European Union

Background to the EU

1957 Treaty Of Rome established the EEC between 6 original members
1960 EFTA between UK, Aus, Den, Nor, Port, Swiss and Swe
1973 UK, Ireland and Denmark join EC
1999 Creating of Euro single currency.

Community Institutions

  1. European Commission, this is the civil service of the EU
  2. Council of Ministers from different countries make decisions on policy
  3. European Council. Meets twice a year to make decisions which fundamentally alter EU policy
  4. European Parliament directly elected body of 626 members
  5. The Court OF Justice. Is based in Luxembourg

Single European Act 1986

This was an attempt to “relaunch” the EU by attempting to create a Single Market.
It was necessary to drop unanimous decision making with an increase in Qualified Majority Voting.
The SEA also committed the EU Economic and Monetary Union (EMU)

Treaty of Maastricht 1992

  1. Economic, social and Political extensions to the EU
  2. Common foreign and security policy
  3. Intergovernmental cooperation on justice and home affairs

Economic Integration

  • Preference Areas. The Lome conference of 1975 gave preferential treatment to certain developing countries
  • Customs Union. This is s free trade area with a common external tariff

Single Market – European Union

This occurs when the member countries act as a single economic area with the free movement of labour and capital

This involves:

  1. No Tariffs on trade between member states
  2. Elimination of border controls
  3. Free movement of People
  4. Mutual recognition of qualifications
  5. Harmonization of taxes and other industrial and economic laws

Monetary Union is a single market plus

  1. A common currency
  2. N0 internal exchange Rates
  3. Common monetary policy

 see Euro

Obstacles To Completing the Single Market in the EU

  1. Customs Formalities
  2. Different Tax Rates, especially on Alcohol and tobacco
  3. State Subsidies to domestic industries, or tax breaks to encourage inward investment. This creates unfair competition within the EU
  4. Different regulations added to the cost of business
  5. Different currencies (until the Euro was launched)
  6. Until 1994 there were restrictions on the movement of capital, but these controls have been abolished and gradual liberalization has been made on other aspects of financial services.

 Benefits of a Single Market

  • Trade Creation. Exploitation of comparative adv allows lower prices and costs. Leading to higher output and more employment
  • Reduction in the direct costs of barriers
  • Economies of scale from specialization
  • Greater competition
  • Free movement of labour increases labour market flexibility and opportunities

Costs of a Single Market

  • Structural Change due to increased specialization
  • Adverse regional multiplier effects. The creation of a single market tends to attract capital and jobs away from the periphery areas to the centre.
  • Development of Monopoly/ Oligopoly power
  • Trade Diversion. If external barriers remain high countries could lose out

EU Competition Policy

The EU competition has the power to examine mergers to see whether they are in the public interest. They are not always opposed to mergers because they can have benefits such as

  1. Economies of scale
  2. Greater international competition.

However the abuse of market power can cause problems such as higher prices, unfair competition.

A merger could be referred to the commission if

  1. New Firm has greater than £3.6 billion
  2. Less than 2/3 of the new firm comes from one member state (therefore there is still a role for national commissions)

Other unfair business practices include

1. Price fixing and market sharing Cartels. In 1994 the major steel manufacturers were fines 7% of their turnover for fixing prices

Social Aspects of the Single Market

The Social Charter

This aimed to give greater protection to workers in the EU it included the following:

  • Free movement of labour
  • Min wages
  • Max working week
  • Right to paid holidays
  • Freedom to join in trades union
  • Vocational training for all EU citizens
  • Equal treatment between men and women
  • Protection for elderly and disabled
  • Health and Safety at work
  • The creation of Eur ES, this is a European information network for job vacancies

 Criticisms of the EU

Should the UK stay in the European Union?

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