Leading Economic Blocs

PRE-VIEWING:

• What stages of economic integration can you enumerate?

WHILE-VIEWING:

While watching, pay attention to the following words and expressions in context. Use them in your answers to the questions below and discussion.

• preferential access
• eliminate tariffs
• impose tariff
• complete embargo
• common currency
• fiscal policy
• discriminatory policies
• undermine the international trade rules
• potential gains of trade
• bargaining power

AFTER-VIEWING:

• Match the term with its definition:

a preferential trading area (PTA)	a common market with a common currency and a common central-bank
a free-trade area	the point of integration at which economic countries involved have no control of economic policy, full monetary union, and complete harmonization of fiscal policy
customs union	a trading bloc that gives preferential access to certain products from certain countries
common market	an agreement made between countries, where the countries agreed to trade freely among themselves but are able to trade with other countries outside the free-trade area
economic and monetary union	an agreement made between countries, where the countries agreed to trade freely among themselves, and they also agreed to adopt common external barriers against any country attempting to import into the customs union
complete economic integration	a customs union with common policies on product regulations, and free movement of goods, capital, and labor

• Describe each stage of economic integration.

• What are the advantages and disadvantages of economic integration? 

LEADING ECONOMIC BLOCS

HIGHLIGHTS

• read the passage
• focus on key terms
• summarize the information
• elaborate on the concepts:

1. The Features of an Economic Bloc
2. Market Access
3. Common Market
4. Trade Rules
5. Standards harmonisation
6. The EU bodies

KEY TERMS 

economic bloc	a set of countries which engage in international trade together, and are usually related through a free trade agreement or other association
gross domestic product (GDP)	the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period
market access	the ability of a company or country to sell goods and services across borders
customs procedures	the set of managements and operations that are carried out related to a specific customs destination
standards harmonization	technical specifications meeting the essential requirements of the EU directives
social welfare policies	aims to protect citizens who may be considered poor, unemployed, unhealthy, or marginalized from their community
common currency	money system for more than one country
representative body	a body or persons (an association, trade union, works council) chosen to make decisions or craft the policy on behalf of  a larger group
admission	the process or fact of entering or being allowed to enter an organization
per capita income	a measure of the amount of money earned per person in a nation or geographic region

The leading economic blocs are illustrated in Exhibit below. Europe has the longest experience with regional integration and is home to several economic blocs. The most important of these are the EU and the European Free Trade Association.

Exhibit: The Most Active Economic Blocs

A map presents countries with the most active economic blocs.

In 1957, six countries—Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany—formed an alliance called the European Economic Community (EEC). Its successor is today’s European Union (EU), established in 1992. The EU features 28 countries from both Eastern and Western Europe. It is the world’s most advanced and largest regional economic bloc. Home to a half billion people, the EU’s total annual GDP is about $18 trillion.

The EU has taken the following specific steps to become an economic union.

Market access. Tariffs and most nontariff barriers have been eliminated for trade in products and services. Rules of origin favor manufacturing using inputs produced in the EU.

Common market. Barriers to the cross-national movement of production factors—labor, capital, and technology—have been removed. For example, an Italian worker now has the right to take a job in Ireland, and a French company can invest freely in Spain.

Trade rules. Customs procedures and regulations have been eliminated, streamlining transportation and logistics within Europe.

Standards harmonization. Technical standards, regulations, and enforcement procedures related to products, services, and commercial activities are being harmonized. For example, where British firms once used imperial measures (pounds, ounces, and inches), they have converted to the metric system that all EU countries use.

In the long run, the EU is seeking to adopt common fiscal, monetary, taxation, and social welfare policies. Introduction of the euro—the EU’s common currency and now one of the world’s leading currencies—simplified cross-border trade and enhanced Europe’s international competitiveness. The European Central Bank is based in Luxembourg and oversees EU monetary functions.

Other EU institutions include the Council of the European Union, a representative body that makes decisions on economic policy, budgets, foreign policy, and admission of new member countries. The European Commission proposes legislation and policies and is responsible for implementing the decisions of the European Parliament and the Council of the EU. The European Parliament consists of elected representatives and develops EU legislation, supervises EU institutions, and makes decisions about the EU budget. The European Court of Justice interprets and enforces EU laws and settles legal disputes between member states.

