Stages of Economic Integration

Stages of Economic Integration

• The stages of economic integration are:
  • Free Trade Area
  • Customs Union
  • Common Market
  • Economic Union
  • Economic and Monetary Union

Free Trade Area

• States remove all customs duties and quotas on trade between them.
• Quotas are numerical limits on imports and exports.
• Customs duties are additional charges on imports and exports.

Customs Union

• Removes tariffs and quotas from trade between members.
• States apply a common external tariff to goods entering the Customs Union.
• This avoids a race to the bottom on tariffs and quotas.

Common Market

• Allows free movement of goods, services, labor, and capital.
• Aims for optimal resource allocation and efficient production.
• This includes the EU's four freedoms of goods, capital, services, and people.

Economic Union

• A combination of the Common Market and Customs Union.

Economic and Monetary Union

• Complete unification of common and monetary policy.
• Features a common currency, monetary and fiscal policy unification.
• Example: the Eurozone.

Development of the Internal Market

• The original goal was to create economic interdependence to cement peace.
• The "Common Market" began in 1957.
• The "Harmonised Model" aimed for full harmonization.
• The EU implemented issue- and sector-specific initiatives.

Development of the Internal Market: Court Influence

• The Court of Justice of the European Union (CJEU) significantly expanded the Common Market.
• The CJEU shifted towards a home country model.
• The Commission pushed for acceptance of the Court's progress, despite Member State resistance.
• In the 1980s, centre-right European governments pushed for greater liberalisation.

Single European Act (1987)

• Established the internal market as 'an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured'.
• Replaced unanimity with qualified majority voting in single market legislation to facilitate harmonisation.

Mutual Recognition

• The EU prioritized mutual recognition over complete harmonisation.
• This allowed for Member State exceptions, but national rule changes were limited by the Treaty and the CJEU.

Eurozone

• 20 Member States are part of the Monetary Union.
• It has expanded since its founding in 1999 with 11 members.
• Features a common monetary policy.

Regulation of the Internal Market

• Article 169 TFEU aims to promote consumer interests, protect health, safety, and economic interests, and promote consumer rights.
• Article 114 TEU is a key piece of legislation used to support the internal market.

Consumer Protection

• National consumer rules can impede free movement and be subject to harmonisation.
• The importance of 'market citizens' potentially outweighs other values.
• This has led to clashes between market freedoms and social values.

Key Takeaways

• The EU has multiple stages of market integration.
• The EU's internal market is defined by Article 26 TFEU and regulated by Article 114 TEU.
• The purpose of the internal market is to create economic interdependence and ensure peace.
• The internal market is a complex and evolving system.

Market Integration

• Market integration involves creating a common market across multiple states.
• It balances regulation and economic freedoms.
• There are two main models: negative integration (removing barriers) and positive integration (creating new rules and institutions).

Host Country Control

• Involves applying the rules of the country where the economic activity takes place.
• It's a typical model for economic interaction between states.
• The EU internal market goes beyond this model and includes rules on non-discrimination.

Harmonised Model

• Involves one set of rules for the entire economic market.
• These rules are set centrally.
• Products and services must comply with these rules to be freely sold within the union.
• EU harmonization allows Member States to retain some discretion.

Home Country Control

• Applies the rules of the country where a product is produced, not where it's sold.
• Requires a high level of trust between countries.
• The EU doesn't have absolute trust, and host countries can deny market access even with mutual recognition.

Consequences of Market Integration

• Raises questions about sovereignty, institutional power, and welfare protection.
• Concerns about democratic decision-making processes.
• Explores the definition, regulation, and impact of the internal market on consumers.

The Internal Market

• Defined by Article 26 of the Treaty on the Functioning of the European Union (TFEU).
• It's an ongoing obligation, not a one-time project.
• Grants power to the EU to legislate.

Internal Market and Free Movement

• Article 26 TFEU defines the internal market as an area without internal frontiers.
• Guarantees free movement of goods, persons, services, and capital.
• The application of "free movement" is complex.

EU Power To Regulate the Internal Market

• Article 114 TFEU provides the legal basis for regulating the internal market.
• This article allows harmonizing regulations, grants broad powers to the EU, but excludes fiscal provisions and worker's rights.

Tobacco Advertising

• The EU's power to regulate the internal market doesn't grant a general authority over the economy.
• Measures must eliminate obstacles to trade, address market distortions, and be connected to national laws.

Consumers and Market Integration

• Article 169 TFEU focuses on consumer protection, aiming to safeguard health, safety, and economic interests.
• This article is rarely used compared to Article 114 TFEU.
• Conflicts can arise between free movement and consumer protection.

Market Citizens

• Consumers who engage in economic activity are considered "market citizens."
• Market values can take precedence over other social values, leading to clashes between market freedoms and other social values.

Conclusion

• The EU is a real-world example of market integration.
• The Internal Market is defined by Article 26 TFEU and regulated under Article 114 TFEU.
• Market integration entails balancing regulation and economic freedoms within a complex, multi-layered framework.