Introduction:

Regional cooperation among developing and developed countries has the potential to support national development strategies, and to some extent fill the gaps in the global economic governance system. But in order to do so it has to extend beyond trade liberalization to include policy areas that strengthen the potential for growth and structural change in developing countries. These include macroeconomic and financial management, as well as trade support and industrial policies. There appears to be an untapped potential for closer regional cooperation among developing countries in these areas, which could also add policy options to those available at the national level. On the other hand, the trend towards North-South bilateral or regional trade agreements, resulting from a sense of frustration of some governments with the slow progress in multilateral trade negotiations and an attempt to advance liberalization in areas that are not subject to these negotiations, threatens the coherence of the multilateral trading system. It also threatens the viability of existing regional cooperation arrangements among developing countries, and, most importantly, the options available to these countries for pursuing their national development strategies. Economic integration within a national economy is associated with expanding domestic markets, a shifting pattern of employment away from rural activities and an increasing industrial division of labour that leads to a dense network of input-output linkages between sectors. Strong national institutions are also required to forge the socio-political consensus needed to mobilize and channel resources into productive investment and to manage the trade-offs incurred along a dynamic development path, including those arising from increased external integration. Developing countries seek to integrate into the world economy in the expectation that this will help accelerate output growth and productivity and improve living standards through increased trade, technology and capital flows. In order to be able to derive such benefits from external integration, similar conditions have to be fulfilled as for internal integration: they must have a certain level of local production capacity, skills and technological sophistication, an array of market supporting institutions and good infrastructure. But with the increasing interdependence of national economies in a globalizing world, national development increasingly depends on the external environment and on coherent structures in the international monetary and financial systems. Last years Trade and Development Report suggested that multilateral structures needed to be more inclusive and flexible if gains from closer integration into the world economy were to be more widely shared. And, as suggested above, new multilateral disciplines are necessary, particularly in the area of international finance, to achieve more balanced outcomes. However, multilateral arrangements are not the only option for fashioning collective and coordinated responses to the challenges confronting developing countries in an increasingly interdependent world economy. Indeed, following the failure of the international financial institutions to manage the financial shocks and crises towards the end of the 1990s, and given the slow progress of the Doha Round of multilateral trade negotiations, regional arrangements have assumed a more prominent place on the international development agenda.

Regional economic cooperation occurs in various forms and degrees, and is in general aimed at increasing cross-border linkages and deepening interpenetration of economic activity for the mutual benefit of economies within a geographic region. A distinction is frequently made between policy induced integration, which is also called regionalism and involves formal economic cooperation arrangements, and market-driven integration, also termed regionalization, which is spurred by regional growth dynamics, the emergence of international production networks and related FDI flows. Recognizing that multilateral disciplines could lead to a narrowing of national policy space for developing countries, regional economic cooperation can provide some means to help countries cope better with globalization. From this perspective, regional institutions could fill gaps in global economic governance structures. The form that such cooperation takes will depend not only on the specific historical, geographical and political circumstances in a region, but also on the relative weight given to market forces and State intervention a choice that can influence economic policies at the national and global levels. Over the past two and half decades these policies have been based on the belief that market liberalization and opening up to international trade and finance would lead to the best possible factor allocation in general, and raise productivity and accelerate technological upgrading in developing countries, in particular. This tendency to give priority to market forces in determining factor allocation is reflected in the rapidly increasing number of regional and bilateral free trade agreements (FTAs) or preferential trade agreements (PTAs) concluded since the early 1990s. The number of trade agreements notified to the GATT/WTO increased from 20 in 1990 to 86 in 2000 and to 159 in 2007. The agreements concluded over the past 20 years have been mainly bilateral, and primarily between developing and developed countries. They have increasingly included provisions aimed at deep integration, which involves additional elements for harmonizing national policies in line with a reform agenda that favours greater freedom for market forces thus also promoting the freedom of movement of TNCs and reduces options for government intervention. This trend, combined with the increasing number of FTAs and RTAs involving countries from different geographical regions, characterizes what has come to be labelled as new regionalism. This term is somewhat misleading, since most of the trade agreements are bilateral and involve countries that are not necessarily in the same geographical region.

Globalisation:
Globalization (or globalisation) describes an ongoing process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of communication and trade. The term is sometimes used to refer specifically to economic globalization: the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology. However, globalization is usually recognized as being driven by a combination of economic, technological, socio-cultural, political, and biological factors. The term can also refer to the transnational circulation of ideas, languages, or popular culture through acculturation. To make the globalization effective for countries the countries of different regeion made different econonic integration.

Economic Integration:
Economic integration is best viewed as a spectrum with the various integrative agreements in effect today lying in the middle of this spectrum. The level of integration defines the nature and degree of economic links among countries. For example, International agreements on trade policies belong to the international cooperation, while the removal of trade barriers is an act of economic integration. So the main characteristic of economic integration is, thus, the abolition of discrimination within an area. Agreement between countries in a geographic region to reduce and ultimately remove tariff and non tariff barriers to the free flow of good, services and factors of production between each other is known as regional economic integration which follows the proof of Comparative Advantage. Europe takes the lead on REI/RTAs. Some examples of economic integration are as follows European Union (EU) North American Free Trade Agreement (NAFTA) South Asian Free Trade Agreement (SAFTA) SAARC ASEAN And so on.

