advantage is greater and import the good for which
its absolute advantage is smaller.
The Heckscher-Ohlin-Samuelson theorem
According to this theorem, the liberalization of trade will bring about the
equalization of relative and absolute returns to the factors of production between
countries or regions.
Example:
Country 1 specializes (due to free trade) in the production of X (labour
Definition of integration
Economic integration can be defined as the elimination of barriers to the
movement of products and factors of production between a group of countries
and the introduction of common policies.
Negative integration: the removal of barriers to trade
Positive integration: introduction of common policies, and building of common
institutions
Stages of integration
Free trade areas:
The member states remove all barriers on trade between themselves but retain
the freedom to implement different commercial policies towards third countries.
Custom unions:
The member states remove all barriers on trade between themselves and
introduce a common external commercial policy towards the rest of the world
Common markets:
These are custom unions, which allow for free factor mobility: freedom of
movement of goods, services, labour and capital.
Economic and monetary union
Includes the following elements: a common market; close co-ordination or
central control of monetary and fiscal policies; a common money or complete
convertibility among national currencies with no possibility of exchange rate
adjustments; and a common authority which acts as a central bank
Political union
Involves a central authority that has supranational powers similar to those of a
nation’s government over various policy areas, and is responsible to a directly
elected central parliament
Subsidiarity
Subsidiarity is the principle that decisions should be taken at the lowest level
that permits effective action. The idea is linked to that of taking decisions ‘as
closely as possible to the citizens’. By limiting action at the EU level to where it is
really necessary, the quality of EU legislation could be improved.
Chapter 3
Lisbon treaty
On 1 December 2009 the Lisbon treaty came into force which encompassed the
following changes:
, A European Council president holding office for two and a half years
renewable once
A new high representative of the Union for Foreign Affairs and Security
Policy
Direct election of the president of the Commission by the European
parliament
‘Double-majority’ voting rule in the council, with 55% of the member
states and 65% of the population necessary to pass a measure by
qualified majority vote.
Extending qualified majority voting to over forty more policy areas
Number of members of EP to be fixed at 751, with a minimum of 6 and a
maximum of 96 per country
Strengthening the national parliaments by giving them the right to raise
objections to proposed EU legislation; reinforcing the principle of
subsidiarity; and increasing their role in responding to new applications for
EU membership
An attempt to list the competences of the EU
The decision-making institutions of the EU
European commission
Made up of one commissioner for each member states. (to ensure that the
concerns of each member states are taken into account). The commissioners at
the head of the Commission are responsible for one or more areas of policy and
are required to act independently of national interest.
The functions of the commission are
To present legislative proposal (involvement at each stage in the EU
legislative process)
To implement decisions
To exercise certain autonomous powers in areas such as competition
policy and trade negotiations
To prepare the annual preliminary draft budget for the EU
To act as guardian of the treaties
To present White and Green papers on specific policy areas (Green paper
= broader, initial ideas; white paper = more guidelines for policy
proposals)
The fact that the commission is not elected and is not directly answerable to the
public is one aspect of the problem of ‘democratic deficit’
The council
The council takes final decisions on legislation jointly with the European
parliament. It is composed of representatives at the ministerial level of each of
the member states.
Main functions:
To pass European laws
, To co-ordinate the broad economic policies of the member states
To conclude international agreements
To approve the budget of the EU
To develop the common foreign and Security policy
To co-ordinate co-operation between national courts and police forces
The European Council
Made up of the heads of state and government together with the president of the
commission. The European council plays an important role in providing overall
political direction to the Union and in resolving problems that have proved
intractable at a lower level.
Lisbon Treaty introduced a European Council president, elected by a qualified
majority of members of the European Council and is not subject to approval by
the EP. It also introduced a High Representative for Foreign Affairs and Security
policy.
Also rotating presidencies of the council. Country holding the presidency has the
power to set the agenda and further policy objectives.
Voting rules in the Council
The Council (also: Council of Ministers) may take decisions by unanimity, simple
majority or qualified majority voting (QMV). The latter one is the most widely
used. More and more policy areas are subject to QMV. In practice there are
usually attempts to reach consensus
European Parliament
Was initially a consultative body, but over the years its powers have increased
and it now legislates jointly with the Council.
It is consulted during the legislative process and is able to use the power
of amendment
It examines the annual work of the Commission and can ask it to put
forward proposals
It has budgetary powers over all types of spending
Grant assent to important agreements with third countries or international
organizations
It has supervisory powers over the work of the commission and monitors
the work of the council
It can investigate alleged contraventions of EU law and appoint an
ombudsman
It’s a forum for discussion
European Court of Justice
Is responsible for interpreting EU law and adjudicating on disputes arising from
the interpretation of the treaties and the legislation based upon them.
, It is composed of one judge from each member state appointed for renewable
terms of six years. It is the highest court to which disputes on EU law can be
taken.
The court of auditors
The collection and spending of EU funds is subject to external control by the
Court of Auditors; it’s authority extends to all institutions and has one member
from each member state elected for a renewable six-year term.
Decision-making procedures
These are the consultation procedure, the co-operation procedure, the co-
decision procedure and the assent procedure
Flexibility or enhanced co-operation
Due to the widening membership of the EU and hence growing diversity,
flexibility or differentiated integration allows those countries that are willing
and/or able to do so to proceed faster in some areas of integration.
Enhanced co-operation = group of member states move ahead while remaining
within the EU framework
Chapter 4
Main arguments in favour of free trade
Trade can be mutually beneficial thanks to the specialization of production
Absolute advantage
If one country is more efficient in the production of one good, and less efficient in
the production of another, then each country should specialize in the production
of the good for which it has an absolute advantage
Comparative advantage
Even when one country is less efficient in the production of both goods there is a
basis for mutually beneficial trade.
Even if one country has an absolute disadvantage in the production of both
goods, it should specialize in the production and export of the good where its
absolute disadvantage is smaller and import the product where its absolute
disadvantage is greater. The country with an absolute advantage in the
production in both goods should specialize in the production and export of the
product where its absolute advantage is greater and import the good for which
its absolute advantage is smaller.
The Heckscher-Ohlin-Samuelson theorem
According to this theorem, the liberalization of trade will bring about the
equalization of relative and absolute returns to the factors of production between
countries or regions.
Example:
Country 1 specializes (due to free trade) in the production of X (labour
