LECTURE 1: HISTORY OF EUROPEAN INTEGRATION

INTRODUCTION

 The European Union is a project that Europe undertook to put an end to decades of
political oppression and war
 The outcomes of this project were intended to be peace, freedom and prosperity

EARLY POST-WAR PERIOD

 In 1945, people residing in nations in the EU were the victims of brutal fascist cruelty
which led to mass destruction and death
 After gruelling years of misery and suffering, people welcomed thoughts of radical
change which were previously strongly opposed
 Millions of people from each nation died during the war and GDP of all economies
declined in growth.
 It took many years for many nations such as France, Germany, Austria and Italy to
recover
 After the war food was scarce and hunger was widespread. Nations relied heavily on
humanitarian aid from organisations such as the UN Relief and Rehabilitation
Administration
 UNRRA provided emergency food, medication and offered shelter to refugees who did
not want to be repatriated
 Countries, particularly those in western Europe suffered governmental and constitutional
crises

PRIME QUESTIONS AND GUIDING IDEOLOGIES

 Three schools of thoughts emerged in the wake of the horror concerning the causes of
the war
 These schools of thought were essential for identifying a solution to prevent another war

The three schools of thought were:

1. Germany was to blame

 The idea of turning Germany into an agricultural country, pastoral in character
was proposed

2. Capitalism was to blame

 Communism was thought to be the solution based on Marxism which blamed
Capitalism for the world’s evils

3. Nationalism was to blame

 Excesses of destructive nationalism (???) was the cause and so deeper integration
in Europe was the solution
  Of course, the third school of thought prevailed among the others. However, this
took a while to put in motion since many nations were re-establishing their
economies or governments
 Military occupation was also very common during this period
 Politically, communist parties seized power in many nations during parliamentary
elections
 The UK and the USA deliberated much concerning the fate of Germany as a nation.
 They concluded that Germany would be beneficial if it were to be sculpted into a
strong economy
 During the Cold War many nations embraced the idea of European integration,
principally to stop communism from spreading in Europe

THE OEEC AND EPU

 The Marshall plan and the Organisation of European Economic Cooperation were set up
to tackle communism
 The Marshall plan was crucial to financing deficits of European countries in the EPU
 These measures were aimed at preventing communism from coming into power in many
countries such as Greece, Italy and France
 George Marshall offered financial aid in exchange for joining the programme for
economic reconstruction
 The mandate of the OEEC was to establish greater European economic integration
 Greater European economic integration was achieved by reducing intra-European trade
barriers i.e. reduced protectionism and setting up the European Payments Union
 The European Payments Union improved the intra-European system of payments

THE EUROPEAN PAYMENTS UNION

 Existed between July 1950 and December 1958

 The EPU managed the debts and surpluses of each nation. It reconciled the debts of
some nations against the surplus of other nations
 Overall, with the aim of balancing the payments of nations within the economic
cooperation
 This meant that nations were no longer indebted to each other directly, but were
indebted to the EPU instead
 The EPU was a major pioneer in achieving European economic integration by loosening
bilateral trade restrictions

 Trade liberalisation become a focus for the OEEC after 1949

 Their efforts to meet this goal was realised through removing quantitative restrictions
This resulted in:

1. Rapid growth of trade and incomes

 GDP increased exponentially
 The volume of exported manufactured goods also increased
 Particularly the expansion of intra-European exports and imports

2. Renewed mindsets of policy makers towards economic integration

 Renewed mindsets opened the door to the European union
 European Integration was now viewed as an idea that made sense
economically as well as politically

 These milestones signalled the importance of achieving economic growth

corporately among nations than competitively
 Of course, this was helped by the loosening of trade barriers which meant
that nations no longer needed to compete with each other in trade

THE DRIVE FOR DEEPER INTEGRATION

 There were concerns of whether current integration (OEEC) would prevent another intra-
European war
 As a result, many believed it necessary to make integration deeper to deem intra-
European war unthinkable
 This included making Germany militarily and economically strong which was not
received well at first

TWO STRANDS OF EUROPEAN INTEGRATION

There are two main strands of European integration – federalism and intergovernmentalism