The European Union

The European Economic Community (EEC), also known as the European Common Market (ECM) or the European Community (EC) and now as European Union ( EU), is by far the most successful of the regional economic integration schemes. The European Union (EU) is an economic and political union of 27 member states which are located primarily in Europe. Committed to regional integration, the EU was established by the Treaty of Maastricht in 1993 upon the foundations of the European Communities. With over 500 million citizens, the EU combined generated an estimated 28% share (US$ 16.5 trillion) of the nominal and about 21% (US$14.8 trillion) of the PPP gross world product in 2009. The EU has developed a single market through a standardised system of laws which apply in all member states, and ensures the free movement of people, goods, services, and capital, including the abolition of passport controls by the Schengen Agreement between 22 EU states. It maintains common policies on trade, agriculture, fisheries and regional development. Sixteen member states have adopted a common currency, the euro, constituting the eurozone. As a legal personality the EU is able to conclude treaties with countries and enacts legislation in justice and home affairs. It has devised the Common Foreign and Security Policy, thus developing a limited role in European defence and foreign policy. Permanent diplomatic missions of the EU are established around the world and representation at the United Nations, WTO, G8 and G-20 is maintained. The EU operates through a hybrid system of supranationalism and intergovernmentalism. In certain areas, decisions are taken by independent supranational institutions, while in others, they are made through negotiation between member states. Important institutions of the EU include the European Commission, the Council of the European Union, the European Council, the Court of Justice of the European Union, and the European Central Bank. is EU citizens elected the European Parliament every five years. The EU traces its origins from the European Coal and Steel Community formed among six countries in 1951 and the Treaty of Rome formed in 1957 by the same states. Since then, it has grown in size through enlargement, and in power through the addition of policy areas to its remit. The last amendment to the constitutional basis of the EU came into force in 2009 and was the Lisbon Treaty, by virtue of which the Charter of Fundamental Rights of the European Union was elevated to legally binding status.

History of EU:
After World War II, moves towards European integration were seen by many as an escape from the extreme forms of nationalism which had devastated the continent. One such attempt to unite Europeans was the European Coal and Steel Community which, while having the modest aim of centralised control of the previously national coal and steel industries of its member states, was declared to be "a first step in the federation of Europe". The originators and supporters of the Community include Jean Monnet, Robert Schuman, Paul Henri Spaak, and Alcide de Gasperi. The founding members of the Community were Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany.[24] In 1957, these six countries signed the Treaties of Rome, which extended the earlier cooperation within the European Coal and Steel Community and created the European Economic Community, (EEC) establishing a customs union and the European Atomic Energy Community (Euratom) for cooperation in developing nuclear energy. In 1967 the Merger Treaty created a single set of institutions for the three communities, which were collectively referred to as the European Communities (EC), although commonly just as the European Community. In 1973, the Communities enlarged to include Denmark, Ireland, and the United Kingdom. Norway had negotiated to join at the same time but Norwegian voters rejected membership in a referendum and so Norway remained outside. In 1979, the first direct, democratic elections to the European Parliament were held. Greece joined in 1981, and Spain and Portugal in 1986. In 1985, the Schengen Agreement led the way toward the creation of open borders without passport controls between most member states and some non-member states. In 1986, the European flag began to be used by the Community[30] and the Single European Act was signed.

The Iron Curtain's fall enabled eastward enlargement. (Berlin Wall)

In 1990, after the fall of the Iron Curtain, the former East Germany became part of the Community as part of a newly united Germany. With enlargement towards Eastern and Central Europe on the agenda, the Copenhagen criteria for candidate members to join the European Union were agreed. The European Union was formally established when the Maastricht Treaty came into force on 1 November 1993, and in 1995 Austria, Sweden, and Finland joined the newly established EU. In 2002, euro notes and coins replaced national currencies in 12 of the member states. Since then, the eurozone has increased to encompass sixteen countries. In 2004, the EU saw its biggest enlargement to date when Malta, Cyprus, Slovenia, Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovak Republic, and Hungary joined the Union. On 1 January 2007, Romania and Bulgaria became the EU's newest members. In the same year Slovenia adopted the euro, followed in 2008 by Cyprus and Malta, and by Slovakia in 2009. In June 2009, the 2009 Parliament elections were held leading to a renewal of Barroso's Commission Presidency, and in July 2009 Iceland formally applied for EU membership. On 1 December 2009, the Lisbon Treaty entered into force after a protracted and controversial birth. This reformed many aspects of the EU but in particular created a permanent President of the European Council, the first of which is Herman van Rompuy, and a strengthened High Representative, Catherine Ashton.

Member states:
The European Union is composed of 27 sovereign Member States: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. The Union's membership has grown from the original six founding statesBelgium, France, (then-West) Germany, Italy, Luxembourg and the Netherlandsto the present day 27 by successive enlargements as countries acceded to the treaties and by doing so, pooled their sovereignty in exchange for representation in the institutions. To join the EU a country must meet the Copenhagen criteria, defined at the 1993 Copenhagen European Council. These require a stable democracy that respects human rights and the rule of law; a functioning market economy capable of competition within the EU; and the acceptance of the obligations of membership, including EU law. Evaluation of a country's fulfillment of the criteria is the responsibility of the European Council.

No member state has ever left the Union, although Greenland (an autonomous province of Denmark) withdrew in 1985. The Lisbon Treaty now provides a clause dealing with how a member leaves the EU. There are four official candidate countries, Croatia, Iceland, Macedonia, and Turkey. Albania, Bosnia and Herzegovina, Montenegro, and Serbia are officially recognised as potential candidates. Kosovo is also listed as a potential candidate but the European Commission does not list it as an independent country because not all member states recognise it as an independent country separate from Serbia. Four Western European countries that have chosen not to join the EU have partly committed to the EU's economy and regulations: Iceland, which is a candidate country, Liechtenstein and Norway, which are a part of the single market through the European Economic Area, and Switzerland, which has similar ties through bilateral treaties. The relationships of the European microstates, Andorra, Monaco, San Marino and the Vatican include the use of the euro and other areas of co-operation.