The newest EU members are mainly in Eastern Europe. They are important, low-cost manufacturing sites for EU firms. Most of the newest EU entrants are one-time satellites of the former Soviet Union and have grown rapidly. Most are poised to achieve per-capita income levels similar to those of the EU’s wealthier countries. However, less-developed economies such as Romania, Bulgaria, and Lithuania will require years of developmental aid to catch up. In recent years, economic crises afflicted long-standing EU members such as Greece and Spain.

The EU’s Common Agricultural Policy (CAP) is a system of agricultural subsidies and programs that guarantees a minimum price to EU farmers and ranchers. The CAP consumes almost half the EU’s annual budget and complicates negotiations with the WTO for reducing global trade barriers. High import tariffs on agricultural goods harm exporters from developing economies such as Africa. The EU is working to reform the CAP, but progress has been slow.

In 2016, the United Kingdom (UK) voted to withdraw from the European Union. By a slim margin, UK voters passed the European Union Membership Referendum, commonly known as “Brexit.” The majority vote surprised the government of Prime Minister David Cameron, leading to his resignation. Many voters believed the EU central government in Belgium had too much influence over British affairs and that membership in the EU threatened UK autonomy. Some voters resented the millions of migrant workers in the UK. Brexit likely will reduce some of the advantages of free trade from which the UK had benefited under regional integration with the EU. It also will affect the status of countless migrant workers. For example, prior to Brexit the number of workers in the UK from Poland alone numbered 850,000.

In the wake of Brexit, the UK faced various options. One option was to exit from the EU altogether. Another option was to adopt an approach similar to Norway, which maintains free movement of goods, capital, and workers with the EU but is not an EU member and follows only those EU regulations accepted by the Norwegian Parliament. The Brexit vote reflects rising nationalism and a rejection of globalization. Brexit set a precedent and other European countries may seek to exit the EU.

MAPS: Full Alternative Text: Long description

The details are as follows:

EU:

Austria

Belgium

Bulgaria

Croatia

Cyprus

Czech Republic

Denmark

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

Monaco

Netherlands

Poland

Romania

San Marino

Slovakia

Slovenia

Spain Portugal

Sweden

EFTA:

Iceland

Liechtenstein

Norway

Switzerland

NATFA:

Canada

Mexico

United States of America

MERCOSUR:

Chile

Argentina

Bolivia

Brazil

Colombia

Ecuador

Paraguay

Peru

Uruguay

Venezuela

CARICOM:

Jamaica

Dominican Republic

Ecuador

Guyana

Haiti

Suriname

CAN:

Peru

Bolivia

Columbia

Venezuela

ASEAN:

Indonesia

Brunei

Cambodia

Laos

Myanmar (Burma)

Philippines

Singapore

Vietnam

APEC:

Australia

Brunei

Canada

Chile

China

China

Indonesia

Japan

Malaysia

Mexico

New Zealand

Papua New Guinea

Peru

Philippines

Russia

Singapore

South Korea

Thailand

United States of America

Vietnam

CER:

Australia

New Zealand

KEY TERMS

MATCH THE TERM WITH ITS DEFINITION:

economic bloc	a body or persons (an association, trade union, works council) chosen to make decisions or craft the policy on behalf of  a larger group
gross domestic product (GDP)	the process or fact of entering or being allowed to enter an organization
market access	technical specifications meeting the essential requirements of the EU directives
customs procedures	money system for more than one country
standards harmonization	a set of countries which engage in international trade together, and are usually related through a free trade agreement or other association
social welfare policies	the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period
common currency	the set of managements and operations that are carried out related to a specific customs destination
representative body	a measure of the amount of money earned per person in a nation or geographic region
admission	aim to protect citizens who may be considered poor, unemployed, unhealthy, or marginalized from their community
per capita income	the ability of a company or country to sell goods and services across borders

RESTORE THE SENTENCE BY FILLING IN THE KEY TERM:

1. The EU, featuring 28 countries, is the world’s most advanced and largest regional ……………...

2. Home to a half billion people, the EU’s total annual …………….. is about $18 trillion..

3. …………….. is a step when tariffs and most nontariff barriers have been eliminated for trade in products and services.

