Question

•How did economic integration in Europe evolve? To answer this question, please think about the stages in economic integration and explain each of these stages and the current stage of economic integration in the European Union. Why is the EU more than just a free trade area and what are some of its achievements? In your answer, mention how it differs from some other regional economic arrangements, naming a few others.

Answer 1

Economic integration

There are several stages in the process of economic integration, from a very loose association of countries in a preferential trade area, to complete economic integration, where the economies of member countries are completely integrated.

A regional trading bloc is a group of countries within a geographical region that protect themselves from imports from non-members in other geographical regions, and who look to trade more with each other. Regional trading blocs increasingly shape the pattern of world trade - a phenomenon often referred to as regionalism.

Free Trade Area

Free Trade Areas (FTAs) are created when two or more countries in a region agree to reduce or eliminate barriers to trade on all goods coming from other members. The North Atlantic Free Trade Agreement (NAFTA) is an example of such a free trade area, and includes the USA, Canada, and Mexico.

Preferential Trade Area

Preferential Trade Areas (PTAs) exist when countries within a geographical region agree to reduce or eliminate tariff barriers on selected goods imported from other members of the area. This is often the first small step towards the creation of a trading bloc.

Customs Union

A customs union involves the removal of tariff barriers between members, together with the acceptance of a common (unified) external tariff against non-members.

Countries that export to the customs union only need to make a single payment (duty), once the goods have passed through the border. Once inside the union goods can move freely without additional tariffs. Tariff revenue is then shared between members, with the country that collects the duty retaining a small share.

Common Market

A common (or single) market is the most significant step towards full economic integration. In the case of Europe, the single market is officially referred to a the 'internal market'.

The key feature of a common market is the extension of free trade from just tangible goods, to include all economic resources. This means that all barriers are eliminated to allow the free movement of goods, services, capital, and labour.

In addition, as well as removing tariffs, non-tariff barriers are also reduced and eliminated.

For a common market to be successful there must also be a significant level of harmonisation of micro-economic policies, and common rules regarding product standards, monopoly power and other anti-competitive practices. There may also be common policies affecting key industries, such as the Common Agricultural Policy (CAP) and Common Fisheries Policy (CFP).

Full Economic Union

Economic union is a term applied to a trading bloc that has both a common market between members, and a common trade policy towards non-members, although members are free to pursue independent macro-economic policies.

The European Union (EU) is the best known Economic union, and came into force on November 1st 1993, following the signing of the  Maastricht Treaty (formally called the Treaty on European Union.)

Monetary Union

Monetary union is the first major step towards macro-economic integration, and enables economies to converge even more closely. Monetary union involves scrapping individual currencies, and adopting a single, shared currency, such as the Euro for the Euro-17 countries, and the East Caribbean Dollar for 11 islands in the East Caribbean. This means that there is a commonexchange rate, a common monetary policy, including interest rates and the regulation of the quantity of money, and a single central bank, such as the European Central Bank or the East Caribbean Central Bank.

Fiscal Union

A fiscal union is an agreement to harmonise tax rates, to establish common levels of public sector spending and borrowing, and jointly agree national budget deficits or surpluses. The majority of EU states agreed a fiscal compact in early 2012, which is a less binding version of a full fiscal union.

Serving some 500 million consumers, the EU is the largest economy and thelargest trading block in the world, and is likely to remain so through its open markets, secure legal investment framework, and low import tariffs.

So, this all achievements and arrangements are influence for "why EU it differs from some other regional economic "