Fig: Countries of EU

Organizations of EU:
The institutions of the EU operate solely within those competencies conferred on it upon the treaties and according to the principle of subsidiarity (which dictates that action by the EU should only be taken where an objective cannot be sufficiently achieved by the member states alone). Law made by the EU institutions is passed in a variety of forms, primarily that which comes into direct force and that which must be passed in a refined form by national parliaments. Competencies in scrutinising and amending legislation are divided equally, with some exceptions, between the European Parliament and the Council of the European Union while executive tasks are carried out by the European Commission and in a limited capacity by the European Council (not to be confused with the aforementioned Council of the European Union). The interpretation and the application of EU law and the treaties are ensured by the Court of Justice of the European Union. There are also a number of ancillary bodies which advise the EU or operate in a specific area.

European Council

The European Council gives direction to the EU, and convenes at least four times a year. It comprises the President of the European Council, the President of the Commission and one representative per member state; either its head of state or head of government. The European Council has been described by some as the Union's "supreme political authority".[49] It is actively involved in the negotiation of the treaty changes and defines the EU's policy agenda and strategies. The European Council uses its leadership role to sort out disputes between member states and the institutions, and to resolve political crises and disagreements over controversial issues and policies. It acts externally as a "collective Head of State" and ratifies important documents (e.g. international agreements and treaties). On 19 November 2009, Herman Van Rompuy was chosen as the first permanent President of the European Council. On 1 December 2009, the Treaty of Lisbon entered into force and he assumed office. Ensuring the external representation of the EU,[50] driving consensus and settling divergences among members are tasks for the President both during the convocations of the European Council and in the time periods between them. The European Council should not be mistaken for the Council of Europe, an international organisation independent from the EU.

Commission
The European Commission acts as the EU's executive arm and is responsible for initiating legislation and the day-to-day running of the EU. The commission is also seen as the motor of European integration. The Commission operates as a cabinet government, with 27 Commissioners for different areas of policy, one from each member state, though Commissioners are bound to represent the interests of the EU as a whole rather than their home state. One of the 27 is the Commission President (currently Jos Manuel Duro Barroso) appointed by the European Council. The other 26 Commissioners are subsequently appointed by the Council of the European Union in agreement with the nominated President, and then the 27 Commissioners as a single body are subject to a vote of approval by the European Parliament. After the President, the most prominent Commissioner is the High Representative of the Union for Foreign Affairs and Security Policy who is ex-officio Vice President of the Commission.

Parliament
The European Parliament (EP) forms one half of the EU's legislature (the other half is the Council of the European Union, see below). The 736 (soon to be 751) Members of the European Parliament (MEPs) are directly elected by EU citizens every five years. Although MEPs are elected on a national basis, they sit according to political groups rather than their nationality. Each country has a set number of seats and in some cases is divided into sub-national constituencies. The Parliament and the Council of the European Union pass legislation jointly in nearly all areas under the ordinary legislative procedure. This also applies to the EU budget. Finally, the Commission is accountable to Parliament, requiring its approval to take office, having to report back to it and subject to motions of censure from it. The President of the European Parliament carries out the role of speaker in parliament and represents it externally. The EP President and Vice Presidents are elected by MEPs every two and a half years.

The ordinary legislative procedure of the European Union.

Council
10

The Council of the European Union (also called the "Council" and sometimes referred to as the "Council of Ministers") forms the other half of the EU's legislature. It consists of a government minister from each member state and meets in different compositions depending on the policy area being addressed. Notwithstanding its different compositions, it is considered to be one single body. In addition to its legislative functions, the Council also exercises executive functions in relations to the Common Foreign and Security Policy.

Courts
The judicial branch of the EUformally called the Court of Justice of the European Unionconsists of three courts: the Court of Justice, the General Court, and the European Union Civil Service Tribunal. Together they interpret and apply the treaties and the law of the EU. The Court of Justice primarily deals with cases taken by member states, the institutions, and cases referred to it by the courts of member states. The General Court mainly deals with cases taken by individuals and companies directly before the EU's courts, [58] and the European Union Civil Service Tribunal adjudicates in disputes between the European Union and its civil service. Decisions from the General Court can be appealed to the Court of Justice but only on a point of law.

Competences
The member states of the EU retain all powers not explicitly handed to the Union, as in most federations. However in some areas the EU does not have exclusive competence, it only plays a supporting role. In such middle ground member states may enact legislation only where the EU has not, or they may elaborate the laws of the EU. Different competencies may also be used in different ways. For example, on foreign and defence issues the Parliament has a smaller role and the Council decides by unanimity rather than by majority. The distribution of competences in various policy areas between Member States and the Union is divided in the following three categories:

11

Exclusive competence
The Union has exclusive competence to make directives and conclude international agreements when provided for in a Union legislative act. the customs union the establishing of the competition rules necessary for the functioning of the internal market monetary policy for the Member States whose currency is the euro the conservation of marine biological resources under the common fisheries policy

Shared competence
Member States cannot exercise competence in areas where the Union has done so.