4. …………….. and regulations have been eliminated, streamlining transportation and logistics within Europe.

5. ……………… — technical standards, regulations, and enforcement procedures related to products, services, and commercial activities are being harmonized.

6. In the long run, the EU is seeking to adopt common fiscal, monetary, taxation, and ……………...

7. Introduction of the euro, the EU’s …………….., simplified cross-border trade and enhanced Europe’s international competitiveness.

8. Other EU institutions include the Council of the European Union, a …………….. that makes decisions on economic policy, budgets, foreign policy, and …………….. of new member countries.

9.Most are poised to achieve …………….. levels similar to those of the EU’s wealthier countries.

COMPLETE THE PASSAGE WITH THE WORDS FROM THE BOX:

logic of diversity national interests liberal intergovernmentalism European integration spill-over process modify qualified majority vote (QMV) compromise  neo-functionalist

Theories of integration have mainly been developed to explain 1) …………….. Europe was the region of the world, where regional integration started in the early 1950s with the European Coal and Steel Community (ECSC) in 1952. Ernest Haas theorized this experience in The Uniting of Europe (1958). The main theoretical contribution was the concept of 2) ……………... Later Lindberg used this concept to study the early years of the European Economic Community (EEC), which started its existence in 1958 (Lindberg, 1963). These early theories are usually referred to as 3) …………….. theories.

There were some efforts to apply these neo-functionalist theories to integration in other parts of the world, especially in Latin America. The integration 4) …………….. in Europe experienced a crisis in the mid-1960, when General de Gaulle instructed his ministers not to take part in meetings of the EEC Council. In the Luxembourg 5) …………….. in January 1966 the then six members of the European Communities (EC) agreed to disagree. The French insisted that decisions by a 6) ……………..could not take place, when a Member State opposed a decision because of important 7) ……………...

Some neo-functionalists tried to 8) …………….. the theory to take account of the events in Europe in the mid-60s. This included Lindberg and Scheingold in Europe’s Would-Be Polity (1970). But many students of European integration now stressed the ‘9) ……………..’ and the more intergovernmental aspects of the EC (e.g. Hoffmann, 1965, P. Taylor, 1983).

Later in the 1990s Andrew Moravcsik developed ‘10) ……………..’ to explain the process of integration in Europe, suggesting the combination of a liberal theory to explain national preference formation and an intergovernmental theory of interstate bargaining to explain substantive outcomes (Moravcsik, 1991, 1993). 

MIXED BAG

How many regional organisations (ROs) were created over time and how did they evolve 1)  in/ with respect to their size? Which differences and similarities can be observed with respect to development of formal RO policy competencies over time and between ROs? 

Answering the first question, a descriptive analysis of the Regional Organization Competencies database (ROCO) of all 76 ROs from 1945 to 2015 reveals interesting insights into 2) patterns/ samples of regional cooperation over time. First, regional cooperation takes place all over the globe. As of 2015, there were 20 ROs in Africa, 16 in the Americas, 22 in Asia, and 13 in Europe. Second, the numbers of ROs have increased from two in 1945 to 71 in 2015. The longitudinal 3) analisis/ analysis shows that there are two different waves of regional cooperation, one after the end of 4)  x/ the WWII and one after the end of 5) x/ the Cold War. Over time, the size of ROs also increased 6) in/ on average, indicating an increased attractiveness of ROs as outlets for cooperation.

With regard to the second question, the analysis shows that RO policy scopes became broader over time as the number of different formal policy 7) competencies/ competence as laid out in RO primary law (e.g. Treaties, Annexes) increased. While the average RO covered 13.5 different policy competencies in 1950, the number has increased to 53.2 in 2015. The broadening of RO policy scopes reflects two waves of regional cooperation: after the end of WWII, RO policy competencies increased incrementally, 8) while/ as after the end of the Cold War there is 9) a/ x much steeper increase of/ in the policy scope of ROs. Yet, the analysis shows that not all ROs contribute to this pattern equally, as they differ considerably in the number of policy competencies as well as the 10) breadth/ broadening of policy scopes over time.