02 WORKSHEET 3

02 Readings 5-6

1. The State in a World of Economic Interdepence

Economic interdepence is a consequence of specialization or the division of labor. The participants in any economic
system must belong to trading network to obatain the products they cannot produce efficiently for themselves.
Economic interdepence is a system by which many companies and nations are economically dependent upon each
other. Advanced economies often become dependent on other nations for goods and services they do not produce
themselves. In general, nations benefit from economic interdepence.

Economic interdependence is a system by which many companies are economically dependent upon each other. On a
macro-economic level, this can involve many countries being economically dependent upon each other as well. This
interdependence is a product of labor specialization, meaning that when so many products are produced in one
nation, jobs become more specialized and economic interdependence is bound to form. When this happens,
companies must become part of a trading network, and they depend upon each other to supply products that they
cannot produce themselves. One by product of economic interdependence is globalization. This is where each nation
and their economies are dependent on other nations for products and goods. For example, the United States today
depends on China to provide it with many goods.

2. Economic and Political Integration: The Case of the European Union

The European Union tax mandate remains narrow. That there was only a limited transfer of tax authority to the EU
exemplifies the failure of political and fiscal integration. Using a political economy framework, the article says and
analyzes why the heads of state rejected tax harmonization proposals in the intergovernmental conferences. The
presented findings of the original namely that resistance against tax harmonization came predominantly from low tax
countries. Moreover, the results indicate that after the accession of the central and eastern European countries the
prospects of harmonizing tax policy starkly decreased. The analysis shows that tax heterogeneity and the
enlargements have negative effects on tax integration. Based on the article, concludes by discussing how the creation
of the monetary union restructured the politics of tax Europeanization and fiscal integration.

Europe clearly stands out, as the continent’s political elites made the leap into market integration shortly after the
Second World War with the launch of the European Coal and Steel Community. Today the European Union has 27
member states, a single currency and monetary system and a supranational European Parliament with growing
legislative powers alongside the Council of Ministers, the EU legislative institution comprised of offical representatives
from national governments. The EU has evolved into a supranational polity with its own kinds of power struggles
among competing national interests, it seemed Europe’s financial crisis would yield more integration rather than less,
with plans for “fiscal union” among the 17 member states of the Eurozone to accompany monetary union. This means
the budgets of the Eurozone countries will likely be subject to approval and oversight by the European Commision,
ang long established rules that were supposed to limit budget deficits are now actually supposed to be enforced. The
European Parliament also passed legislation in September 2013 to implement closer integration and supervision of
the banking sector.

The EU is regarded by some leading scholars as having strengthened the state because it empowers the member
states to protect their interest into the international arena, enables national governments to build resources directed
toward international negotiations, and bolsters national regulatory mechanisms to fulfill the resulting international
commitments. Member states also routinely engage in democratic debates over how to position themselves in the
European Union.