Supporting competence
The Union can carry out actions to support, coordinate or supplement Member States' actions.

common commercial policy

the internal market social policy, for the aspects defined in this Treaty economic, social and territorial cohesion agriculture and fisheries, excluding the conservation of marine biological resources environment consumer protection transport trans-European networks energy the area of freedom, security and justice common safety concerns in public health matters, for the aspects defined in this Treaty

the protection and improvement of human health industry culture tourism education, youth, sport and vocational training civil protection (disaster prevention) administrative cooperation

12

Working Procedure of EU:

I. The decision-making triangle The European Union is more than just a confederation of countries, but it is not a federal state. It is, in fact, a new type of structure that does not fall into any traditional legal category. Its political system is historically unique and has been constantly evolving over more than 50 years. The Treaties (known as primary legislation), are the basis for a large body of secondary legislation which has a direct impact on the daily lives of EU citizens. The secondary legislation consists mainly of regulations, directives and recommendations adopted by the EU institutions. These laws, along with EU policies in general, are the result of decisions taken by the institutional triangle made up of the Council (representing national governments), the European Parliament (representing the people) and the European Commission (a body independent of EU governments that upholds the collective European interest). (a) The Council of the European Union and the European Council The Council of the European Union (also known as the Council of Ministers) is the EUs main decision-making body. The EU member states take it in turns to hold the Council Presidency for a six-month period. Every Council meeting is attended by one minister from each EU country. Which ministers attend a meeting depends on which topic is on the agenda: foreign affairs, agriculture, industry, transport, the environment, etc. The Council has legislative power, which it shares with the European Parliament under the co-decision procedure. In addition to this, the Council and the Parliament share equal responsibility for adopting the EU budget. The Council also concludes international agreements that have been negotiated by the Commission. According to the Treaties, the Council has to take its decisions either by a simple majority vote, a qualified majority vote or unanimously, depending on the subject to be decided. The Council has to agree unanimously on important questions such as amending the Treaties, launching a new common policy or allowing a new country to join the Union. In most other cases, qualified majority voting is used. This means that a Council decision is adopted if a specified minimum number of votes are cast in its favour. The number of votes allocated to each EU country roughly reflects the size of its population.

13

Number of votes for each country in the Council Germany, France, Italy and the United Kingdom 29 Spain and Poland 27 Romania 14 Netherlands 13 Belgium, Czech Republic, Greece, Hungary and Portugal 12 Austria, Bulgaria and Sweden 10 Denmark, Ireland, Lithuania, Slovakia and Finland 7 Estonia, Cyprus, Latvia, Luxembourg and Slovenia 4 Malta 3 Total: 345 A minimum of 255 votes out of 345 (73.9 %) is required to reach a qualified majority. In addition:

a majority of member states (in some cases two thirds) must approve the decision, and any member state may ask for confirmation that the votes cast in favour represent at least 62 % of the EUs total population

The European Council meets, in principle, four times a year. It is chaired by the president or prime minister of the country holding the presidency of the Council of the European Union at the time. The President of the European Commission attends as a full member. Under the Treaty of Maastricht, the European Council officially became an initiator of the Unions major policies and was empowered to settle difficult issues on which ministers meeting in the Council of the European Union fail to agree. The European Council also deals with pressing international issues through the common foreign and security policy (CFSP), which is intended to allow the EU to speak with one voice on diplomatic questions. (b) The European Parliament The European Parliament is the elected body that represents the EUs citizens. It exercises political supervision over the EUs activities and takes part in the legislative process. Since 1979, members of the European Parliament (MEPs) have been directly elected, by universal suffrage, every five years.

Number of seats in the European Parliament per country 2007 14

09 Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom Total 18 24 18 6 24 14 6 14 78 99 24 24 13 78 9 13 6 5 27 54 24 35 14 7 54 19 78 785

15

The European Parliament normally holds its plenary sessions in Strasbourg and any additional sessions in Brussels. It has 20 committees which do the preparatory work for plenary sessions, and a number of political groups that usually meet in Brussels. The General Secretariat is based in Luxembourg and Brussels. The Parliament takes part in the legislative work of the EU at three levels:

Under the cooperation procedure , introduced by the Single European Act in 1987, the European Parliament can give its opinion on draft directives and regulations proposed by the European Commission, which is asked to amend its proposals to take account of Parliaments position. Since 1987, there has also been the assent procedure , under which the European Parliament must give its assent to international agreements negotiated by the Commission and to any proposed enlargement of the European Union. The 1992 Treaty of Maastricht introduced the co-decision procedure , which puts the Parliament on an equal footing with the Council when legislating on a whole series of important issues including the free movement of workers, the internal market, education, research, the environment, trans-European networks, health, culture, consumer protection, etc. The European Parliament has the power to throw out proposed legislation in these fields if an absolute majority of