There are presently ongoing debates concerning the excessiveness of integration in Europe

However, the following views were expressed about European integration:

1. Intra-European conflict
 Some Europeans felt that national sovereignty and the nation state –
products of European integration made the European integration
system susceptible to conflicts
 This is because nations would be competing over conflict
 Overall, to resolve this issue, the idea of embedding a federalist
structure into European integration was conjured
  A federalist structure would allow nations to exercise some powers
they possessed exclusively pre-integration

2. Closer economic cooperation

 Other Europeans, particularly the Brits thought that European
integration would lead to effective and stable government
 Closer and entrenched cooperation was ideal for achieving this goal
 This cooperation would be conducted on an intergovernmental basis
 Where national officials would be elected, possessing powers to agree
on any cooperation unanimously with other officials

 Federalism was the popular choice among nations that were severely
wrought by death and destruction during the wars

TWO EARLY EXTREMES: COUNCIL OF EUROPE AND THE ECSC

 Intergovernmentalism was the dominant ideology post war

 Many establishments existed where intergovernmentalism was weaved into the fabric of
its structure
 Examples include the Organisation of European Economic Cooperation (OEEC) and the
Council of Europe
 Intergovernmentalism favours unanimity i.e. one nation, one vote
 Federalism creeped in from 1952 with the first major stride being the Schuman Plan
created by Jean Monet
 The purpose of the Schuman plan was to render Franco-German wars materially
impossible
 Following from this, the European Coal and Steal Community was created
 Consisting of France, Germany, Belgium, Netherlands, Luxembourg and other nations
(the big six)
 Pioneers of European integration
 The ECSC represents and has become an emblem of federalism

THE EUROPEAN COAL AND STEEL COMMUNITY (ECSC)

 This initiative was launched by France and Germany in 1952

 Members that joined had to surrender their coal and steel sectors to the governing
authorities (France and Germany)
 This meant that decisions concerning pricing, trade and production were made by them
 Most nations declined because the coal and steel sector are key drivers of an economy
 This is an example of federalism at its peak
FEDERALIST TRACK: THE TREATY OF ROME

 The ECSC was a pilot for European integration

 Since it was a success this demonstrated that integration in a federalist structure was
possible
 North Atlantic Treaty Organisation (NATO) is Western Europe’s main defence
organisation
 It was convened as a response to the expansion of the Soviet
 The treaty of Rome (1957) refers to the European Economic Community (EEC) and the
European Atomic Energy Community (Euratom)
 In 1965, Euratom, EEC and the ECSC all merged to become the Economic Community
 Members of the Economic Community were committed to deep economic integration – a
customs union

This included:

1. Removing all tariffs on intra-EU trade

2. Removing all quotas on intra-EU trade
3. Adopting a common tariff on imports from non-Member nations
4. Free mobility of workers
5. Capital market integration
6. Free trade in services
7. Range of common policy

 The treaty of Rome also led to the creation of the European Parliamentary Assembly
(European Parliament), the European Court of Justice and the European Commission

INTERGOVERNMENTAL TRACK: FROM OEEC TO EFTA

 Within Europe in the late 20th century, nations belonged to either the European Economic
Community or the Organisation of European Economic Cooperation
 Nations part of the OEEC felt discriminated and marginalised due to all the trade
benefits that members of the EC were reaping
 As a result, the UK established and spearheaded the European Free Trade Association
(EFTA) as a rebuttal
 The Stockholm Convention was the founding document of the EFTA
 During this era, export trade among nations belonging to either associations surged,
whereas import trade remain relatively unchanged
EVOLUTION TO TWO CONCENTRIC CIRCLES: THE DOMINO EFFECT PART 1

 Discrimination between the two associations emerged when barriers within each
organisation began to dissolve
 The removal of barriers led to major profit opportunities for exporters in both groups
 Unfortunately, the six members EEC members significantly outperformed members of
the EFTA in terms of GDP and market size
 The EEC was far more attractive to exporters than the EFTA because of this
 This is the principal argument of deeper integration; it lowers relative competitiveness
and puts pressure on outsiders to join
 Consequently, as more join, the trade bloc enlarges – putting more pressure on
outsiders to join
 The British government were the first to react to this pressure

