Title: European Union: Basic Facts
1European Union Basic Facts
- Jan Fidrmuc
- Brunel University
2History
- 1951 European Coal and Steel Community
- Motivation preventing another war in Europe
- Coal/steel critical inputs for industry and
military - 1957 (Treaty of Rome) European Economic
Community (EEC) and European Atomic Energy
Community (Euratom) - Members F, D, I, NL, B, LUX
- Aims customs union and CET by 1969
- CET set as average of national tariffs CET
revenue to accrue to European Commission
3History
- 1960 European Free Trade Association (EFTA)
- Response to formation of EEC and to threat of
trade discrimination - Members UK, S, N, DK, P, CH, A
- Aim free-trade area, not customs union
- No tariffs or quotas on intra-EFTA trade
- But no CET
- Agricultural products excluded from
liberalization
4Non-overlapping circles 1960-1973
IS
EFTA-7
NL
D
B
L
N
FIN
S
F
I
DK
UK
EEC-6
IRL
A
P
CH
E
GR
5History
- Domino Effect
- Customs union ? intra-EEC trade rose
- Imports from non-EEC Europe stagnant
- GDP of EEC6 double that of EFTA7
- EEC6 faster growth than EFTA7
- Integration with EEC more attractive than EFTA
- 1973 1st enlargement (UK, DK and IE)
- Staying out even less attractive
- 1973 Free trade area between EEC EFTA
6Market Size (GDP) EEC vs EFTA, 1960-70.
7Concentric circles from 1973
8History
- Non-tariff barriers to trade despite customs
union - Technical standards and regulations, capital
controls, rules for public procurement, border
formalities, etc. - Single European Act of 1987
- To create "an area without internal frontiers in
which the free movement of goods, persons,
services and capital is ensured". - Single Market Programme effective from 1992
- Decision making QMV instead of unanimity
9History
- Domino Effect II
- Deeper integration in the EEC strengthened the
incentive to join - This incentive rose with further enlargements
10History
- 1992 Maastricht Treaty
- EEC ? European Union (EU)
- Monetary union and ECB by 1999
- Single currency by 2002
- Three pillar structure division of power
between national governments and EU - 1st Economics Single Market, Competition
Policy, Common Agricultural Policy, EMU/ECB - 2nd Security and Foreign Policy
- 3rd Justice and Home Affairs
- EC law applies to 1st pillar
11History
- Attempts at reform of EU institutions
- Motivation streamlining decision making before
further enlargements - Amsterdam Treaty (1997) minor changes
- Nice Treaty (2001)
- Paved way for enlargement by assigning new votes
for EU members and candidate countries - Failed to implement significant reform of
institutions
12History
- Constitutional Treaty (2004)
- Reformed QMV with expanded application
- Introduced President and Foreign Minister
- Reduced European Commission to 15 members
- EU would become a legal entity
- Rejected in referenda in France and the
Netherlands in 2005
13History
- Lisbon Treaty (2007)
- Reforms QMV and expands its application
- Introduces President and High Representative for
Foreign Affairs - Reduced European Commission to 18 members
- EU to become a legal entity
- Rejected in referendum in Ireland in 2008
- 2nd vote due on 2 Oct 2009
14Founder Countries of EEC
1958
151st enlargement 1973
1973
1958
162nd Enlargement 1981
1973
1958
1981
173rd Enlargement 1986
1973
1958
1986
1981
184th Enlargement 1995
1995
1973
1958
1986
1981
195th Enlargement 2004
1995
1973
2004
1958
Cyprus
1986
Malta
1981
206th Enlargement 2007
1995
1973
2004
1958
2007
Cyprus
1986
Malta
1981
21Facts Population
22Facts Income per capita
23Facts Size of Economies
24Elements of EU Integration
- Free trade in goods
- No tariffs, quotas or any other barriers to trade
- Common trade policy vis-Ã -vis ROW
- Undistorted competition
- State aid regulated by Commission and
anti-competitive behaviour regulated by
Commission - Approximation of laws (i.e. harmonisation)
- Taxes weak restrictions aimed at preventing
subsidies via lower tax rates for some firms no
explicit harmonisation
25Elements of EU Integration
- Unrestricted trade in services
- Single European Act, 2006 EU Services Directive
- Some barriers persist (e.g. banking regulation
may raise barriers to foreign banks) - Labour and capital market integration
- Free movement of workers (not people)
- Free movement of capital (but many loopholes
initially, until Single Market implemented)
26Elements of EU Integration
- Exchange rate and macroeconomic policy
coordination - Matter of common interest but only informal
coordination - Common agricultural policy (CAP)
- Set up only in 1962
- Social policies
- No explicit coordination
- Exception equal pay and prohibition of
labor-market discrimination
27Elements of EU Integration
- Single currency
- First (failed) attempts in 1970
- Maastricht Treaty commitment to common EU-wide
currency - Opt-outs for UK and Denmark
28Institutions
- European Council
- Prime minister or president of each EU member
plus the President of the European Commission - Sets broad guidelines for EU policy
- Meets at least twice a year (June and December)
- No active role in EU law-making decisions must
be translated into action via Treaty changes or
secondary legislation
29Institutions
- Council of Ministers
- Representatives at ministerial level from each
Member State minister for the relevant area, e.g
finance ministers on budget issues - EUs main decision-making body
- Two main decision-making rules
- Unanimity (most important issues), e.g. Treaty
changes, enlargement, multi-year budget plan - Qualified majority voting (QMV) most issues
(about 80 of all Council decisions)
30Institutions
- European Commission (EU government)
- Proposes legislation to the Council Parliament
- Administers and implement EU policies
- Monitors and enforces EU law
- Represents EU at international negotiations
- Nice Treaty each member one Commissioner
- Lisbon Treaty 2/3 of members get rotating
Commissioners - May be amended
- Commissioners not intended as national
representatives but in charge of specific area of
EU policy
31Institutions
- European Parliament
- Oversees EU institutions, especially Commission
- Formulates legislation and proposes budget,
together with Council of Ministers and Commission - 785 members (MEPs), directly elected in special
elections every 5 years - Number of MEPs per nation varies with population
but rises less than proportionally - MEPs represent local constituencies, organized
along the left-right dimension, not national lines
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34Institutions
- EC Law
- Autonomous Independent of national law
- Directly applicable has the force of law in
member states - Supranational EC law takes precedence over
national law
35Institutions
- EC Law Sources
- Primary legislation EU Treaties
- Secondary legislation (EU Law) Regulations,
decisions, directives, recommendations and
opinions - Case law ECJ decisions
36Institutions
- European Court of Justice
- ECJ settles disputes between Member States,
between EU and a Member State, between different
EU institutions, and between individuals and the
EU - Supranational power ECJ rulings cannot be
overturned by national courts
37 The Budget Expenditure (2009)
38 Evolution of Spending Priorities
39 Evolution of Spending, Level
40 Evolution of Spending, Level
41 Funding of EU Budget
- EUs budget must balance every year.
- Financing sources four main types
- Tariff revenue and Agricultural levies (tariffs
on agricultural goods) - VAT resource (in essence 1 per cent value added
tax) - GNP based (tax paid by members based on their
GNP). - Miscellaneous (e.g. taxes paid by EU employees)
42 Evolution of Funding Sources
43Contribution vs GDP
44 Funding of EU Budget
- Members contributions approximately 1 of GDP
regardless of per-capita income. - EU contributions not progressive
- e.g. richest nation, (L) pays less of its GDP
than the poorest nation (P). - Net contributions more in line with economic
development of countries - Not perfectly so
- E.g. Ireland.
45Net Contribution by Member