European Integration

Liviu-George Maha

Economics and International Relations Department

Faculty of Economics and Business Administration
Alexandru Ioan Cuza University of Iasi
Syllabus
Globalization and regionalization
Economic integration: concept and stages
History and facts
Institutions and decision making
Market size and scale effects
Growth effects and factor market integration
Economic integration, labour markets and migration
EU trade policy
The Common Agricultural Policy
Location effects, economic geography and regional policy
EU competition and state aid policy
The European Neighbourhood Policy
The European monetary union
Fiscal policy and the Stability Pact
The financial markets and the euro
Romania member of the European Union
 Trends in world economy
Rapid growth in:

World trade
(exports and/or
imports)

Foreign direct
investment (FDI)

Foreign portfolio
investment

Cross-border
mergers/acquisitio
ns. Changes in trade and capital flows
Source: World Bank, UNCTAD (various years)
 Globalization different perspectives:
economists, political scientists, sociologists,
international relations specialist (1)
the process of transformation of local phenomena into global ones. It
can be described as a process by which the people of the world are
unified into a single society and function together. This process is a
combination of economic, technological, socio-cultural and political
forces (Croucher, 2003).
a widening, deepening and speeding up of interconnectedness in all
aspects of contemporary social life from the cultural to the criminal,
the financial to the spiritual (Held et al., 1999).
increasing global interconnectedness, so that events in one part of
the world are affected by, have to take account of, and also
influence, other parts of the world. It also refers to an increasing
sense of a single global whole (Tiplady, 2003).
the worldwide movement towards economic, financial, trade and
communications integration. Globalisation implies opening out
beyond local and nationalistic perspectives to a broader outlook of an
interconnected and inter-dependent world with the free transfer of
capital, goods and services across national frontiers (Business
Dictionary).
Globalization different perspectives:
economists, political scientists, sociologists,
international relations specialist (2)
refers to the shift toward a more integrated and interdependent
world economy[through] the merging of historically distinct and
separate national markets into one huge global market place (Hill,
2005).

process by which the whole world becomes a single market. This

means that goods and services, capital and labour are traded on a
worldwide basis, and information and the results of research flow
readily between countries (Black, 2002).

reflects a business orientation based on the belief that the world is

becoming more homogenous and that distinctions between
national markets are not only fading but, for some products, will
eventually disappear (Czinkota and Moffat, 1999).

...trend toward greater economic, cultural, political, and technological

interdependence among national institutions and economies.
Globalization is characterized by denationalization and
globalization is different from internationalization (Wild and Wild,
2015).
 Globaliza
Globaliza
tion of
tion of
productio
markets
n
Dispersal of
Convergence in production
buyer preferences activities
in markets around worldwide to
the world minimize costs or
maximize quality
Benefits of Globalization of
Markets
Reduces marketing costs
Creates new market opportunities
Levels uneven income streams
Local buyers needs
Global sustainability

Benefits of Globalization of
Production
Access lower-cost workers
Access technical expertise
Access production inputs
Globalisation characteristics
(1)
New markets (growing global markets in services banking,
insurance, transport; new financial markets deregulated, globally
linked, working around the clock, with action at a distance in real time,
with new instruments such as derivatives; deregulation of antitrust
laws and growth of mergers and acquisitions; global consumer
markets with global brands).

New tools of communications (Internet and electronic

communications linking many people simultaneously; cellular phones
and mobile telephony; fax machines; faster and cheaper transport by
air, rail, sea and road; computer-aided design and manufacture).

New actors (multinational corporations integrating their production

and marketing, dominating world production; the World Trade
Organization the first multilateral organization with authority to force
national governments to comply with trade rules; a growing
international network of non-governmental organizations NGOs;
regional blocs proliferating and gaining importance; more policy
coordination groups: G-7, G-8, OECD, IMF, World Bank).
Globalisation characteristics
(2)
New rules and norms (market economic policies spreading
around the world, with greater privatization and liberalization than
in earlier decades; widespread adoption of democracy as the
choice of political regime; human rights conventions and
instruments building up in both coverage and number of
signatories and growing awareness among people around the
world; consensus goals and action agenda for development;
conventions and agreements on the global environment
biodiversity, ozone layer, disposal of hazardous wastes,
desertification, climate change; multilateral agreements in trade,
taking on such new agendas as environmental and social
conditions; new multilateral agreements for services, intellectual
property, communications more binding on national governments
than any previous agreements).
Key Players in International
Business
Companies of all types and sizes and in all sorts of industries
become involved in international business, yet they vary in the
extent of their involvement.

