Economic Integration and the European Union
Mechanisms for Cooperation and Economic Integration
The forms of relationship or cooperation between countries throughout history have been evolving toward greater economic integration, as shown in the diagram below:
- Mercantilism: The objective was to limit international trade. The important thing was to export in order to accumulate precious metals, but imports had to be limited.
- Free Trade: It aims to promote international trade while minimizing any protective measures.
- Bilateralism: Limits trade to bilateral relations (between two countries), both for the exchange of products and payments.
Classes of Economic Integration
Economic integration is a process through which two or more previously separated markets come together to form a single economic space of a more convenient size. The aim is to gain efficiency and welfare.
- System of Tariff Preferences: Based on the fact that all the territories granted by it a number of customs advantages not extended to third parties.
- Free Trade Zones: Areas consisting of two or more countries that immediately or gradually suppress customs and trade barriers between each other. Against third parties, each maintains its own tariffs and its own trade regime.
- Customs Union (CU): Involves tariff and trade. It also meant the formation of a common customs tariff towards third countries (Common External Tariff or CET).
- Common Market: They act as a block, defining external trade tariffs, nullifying internal tariffs, and allowing the freedom to provide services and freedom of establishment of companies.
- Economic Union: Common economic and fiscal policies and materials are also established in member countries.
Effects of Economic Integration
- Economies of scale: Derives from the possibility of raising the production volume, which means achieving greater efficiency at a lower cost base.
- Progress towards economies of specialization: Thus, each country can turn to its comparative advantages, focusing on sectors of production for which it is better equipped.
- Intensification of competition: Favorable effects on the rate of development and employment.
- Empowerment of large-scale economic activities.
- Increase in the bargaining power of member countries.
From a socio-political perspective, economic cooperation and integration has emerged as an acceptable formula for bringing peoples and cultures together.
The European Union
After the Second World War, a new international order was initiated, whose main objective was to overcome the ravages of conflict. In addition, the world had been divided into two blocks, controlled by the United States of America (USA) and the Union of Soviet Socialist Republics (USSR). These two blocks had a completely opposite understanding of politics, economics, and international relations. Therefore, conditions were created that were named permanent tension with the end of the Cold War.
In 1951, sectoral economic cooperation was signed: the European Coal and Steel Community (ECSC), which included Belgium, Holland, Luxembourg, France, Italy, and Germany. In the Treaty of Rome (1957), these countries agreed to form a supranational entity with a true vocation to articulate a common market.
Main institutions of the European Union today:
- The Council and the European Parliament
- European Commission
- The Courts and Accounts
- The various committees
Spain and Portugal joined in 1986. The EEC was renamed the EU after the Treaty of Maastricht. There are 27 countries.
Towards the EMU
The European project has been consolidating around a common area of economic exchange, where goods, capital, and people can move freely between Member States in order to achieve greater efficiency and economic well-being. Following the publication of the Single European Act, a timetable was set out for the construction of the European single market with free movement of factors, to be consummated, as it was, in 1993. Since then, the term European Union has been coined. The Maastricht Treaty formed the basis for a true economic union with a common currency among the countries wishing to do so and fulfilling basic economic discipline.