FIRST ENLARGEMENT AND EEC-EFTA FTAs

 Many nations in the EFTA applied for EEC membership after suffering from the
discrimination of being a non-EEC member and witnessing the many economic benefits
from members in the EEC
 Their reasons for applying ranged from political, democratic, neutrality and other
reasons
 Britain was the first EFTA member to apply for EEC membership in 1961
 However, many EFTA member countries experienced resistance in joining in EEC –
especially from Charles de Gaulle who famously said “non”
 After Charles de Gaulle retired, the countries that applied before were able to obtain
membership
 Although there was a catch. These new members of the EEC became members through
Bilateral Free Trade Agreements (FTAs)
 Consequently, the EEC expanded, and the EFTA shrunk
 By the mid-1970s, trade agreements had evolved into two concentric circles as depicted
below

Western Europe’s Trade Arrangement in the mid-1970s

A
FI
N N
U IR I
K LB S
D
K C
P L I
F H
N
L
EURO-PESSIMISM

 Euro-pessimism marks an era where European integration was marred by economic and
political crises in the 1960s and 1970s
 After the successful implementation of the customs union, European integration
stagnated

POLITICAL SHOCKS

 Charles de Gaulle was vehemently against majority voting which was a requirement of
the Treaty of Rome
 He believed that a nation should not have to follow a policy which they voted strongly
against – majority voting
 Charles de Gaulle’s strong opinion concerning the political mechanisms of European
integration convinced many others to agree the same
 As a result, the clause on majority voting in the Treaty of Rome was repealed
 Instead a voting system that favoured unanimity and consensus was adopted which
contrasted supranationalism
 This was called the Luxembourg Compromise
 Unfortunately, this meant that the EEC’s ability to make decisions was severely curbed

FAILURE OF MONETARY INTEGRATION

 Another commitment of European integration was achieving monetary stability,

particularly exchange rate stability
 The EEC established a Werner Committee, its sole purpose being to promote monetary
stability
 The Werner Plan, designed by the committee was adopted in 1971 to achieve this goal
for the European Monetary Union
 This plan outlined a step-by-step guide for European monetary union
 Unfortunately, the ECC’s plans to achieve monetary stability was interrupted by the
USA’s inflationary monetary policy which materialised throughout Europe
 Furthermore, the oil price war in the Middle East and the Iranian Revolution exacerbated
the problem for achieving a European monetary union
 Ultimately, these shocks led to stagflation – incomes falling whilst inflation rises
 Despite attempts to keep economies resilient through expansionary fiscal and monetary
policy, this just added to the already high inflation
 Monetary integration failure was a key feature of pessimism
FAILURE OF DEEPER TRADE INTEGRATION

 An attempt at deeper trade integration failed when many intra-European nations

implemented new trade barriers when tariff barriers were falling
 This was in the form of technical regulations and standards for products, supposedly to
protect consumer interests and domestic firms
 But, this inhibited intra-European trade and harmonisation of the common market
 The EU tried to remove these barriers in 1969 with its ‘General Programme’, aimed at
liberalising technical barriers to trade
 The ‘General Programme’ relied on detailed technical regulations for single products or
groups of products implemented by unanimously agreed directives
 Unanimity led to the failure of this initiative and as a result Harmonisation slowed down
 Failures at integration brought the European Construction to a halt

Evidence of decelerated harmonisation:

1. 10 years required to adopt a directive on gas containers made of unalloyed steel

2. 9.5 years required was the average delay for the 15 directives adopted en masse
in 1981
3. Thousands of technical regulations and standards were implemented by
members states each year

BRIGHT SPOTS

 The European Monetary system (EMS) was in motion from 1978 and thrived at stabilising
intra-EEC exchange rates

THE SINGLE MARKET PROGRAMME AND THE EEA

 Jacques Delors was a leading advocate of European integration

 His unflinching passion for European integration resulted in the manifestation of the
internal market promised in the Treaty of Rome
 He called completion of the internal market the ‘Single Market Programme’
 By 1987, all member states implemented single market measures through the
Community legislation the ‘Single European Act’
 THE SINGLE MARKET PROGRAMME