16

members of Parliament vote against the Councils common position. The Treaty has made provision for a conciliation procedure. The European Parliament also shares, with the Council, equal responsibility for adopting the EU budget. The Parliament can reject the proposed budget, and it has already done so on several occasions. When this happens, the entire budget procedure has to be re-started. The European Commission proposes the draft budget, which is then debated by the Council and the European Parliament. Parliament has made full use of its budgetary powers to influence EU policymaking. Last but not least, the European Parliament exercises democratic supervision over the Union. It has the power to dismiss the Commission by adopting a motion of censure. This requires a two-thirds majority. It also supervises the day-to-day management of EU policies by putting oral and written questions to the Commission and the Council. Finally, the President of the European Council reports to the Parliament on the decisions taken by the Council. (c) The European Commission The Commission is the third part of the institutional triangle that manages and runs the European Union. Its members are appointed for a five-year term by agreement between the member states, subject to approval by the European Parliament. The Commission is answerable to the Parliament, and the entire Commission has to resign if the Parliament passes a motion of censure against it. Since 2004, the Commission has been made up of one Commissioner from each member state. The Commission enjoys a substantial degree of independence in exercising its powers. Its job is to uphold the common interest, which means that it must not take instructions from any national EU government. As Guardian of the Treaties, it has to ensure that the regulations and directives adopted by the Council and Parliament are being implemented in the member states. If they are not, the Commission can take the offending party to the Court of Justice to oblige it to comply with EU law. As the EUs executive arm, the Commission implements the decisions taken by the Council in areas such as the common agricultural policy. It has wide powers to manage the EUs common policies, such as research and technology, overseas aid, regional development, etc. It also manages the budget for these policies. The Commission is assisted by a civil service made up of 46 directorates-general (DGs) and services, which are mainly based in Brussels and Luxembourg.

17

II. Other institutions and bodies

(a) The Court of Justice The Court of Justice of the European Communities, located in Luxembourg, is made up of one judge from each EU country, assisted by eight advocates-general. They are appointed by joint agreement of the governments of the member states for a renewable term of six years. Their independence is guaranteed. The Courts role is to ensure that EU law is complied with, and that the Treaties are correctly interpreted and applied. (b) The Court of Auditors The Court of Auditors in Luxembourg was established in 1975. It has one member from each EU country, appointed for a term of six years by agreement between the member states following consultation of the European Parliament. It checks that all the European Unions revenue has been received and all its expenditure incurred in a lawful and regular manner and that the EU budget has been managed soundly. (c) The European Economic and Social Committee When taking decisions in a number of policy areas, the Council and Commission consult the European Economic and Social Committee (EESC). Its members represent the various economic and social interest groups that collectively make up organised civil society, and are appointed by the Council for a four-year term. (d) The Committee of the Regions The Committee of the Regions (CoR) was established under the Treaty on European Union and consists of representatives of regional and local government proposed by the member states and appointed by the Council for a four-year term. Under the Treaty, the Council and Commission must consult the CoR on matters of relevance to the regions, and it may also issue opinions on its own initiative. (e) The European Investment Bank The European Investment Bank (EIB), based in Luxembourg, provides loans and guarantees to help the EUs less developed regions and to help make businesses more competitive. (f) The European Central Bank The European Central Bank (ECB), based in Frankfurt, is responsible for managing the euro and the EUs monetary policy.

18

Different policies of EU:

I. Solidarity policies The main purpose of the solidarity policies is to support the completion of the single market, and to correct any imbalances by means of structural measures to help regions lagging behind or industrial sectors encountering difficulties. The need for solidarity between EU countries and between regions became even more acute following the recent entry of 12 newcomers with incomes well below the EU average. The EU must also play its part in helping to restructure sectors of the economy, which have been badly affected by fast-growing international competition. (a) Regional aid The EUs regional policy is based on transfers of funds from rich to poor countries. The money is used to boost development in regions lagging behind, to rejuvenate industrial regions in decline, to help young people and the long-term unemployed find work, to modernise farming and to help less-favoured rural areas. The funds earmarked for regional activities in the 200713 budget are targeted at three objectives.

Convergence. The aim here is to help the least-developed countries and regions catch up more quickly with the EU average by improving conditions for growth and employment. This is done by investing in physical and human capital, innovation, the knowledge society, adaptation to change, the environment and administrative efficiency. Regional competitiveness and employment. The objective is to increase the competitiveness, employment levels and attractiveness of regions other than the least-developed ones. The way to make this happen is to anticipate economic and social changes and promote innovation, entrepreneurship, environmental protection, accessibility, adaptability and the development of inclusive job markets. European territorial cooperation. The aim of this new objective is to increase cross-border, transnational and interregional cooperation. It aims to promote joint solutions to problems that are shared by neighbouring authorities in sectors such as urban, rural and coastal development, the cultivation of economic relations, and networking between small and medium-sized enterprises (SMEs).

These objectives will be financed by specific EU funds, which will top up or stimulate investment by the private sector and by national and regional government. These funds are known as the Structural Funds and the Cohesion Fund.

19

The European Regional Development Fund (ERDF) is the first Structural Fund and provides funding to strengthen economic, social and territorial cohesion by reducing differences between regions and supporting the structural development and adjustment of regional economies, including the redevelopment of declining industrial regions. The European Social Fund (ESF), the second Structural Fund, provides funding for vocational training and job-creation initiatives. In addition to the Structural Funds, there is a Cohesion Fund, which is used to finance transport infrastructure and environmental projects in EU countries whose GDP per capita is lower than 90 % of the EU average.

(b) The common agricultural policy (CAP) The aims of the CAP, as set out in the original Treaty of Rome from 1957, have largely been achieved: a fair standard of living has been ensured for the farming community; markets have been stabilised; supplies reach consumers at reasonable prices; farming infrastructure has been modernised. Other principles adopted over the course of time have also worked well. Consumers enjoy security of supply and the prices of agricultural products are kept stable, protected from fluctuations on the world market. However, the CAP has been a victim of its own success. Production grew far faster than consumption, placing a heavy burden on the EU budget. In order to resolve this problem, agriculture policy had to be redefined. This reform is beginning to show results. Production has been curbed. Farmers are being encouraged to use sustainable farming practices that safeguard the environment, preserve the countryside and contribute to improving food quality and safety. The new role of the farming community is to ensure a certain amount of economic activity in every rural area and to protect the diversity of Europes countryside. This diversity and the recognition of a rural way of life people living in harmony with the land are an important part of Europes identity. The European Union wants the World Trade Organisation (WTO) to put more emphasis on food quality, the precautionary principle and animal welfare. The European Union has also begun reforming its fisheries policy. The aim here is to reduce the overcapacity in fishing fleets, to preserve fish stocks and to provide financial assistance to allow fishing communities to develop other economic activities. (c) The social dimension The aim of the EUs social policy is to correct the most glaring inequalities in European society. The European Social Fund (ESF) was established in 1961 to promote job creation and help workers move from one type of work and/or one geographical area to another.