Large companies from the wealthiest nations still dominate

international business.
But firms from emerging markets (such as Brazil, China,
India, and South Africa) now vigorously compete for global
market share.
Small and medium-sized companies are also increasingly
active in international business, largely because of advances in
technology.
A multinational corporation (MNC) is a business that has
direct investments (in the form of marketing or manufacturing
subsidiaries) abroad in multiple countries
International business competition has given rise to a new
entity, the born global firma company that adopts a global
perspective and engages in international business from or near
its inception.
Researchers have created ways to measure the extent of globalization
scientifically. One index of globalization is the one created by the KOF
Swiss Economic Institute (www.kof.ethz.ch). This index ranks nations on
23 variables within three dimensions: economic globalization (trade
and investment volumes, trade and capital restrictions), social
globalization (dissemination of information and ideas), and political
globalization (political cooperation with other countries).
Regional economic
integration
Degrees of economic and
political integration
The case for regional
integration
The case against regional
integration
The
Worlds
Main
Regional
Trading
Blocs
Integration in Europe

European Free Trade

Agreement (EFTA)

Feared a loss of
national sovereignty
Feared destructive
rivalry
Desired free-trade
gains
Cooperates with EU
 Integration in the Americas
North American Free Trade Agreement
(USA, Canada, Mexic)
Effective in January 1994
Comprises a market with 450 Effects of NAFTA
million consumers
A GDP of around $17 trillion Growing trade among the
Free Trade Agreement three participating nations
Provisions: Effect on employment and
Government procurement wages is not as easy to
practices determine
Subsidies Claims of environmental
Countervailing duties damage
Trade in services Environmental protection
Intellectual property rights efforts
Standards of health Delays in NAFTA expansion
Safety
Environment
 Central American Free Trade
Agreement (CAFTA-DR)
Established in 2006 to include
seven countries: The United
States, Costa Rica, El Salvador,
Guatemala, Honduras, Nicaragua,
and the Dominican Republic.
Combined value of goods traded
is around $39 billion
Benefits to the United States:
Reduce tariff and nontariff
barriers against U.S. exports
to the region.
Ensure that U.S. companies
are not disadvantaged by
Central American nations
trade agreements with other
countries.
Reform of Central American
nations legal and business
environments.
Support U.S. national security
Andean Community (CAN)
Comunidad Andina de
Naciones, or CAN
Four South American
countries located in the
Andes mountain range
Bolivia, Colombia, Ecuador,
and Peru
A market of around 97
million consumers
A combined GDP of about
$220 billion
Rocky beginning
Internal tariff reduction
Common external tariff
Common transport policies
Incomplete customs union
Ideological conflict
 Southern Common Market Caribbean Community and
(MERCOSUR) Common Market (CARICOM)

El Mercado Comun del Sur, or Was formed in 1973

MERCOSUR 15 full members, 5 associate
Established in 1988 members, and 8 observers
between Argentina and active
Brazil but expanded to A combined GDP of nearly $30
include Paraguay and billion
Uruguay in 1991 and A market of almost 16 million
Venezuela in 2006 people
Central
Do American
not have Common
the imports one
Associate members include
Bolivia, Chile, Colombia, anotherMarket
needs (CACM)
Ecuador, and Peru
Was formed in 1961:
Mexico has been granted
Costa Rica, El Salvador,
observer status in the bloc.
Guatemala, Honduras, and
A market of more than 275
Nicaragua
million consumers
A market of 30 million
A GDP of around $3.5
consumers
trillion
A combined GDP of about $200
A customs union
billion
Emerging as the most powerful
The common market was never
trading bloc in all of Latin
realized
 Association of Southeast Asian Asia Pacific Economic
Nations (ASEAN) Cooperation (APEC)
Formed in 1967 Formed in 1989
Ten ASEAN (www.aseansec.org) Now has 21 members
countries Account for more than 40
Indonesia, Malaysia, the percent of world trade
Philippines, Singapore, A combined GDP of about $32
Thailand, Brunei, Vietnam, trillion
Laos, Myanmar, and Aim to strengthen the
Cambodia multilateral trading system
A market of nearly 600 million Liberalizing trade and
consumers investment procedures
A GDP of nearly $2.4 trillion among member nations
Main objectives
1. Promote economic, cultural,
and social development in
the region
2. Safeguard the regions
economic and political
stability
3. Serve as a forum in which
differences can be resolved
fairly and peacefully
China, Japan, and South Korea
Stages of economic
integration around the world
Participation in key mega regionals
and OECD membership
Source: World Investment Report
(2014), Figure 7, p. xxiv.