 The single market programme was designed to reinforce the four freedoms (free
movement of goods, services, people and capital’
 This is because despite deeper integration among European nations, intra-Economic
Community trade was far from frictionless
 This is because of the trade barriers implemented by certain member states in the form
of technical regulations and standards
 Other barriers to trade included certification, industrial regulations, capital controls,
administrative and frontier formalities and tax differences
 Overall, these measures were trade-inhibiting

The ‘Single Market Programme’ eradicated trade-inhibiting barriers in the following order:

Liberaisation of trade in Streamlining ot elimination Harmonisation of VAT rates

goods of border formalities within wide bands

Harmonisation and mutual

Liberalisation of recognition of technical
Liberalisation of factor trade
government procurement standards in prodcution,
packaging and marketing

Liberalisation of cross-
border market-entry
Removal of all capital Increase in captial market policies including mutal
controls integration recognition of approval by
national regulatory
aagencies
 The ‘Single Market Programme’ also prevented decisions from being deliberated for
extensive periods of time under the unanimity system of decision
 It changed this system of decision making to majority voting, allowing decisions to be
reached quicker

FOCUS ON CAPITAL MOBILITY

 Capital mobility is the most revolutionary feature of the ‘Single Market Programme’
 Before it, only some EU members had liberalised capital mobility whereas other nations
opposed the idea
 Unrestricted capital controls achieved by the ‘Single Market Programme’ made it
possible for EU members to achieve exchange rate stability and monetary policy stability
concurrently
 Previously, EU members would manipulate the exchange rates to achieve stabilisation of
monetary policy – thus forgoing exchange rate stabilisation

THE EEA AND THE FOURTH ENLARGEMENT

 The ‘Single European Act’ contributed to even deeper European integration for EU
nations
 However, for non-EU nations (EFTA nations), this meant that the discriminatory effects
of integration worsened
 As a result, many non-EU nations pleaded their governments to seek more integrated
trade deals with the EU
 In response to their pleas, Jacques Delors commissioned the European Economic Area
(EEA) as a way of extending the Single Market to EFTA economies
 However, this excluded agriculture and the Common External Tariff

Economies that joined the EEA had to make the following compromises:

1. Forfeit their right to reject EU legislation

2. Renege on their aversion of supranationalism

COMMUNISM’S CREEPING FAILURE AND SPECTACULAR COLLAPSE

 Communism – an economic and political system that seeks to create a classless society
in which the major means of production, such as mines and factories are owned and
controlled by the public (NATIONALISATION)
 Capitalism – an economic and political system in which a country’s trade and industry
are controlled by private owner for profit, rather than by state (PRIVITISATION)

MAASTRICHT TREATY, THE EURO AND GERMAN UNIFICATION

 Many feared that the Germans amassed a lot of political power in the EU due to the fall
of the Berlin wall, unifying the different parts of the nation. Making them a feared
economic and military powerhouse
 Jacques Delors proposed further economic and monetary integration, leading to political
integration
 He believed that this would dispel people’s concerns of the German nation
 This proposal was made flesh in the ‘Treaty of Maastricht’
 Under the ‘Treaty of Maastricht’, EU nations had to cede their monetary powers to the
supranational body – the European Central Bank
 EU member nations were also required to forgo their national currencies and adopt the
EU currency
 The ‘Treaty of Maastricht’ was a milestone of deeper EU integration since the ‘Treaty of
Rome’
 The ‘Treaty of Maastricht’ is formally known as the ‘Treaty on European Union’

The ‘Treaty of Maastricht’ also:

1. Created EU citizenship
 Right to move in and out of EU states
 Right to vote in EU and local elections
2. Guaranteed the free movement of capital
3. Strengthened EU cooperation in non-EU areas
 Security and defence policy
 Law enforcement
 Criminal justice
 Civil judicial matters
 Asylum and immigration policies
4. Enshrined the principle of subsidiarity
 This principle controlled the transfer of responsibility from member states
to the EU
5. Strengthened European Parliament’s power over EU legislation
6. Introduced the ‘Social Chapter’
 Expanded the EU’s social dimension
 Introduce policies on worker’s health and safety, workplace conditions,
equal pay and consultation of employees