20

Financial aid is not the only way in which the EU seeks to improve social conditions in Europe. Aid alone could never solve all the problems caused by economic recession or by regional under-development. The dynamic effects of growth must, above all, encourage social progress. This goes hand in hand with legislation that guarantees a solid set of minimum rights. Some of these rights are enshrined in the Treaties, e.g. the right of women and men to equal pay for equal work. Others are set out in directives concerning the protection of workers (health and safety at work) and essential safety standards. In 1991, the Maastricht European Council adopted the Community Charter of Basic Social Rights, setting out the rights that all workers in the EU should enjoy: free movement; fair pay; improved working conditions; social protection; the right to form associations and to undertake collective bargaining; the right to vocational training; equal treatment of women and men; worker information, consultation and participation; health protection and safety at the workplace; protection for children, the elderly and the disabled. At Amsterdam in June 1997, this Charter became an integral part of the Treaty and is now applicable in all the member states. II. Innovation policies The European Unions activities impact on the day-to-day life of its citizens by addressing the real challenges facing society: environmental protection, health, technological innovation, energy, etc. (a) The environment and sustainable development The cornerstone of EU environmental activity is an action programme entitled Environment 2010: our future, our choice. This covers the period from 2001 to 2010 and emphasises the need to:

mitigate and slow down climate change and global warming; protect natural habitats and wild fauna and flora; deal with problems linked to environment and health; preserve natural resources and manage waste efficiently.

Throughout the period covered by this programme and the five programmes preceding it, and in more than 30 years of setting standards, the EU has put in place a comprehensive system of environmental protection. The problems being tackled are extremely varied: noise, waste, the protection of natural habitats, exhaust gases, chemicals, industrial accidents, the cleanliness of bathing water and the creation of a European information and assistance network for emergencies, which would take action in the event of environmental disasters such as oil spills or forest fires.

21

More recently, concerns about the health effects of pollution have been examined in an environment and health action plan for the 200410 period. This plan establishes the link between health, the environment and research policy. European regulation provides the same level of protection throughout the EU, but is flexible enough to take account of local circumstances. It is also constantly being updated. For example, it has been decided to rework the legislation concerning chemicals and replace earlier rules, which were developed on a piecemeal basis, with a single system for the registration, evaluation and authorisation of chemicals (REACH). This system is based on a central database being run by a new European Chemicals Agency, located in Helsinki. The aim is to avoid contamination of the air, water, soil or buildings, to preserve biodiversity and to improve the health and safety of EU citizens while at the same time maintaining the competitiveness of European industry. (b) Technological innovation The founders of the European Union rightly saw that Europes future prosperity would depend on its ability to remain a world leader in technology. They saw the advantages to be gained from joint European research. So, in 1958, alongside the EEC, they established Euratom the European Atomic Energy Community. Its aim was for EU countries together to exploit nuclear energy for peaceful purposes. As part of this, the Joint Research Centre (JRC) was created consisting of nine institutes at four locations: Ispra (Italy), Karlsruhe (Germany), Petten (the Netherlands) and Geel (Belgium). However, as innovation gathered pace, European research had to diversify, bringing together as wide a variety of scientists and research workers as possible. The EU had to find new ways of funding their work and new industrial applications for their discoveries. Joint research at EU level is designed to complement national research programmes. It focuses on projects that bring together a number of laboratories in several EU countries. It also supports fundamental research in fields such as controlled thermonuclear fusion (a potentially inexhaustible source of energy for the 21st century). Moreover, it encourages research and technological development in key industries such as electronics and computers, which face stiff competition from outside Europe. The main vehicle for funding EU research is a series of framework programmes. The seventh research and technological development framework programme covers the 200713 period. The biggest share of the 50 billion plus budget will go on areas like health, food and agriculture, information and communications technology, nanosciences, energy, the environment, transport, security and space and socioeconomic sciences. Additional programmes will promote ideas, people and capacities, via research work at the frontiers of knowledge, support for researchers and their career development and international cooperation.

22

(c) Energy Fossil fuels oil, natural gas and coal account for 80 % of energy consumption in the EU. A large and growing proportion of these fossil fuels are imported from outside the EU. At present, 50 % of gas and oil is imported, and this dependence could grow to 70 % by 2030. The EU will thus be more vulnerable to cuts in supply or price hikes caused by international crises. Another reason to reduce its consumption of fossil fuels is to reverse the process of global warming. Various steps will have to be taken in future, such as saving energy by using it more intelligently, developing alternative energy sources(particularly renewable energy sources in Europe), and increasing international cooperation. Energy consumption could fall by one fifth by 2020 if consumers changed their behaviour and if technologies that improve energy efficiency were fully used. III. Paying for Europe: the EU budget To fund its policies, the European Union has an annual budget of more than 120 billion. This budget is financed by what is called the EUs own resources, which cannot exceed an amount equivalent to 1.24 % of the total gross national income of all the member states. These resources are mainly drawn from:

customs duties on products imported from outside the EU, including farm levies; a percentage of the value-added tax applied to goods and services throughout the EU; contributions from the member states in line with their respective wealth.

