Integrarea economică europeană

Lecture 1. The peculiarities of IEI

• Highest level on integration – EU

• Political integration studies preceded economic integration ones

Meanings of the EI:

1) transformation from micro-spaces to macro-spaces

2) lack of discrimination and progressive elimination of discrimination btw countries

3) a series of processes through which different states from a commercial regional group integrate

4) achievement of complete unification btw distinct economies (single economic structure)

5) EI precedes political integration. Economic communities naturally evolve into political ones (the free movement of goods naturally generates a demand for further integration)

EI is :

1) positive – institutional – creating integration policies (2nd step)

2) negative – functional – eliminating barriers for free movement (1st step)

EI: I) short term (market integration)

II) Integration of economies (long term)

EI as a:

- process – elimination of barriers

- state of facts – lack of any form of discrimination

FORMS OF INTEGRATION (B.Balassa)

1) Free Trade Area (FTA)

2) Customs Unions (CU) = FTA +common commercials quotas

3) Common Market (CM) = CU + free movement of persons, capital, etc.

4) Economic Union (EcUn) = CM + coordination of national economic policies

5) Total Economic Integration (TEI) = EcUn + all relevant policies conducted at the supranational level. >> Eurozone

6) Full Political Integration (FPA)

Consequences of EI:

1) for trade flows: trade creation (creare de comert), trade diversion (deturnare de comert)

2) for internal agents:

- producers: lower prices, increased productivity, economies of scale

- consumers: lower prices, higher real consumption, increased choice of products

3) dynamic effects:

- for allocation of resources: better competition, better allocation of resources, lower costs, profitability

- inefficient Co will suffer loss of market share of close down

- unemployment or migration

- for accumulation: growth, welfare, sustainable development

- for localization within the FTA or CU

Basic tariff analysis (slide)

Theme 2. Theory of economic integration.

The main theories:

1.Theory of economic/politic union.

Classic theory of customs unions –

the creation of a pure CU based only on customs tariffs reduction, as an instrument of political and trade protection. (from the 15th century Colbert, managed to create in France CU, eliminating the barriers among the 12 local regions).

Scientists: H.A. Wirsching in 1928, studies the CUs of Europe from 17th till 19th century. Y. Le Troquer, A. Tibal and L. Cocquet study this theory in 1929, in 1930 – J. Mazzei.

Victor Badulescu identified the types of CU:

1. Perfect CU – when customs is abolished (ex. Benelux)

2. Imperfect CU – countries have their own customs policy, but offer each other reduction and preferences

3. CU with preferential tariffs -having only reciprocal preferences for a part of the products.

The modern theory of CU

- Deals with technical aspects of functioning of CU – the coordination of tariffs structures and comecrial policies of member countries as well as the results of unification structure such as increasing the welfare of the member countries. The main scientists: J. Viner, Meade and Lipsey.

- In 1950 Viner made a clear distinction between trade creation and trade diversion.

- In the same decade Meade elaborates a model to analyze the effects of CU on products distribution.

The main aspects of Meade’s model are:

- The creation of CU tends to be successful if the partners economies are similar

- The changes of CU implementation increase if the legal framework is well determinate

- If more products will be available in member countries then CU will be more favorable.

- Each of the partners will be the supplier for the other one of the products it sells the main buyer for the ones he buys

- The advantages of CU will be directly related to its size (number of partners)

- CU is constituted in a world that faces quantitative restrictions.