MAASTRICHT RATIFICATION DIFFICULTIES

 Ratification of the Maastricht Treaty was different

 This is because this treaty had to be ratified by each member state in their national
parliament, commonly by a referendum
 Ratification was particularly difficult in Britain, France and Denmark
 However, this became possible in Denmark and France after op-outs were promised

REUNITING EAST AND WEST EUROPE

 Central and eastern European countries wanted access to the Single Market and the
North Atlantic Treaty Organisation because of the trade benefits

FIRST STEPS: THE EUROPE AGREEMENTS

 The EU were cautious of allowing CEECs membership in the EU, so they decided to form
trade partnerships instead to circumvent granting official membership
 CEECs had to sign Associative Agreements also called European Agreements establishing
bilateral free trade
 Through the bilateral trade agreements, the economies of CEECs were able to thrive,
benefiting from EU laws and practices such as competition policy and harmonisation
 Later on, the EU stopped offering European Agreements as the expansion of the east
was perceived to threaten EU special interest groups

COPENHAGEN TO COPENHAGEN: FROM 1993 ACCESSION CRITERIA TO EU MEMBERSHIP

 The European Council is located in Copenhagen

 In 1993, the EU decided to end its uncertainty about giving CEECs EU membership and
offered their associative EU countries the chance to become EU members
 However, to successfully qualify for membership these countries have to meet a criterion
called the ‘Copenhagen Criteria’ for membership

The criterion outlines that a country must:

1. Be politically stable
 Democracy
 Rule of law
 Human rights
 Respect for and protection of minorities
2. Have a functioning market economy
 Capable of handling competitive pressures and market forces within the
Union
3. Accept the Community ‘acquis’
 This means all aspects of EU law
 Undertaking membership obligations
PREPARING FOR EASTERN ENLARGEMENT: A STRING OF NEW TREATIES

 The eastern enlargement where central and eastern European countries joined the EU
created managerial problems for EU institutions
 This is because EU institutions were intended to be operated by six members states, but
the addition of new members states made this chaotic
 A number of treaties were employed to make the running of EU institutions with the EUs
growing membership more manageable such as the Amsterdam, Nice, Constitutional
and Lisbon Treaties
 In order to identify areas in EU institutions in need of reform, the European Council
produced the ‘Westendorp Report ‘
 The process of identifying problems and finding solutions for reform expanded over a
16-year period in the form of the four treaties (ANCL)

AMSTERDAM TREATY: CLEANING UP THE MAASTRITCH TREATY

 The Intergovernmental Conference of 1996 produced the Amsterdam Treaty of 1997

 The treaty offered reform on expanding the powers of the EU

It included:

1. Bigger role for the EU in social policy formation

2. Boosted powers of the European Parliament
3. Flexile integration/closer cooperation was introduced

 Though, not all the powers had been settled. The remaining powers still up for debate
were called the ‘Amsterdam Leftovers’
 ‘Amsterdam Leftovers’ concerned the size and composition of EU institutions, extension
of majority voting and Council voting rules

NICE TREATY: FAILED ATTEMPT TO REFORM EU INSTITUTIONS

 The ‘Nice Treaty’ was a failed attempt at reforming EU institutions

 This is because EU leaders were still deliberating over the ‘Amsterdam Leftovers’ –
suggested reform ideas that had not yet been settled
 The treaty faced difficulties with ratification, and this was due to the Irish’s opposition of
the treaty
 Political assurances like Irish neutrality was enough to swing their vote to accept the
Nice Treaty
 Part of the Nice Treaty was also agreeing on another Intergovernmental conference to
discuss more reform issues

The general themes for this ‘Declaration on the Future of the Union’ were:

1. Clearer separation of powers between the EU and its members

2. Clarifying the status of the Charter of Fundamental Rights proclaimed in Nice
3. Making treaties comprehensible whilst maintaining its meaning
4. Defining the role of national parliaments in the European institutions