Each annual budget is part of a seven-year budget cycle known as the financial perspective. The financial perspectives are drawn up by the European Commission and require unanimous approval from the member states and negotiation and agreement with the European Parliament. Under the 200713 financial perspective, the total budget for this period is 864.4 billion.

23

Some major steps taken by EU:

1. The European Coal and Steel Community is established by the six founding members On 9 May 1950, the Schuman Declaration proposed the establishment of a European Coal and Steel Community (ECSC), which became reality with the Treaty of Paris of 18 April 1951. This put in place a common market in coal and steel between the six founding countries (Belgium, the Federal Republic of Germany, France, Italy, Luxembourg and the Netherlands). The aim, in the aftermath of World War Two, was to secure peace between Europes victorious and vanquished nations and bring them together as equals, cooperating within shared institutions.

On 9 May 1950, French Foreign Minister Robert Schuman first publicly put forward the ideas that led to the European Union. So 9 May is celebrated as the EU's birthday. 2. The Treaty of Rome establishes a common market The Six then decided, on 25 March 1957 with the Treaty of Rome, to build a European Economic Community (EEC) based on a wider common market covering a whole range of goods and services. Customs duties between the six countries were completely abolished on 1 July 1968 and common policies, notably on trade and agriculture, were also put in place during the 1960s.

24

3. The Community expands to nine member statesand develops its common policies So successful was this venture that Denmark, Ireland and the United Kingdom decided to join the Community. This first enlargement, from six to nine members, took place in 1973. At the same time, new social and environmental policies were implemented, and the European Regional Development Fund (ERDF) was established in 1975. 4. The first direct elections to the European ParliamentJune 1979 saw a decisive step forward for the European Community, with the first elections to the European Parliament by direct universal suffrage. These elections are held every five years. 5. The first Mediterranean enlargement In 1981, Greece joined the Community, followed by Spain and Portugal in 1986. This strengthened the Communitys presence in southern Europe and made it all the more urgent to expand its regional aid programmes. 6. Completion of the single market The worldwide economic recession in the early 1980s brought with it a wave of europessimism. However, hope sprang anew in 1985 when the European Commission, under its President Jacques Delors, published a White Paper setting out a timetable for completing the European single market by 1 January 1993. This ambitious goal was enshrined in the Single European Act, which was signed in February 1986 and came into force on 1 July 1987. 7. The Treaty of Maastricht establishes the European Union The political shape of Europe was dramatically changed when the Berlin Wall fell in 1989. This led to the unification of Germany in October 1990 and the coming of democracy to the countries of central and eastern Europe as they broke away from Soviet control. The Soviet Union itself ceased to exist in December 1991. At the same time, the member states were negotiating the new Treaty on European Union, which was adopted by the European Council, composed of presidents and/or prime ministers, at Maastricht in December 1991. The Treaty came into force on 1 November 1993. By adding areas of intergovernmental cooperation to existing integrated Community structures, the Treaty created the European Union (EU).

25

The Berlin Wall was pulled down in 1989 and the old divisions of the European continent gradually disappeared.

8. The EU expands to 15 members This new European dynamism and the continents changing geopolitical situation led three more countries Austria, Finland and Sweden to join the EU on 1 January 1995. 9. Euro notes and coins are introduced By then, the EU was on course for its most spectacular achievement yet, creating a single currency. The euro was introduced for financial (non-cash) transactions in 1999, while notes and coins were issued three years later in the 12 countries of the euro area (also commonly referred to as the euro zone). The euro is now a major world currency for payments and reserves alongside the US dollar. Europeans are facing globalisation. New technologies and ever increasing use of the Internet transform the economies, but also bring social and cultural challenges. In March 2000, the EU adopted the Lisbon strategy for modernising the European economy and enabling it to compete on the world market with other major players such as the United States and the newly industrialised countries. The Lisbon strategy involves encouraging innovation and business investment and adapting Europes education systems to meet the needs of the information society.

26

The euro: the common currency for over 310 million people in the EU. At the same time, unemployment and the rising cost of pensions are putting pressure on national economies, making reform all the more necessary. Voters are increasingly calling on their governments to find practical solutions to these problems. 10. Ten more countries join the Union Scarcely had the European Union grown to 15 members when preparations began for a new enlargement on an unprecedented scale . In the mid-1990s, the former Soviet-bloc countries (Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia), the three Baltic states that had been part of the Soviet Union (Estonia, Latvia and Lithuania), one of the republics of former Yugoslavia (Slovenia) and two Mediterranean countries (Cyprus and Malta) began knocking at the EUs door. The EU welcomed this chance to help stabilise the European continent and to extend the benefits of European integration to these young democracies. Negotiations on future membership opened in December 1997. The EU enlargement to 25 countries took place on 1 May 2004 when 10 of the 12 candidates joined. Bulgaria and Romania followed on 1 January 2007.

27

Different development programs taken by EU:

Agriculture
The Common Agricultural Policy (CAP) is one of the oldest policies of the European Community, and was one of its core aims. The policy has the objectives of increasing agricultural production, providing certainty in food supplies, ensuring a high quality of life for farmers, stabilising markets, and ensuring reasonable prices for consumers. It was, until recently, operated by a system of subsidies and market intervention. Until the 1990s, the policy accounted for over 60% of the then European Community's annual budget, and still accounts for around 35%.

