Economic Integration

c) Common market:

• c) Common market:
• free movement of products and factors (resources), which is customs union plus factor mobility
• EU (European Union – previously Euro Econ Community)
• d) Economic union
• common market plus common currency
• coordination of fiscal and monetary policy
• EMU (Economic and Monetary Union)

3. Economic effects of economic integration

• 3. Economic effects of economic integration
• Econ integration brings significant benefits, more efficient allocation of resources
• Static effects: Short-term effects
• Better use of existing resources
• Trade creation: production shifts to more efficient member countries from inefficient domestic or outside countries.
• Specialization, comparative advantage
• Dynamic effects: Long-term effects
• Cost reduction due to economies of scale
• Cost reduction due to increased competition.
• Both producers and consumers benefit from more efficient allocation of resources as a result of integration

History of European Union

• History of European Union
• The legal base of the EU is a sequence of treaties between its member states. These have been much amended over the years, with each new treaty amending and supplementing earlier ones.
• a) The first such treaty was the Treaty of Paris (1951) which established the European coal and steel community between the original group of 6 European countries (France, West Germany, Italy, Belgium, Luxembourg, Netherlands) to pool the steel and coal resources of its member-states, thus preventing another European war.
• b) Treaty of Rome (1957)
• Still in effect, though much amended since then, most notably by the Maastricht treaty of 1992, which first established the EU under that name.
• Formation of EEC (European Economic Community), initially free trade area, becoming a customs union in 1967 (no internal tariffs and common external tariffs).
• The Stockholm convention in 1960 created EFTA by 7countries to counteract EEC (Austria, Denmark, Norway, Sweden, Portugal, Switzerland and UK)
• c) Single European Act of 1987
• Creation of single market (Common market) effective on 1/1/ 1993 (free movement of products and factor resources (goods, people, capital)
• Rename EEC by EU (15 members) Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, Netherlands, Portugal, Spain, Sweden and UK.