Energy
EU energy production 46% of total EU primary energy use Nuclear energy 29.3% Coal & lignite 21.9% Gas 19.4% Renewable energy 14.6% Oil 13.4% Other 1.4% Net imports of energy 54% of total primary EU energy use Oil & petroleum products 60.2% Gas 26.4% Other 13.4%

The EU has had legislative power in the area of energy policy for most of its existence; this has its roots in the original European Coal and Steel Community. The introduction of a mandatory and comprehensive European energy policy was approved at the meeting of the European Council in October 2005, and the first draft policy was published in January 2007. The Commission has five key points in its energy policy: increase competition in the internal market, encourage investment and boost interconnections between electricity grids; diversify energy resources with better systems to respond to a crisis; establish a new treaty framework for energy co-operation with Russia while improving relations with energy-rich states in Central Asia and North Africa; use existing energy supplies

28

more efficiently while increasing use of renewable energy; and finally increase funding for new energy technologies.

Infrastructure
The EU is working to improve cross-border infrastructure within the EU. The developing European transport policies will increase the pressure on the environment in many regions by the increased transport network. In the pre-2004 EU members, the major problem in transport deals with congestion and pollution. After the recent enlargement, the new states that joined since 2004 added the problem of solving accessibility to the transport agenda. The Polish road network in particular was in poor condition: at Poland's accession to the EU, 4,600 roads needed to be upgraded to EU standards, demanding approximately 17 billion.

Regional development
There are substantial economical disparities across the EU. Even corrected for purchasing power, the difference between the richest and poorest regions (271 NUTS-2 regions of the Nomenclature of Territorial Units for Statistics) ranged, in 2007, from 26% of the EU27 average in the region of Severozapaden in Bulgaria, to 334% of the average in Inner London in the United Kingdom. On the high end, Inner London has 83,200 PPP per capita, Luxembourg 68,500, and Bruxelles-Cap 55,000, while the poorest regions, are Severozapaden with 6,400 PPP per capita, Nord-Est and Severen tsentralen with 6,600 and Yuzhen tsentralen with 6,800. Compared to the EU average, the United States GDP per capita is 35% higher and the Japanese GDP per capita is approximately 15% higher.

Environment
The first environmental policy of the European Community was launched in 1972. Since then it has addressed issues such as acid rain, the thinning of the ozone layer, air quality, noise pollution, waste and water pollution. The Water Framework Directive is an example of a water policy, aiming for rivers, lakes, ground and coastal waters to be of "good quality" by 2015. Wildlife is protected through the Natura 2000 programme and covers 30,000 sites throughout Europe. In 2007, the Polish government sought to build a motorway through the Rospuda valley, but the Commission has been blocking construction as the valley is a wildlife area covered by the programme.

29

The Commission have managed to protect the Rospuda valley in Poland. The REACH regulation was a piece of EU legislation designed to ensure that 30,000 chemicals in daily use are tested for their safety. In 2006, toxic waste spill off the coast of Cte d'Ivoire, from a European ship, prompted the Commission to look into legislation regarding toxic waste. With members such as Spain now having criminal laws against shipping toxic waste, the Commission proposed to create criminal sentences for "ecological crimes". Although the Commission's right to propose criminal law was contested, it was confirmed in this case by the Court of Justice.

Education and research

Education and science are areas where the EU's role is limited to supporting national governments. In education, the policy was mainly developed in the 1980s in programmes supporting exchanges and mobility. The most visible of these has been the Erasmus Programme, a university exchange programme which began in 1987. In its first 20 years it has supported international exchange opportunities for well over 1.5 million university and college students and has become a symbol of European student life. There are now similar programmes for school pupils and teachers, for trainees in vocational education and training, and for adult learners in the Lifelong Learning Programme 20072013. These programmes are designed to encourage a wider knowledge of other countries and to spread good practices in the education and training fields across the EU. Through its support of the Bologna process the EU is supporting comparable standards and compatible degrees across Europe.

Erasmus students from five countries in the Netherlands.

30

Conclusion:
A day will come when all the nations of this continent, without losing their distinct qualities or their glorious individuality, will fuse together in a higher unity and form the European brotherhood. A day will come when the only battlefield will be the marketplace for competing ideas. A day will come when bullets and bombs will be replaced by votes. Victor Hugo spoke those prophetic words in 1849, but it took more than a century for his utopian predictions to start coming true. During that time, two world wars and countless other conflicts on European soil caused millions of deaths and there were times when all hope seemed lost. Today, the first decade of the 21st century offers brighter prospects, but it also brings Europe new difficulties and challenges. The process of European integration now affects the whole continent, which, in turn, is part of a rapidly and radically changing world that needs to find new stability. Europe is affected by events on other continents, whether it be relations with the Islamic world, disease and famine in Africa, unilateralist tendencies in the United States, the dynamic economic growth in Asia or the global relocation of industries and jobs. Europe must not only concentrate on its own development but also embrace globalisation. The practical changes to adapt the structure of an EU originally meant for six members to one of 27 were incorporated into the Lisbon Treaty, which was agreed in 2007, but will not come into force until it has been ratified by all member states. It will make the EU more democratic and transparent, introduce simplified working methods and voting rules, ensure our fundamental rights through a charter, and allow the EU to speak with one voice on global issues.

31

Bibliography
1. Annual General Report of EU 2008 2. Annual General Report of EU 2009 3. International Economy-by Dr. Francis Cherunilam 4. www.wikipedia. com

32