D271 Ch3 notes

Critical feature of European integration

Open and Democratic approach

Broadening?

The European market regularly broadens geographically

• Basically, more new member states join overtime

Common Agricultural Policy

One of the first policies from trade cooperation in Europe

Article 49 of Treaty on European Union

Requires candidates to:

• Fully accept the laws of the EU (acquis communautaire)

• Respect different transition periods

How long does it typically take countries to negotiate the general principles of EU

2-4 years

Transition periods

The time a country is allotted to adopt the laws of the EU (basically the period they are given to not have to follow the laws just yet)

Transition periods 10 specific countries:

• The free movement of goods, people, and capital

• Pharmaceutical product regulations (usually less than 5 years)

• Up to 2011 for free movement of goods

• Up to 2012 for agriculture

• Up to 2015 for environmental rules

European Regional Development Fund

Created during the first enlargement wave for Ireland, the UK, and Denmark

Fall of the Berlin Wall and collapse of Soviety system

Caused new enlargements

Largest expansion ever

Ten new members in 2004 with great wealth and performance, solidifying economic stability for the region

The European Free Trade Association (EFTA)

An intergovernmental organization made to promote free trade among members

Kind of acted like an alternative EU

Has close ties to the EU

EFTA has 3 main tasks

• Regulate economic relations between the 4 members

• Manage European Economic Area which is an agreement between EU and 3 members of EFTA

• Develop network of free trade agreements outside of the members (global)

Lisbon Treaty Article 50

Provides rights for an EU member to leave

• The UK is the first ever member to use it

Regionalism

States forming tighter relations and cooperation with nearby countries

• This is becoming more necessary because globalization is putting pressure on states and firms that are too small to compete with massive markets like China

RTAs (Regional Trade agreements)

The EU is very advanced in implementing goals committed to in regional trade agreements

Current debate abotu integration

Should the Eu integrate more deeply and slowly or just broadly integrate a bunch of member states and expand geographically?

• Deeply would mean:

• Share more common policies

• Increase costs

• Basically, reduce sovereignty

Economic integration is positively correlated with?

Foreign direct investment performance

Debate about enlargement by unity

Supporters argue that the business environment evolves on the basis of peace and prosperity

Critics argue that unity in diversity is very complex

Expansion implies trade creation and trade diversion

Newly integrated EU members will replace an outside trade partnership for one with an EU member (diversion)

EU regulations costs EU consuemrs

But greatly improves comeptitvness, trade, investment, and innovation

Rules also become more harmonized, reducing the cost of bureaucratic trade procedures

European integration improves the wieght of europes voice in multilateral trade negotiations

But that’s assuming they all agree on the same stance

Regional Integration in less comeptiitve sectors

Causes rising unemloyment

Internationalization is good for?

Corporate competitiveness

• And thats because of low operation and environmental risks

Choosing to move a firm to a different location can

• Optimize or reduce costs

• provide opportunities for growth

• Develop new strategic strengths

The prerequisites of internationalization (business beyond home) are based on the presumption that other countries will offer advantages

• Ownership specific advantages

• Internationalization

• Location-specific advantages

What makes relocating attractive

Gains from cost benefits and accessing foreign resources

Value Chain

• Planning and time management

• Shipping, integrating logistics, order fulfilmemnt

• Service provision

• Manufacturing and inventory management

• Orders and invoicing

Why is Estonia attractive for bsinesses

Strength of their legal rights

Depth of their credit information index (rules and practices affecting credit information)

Who is Estonia’s largest trade partenr

Finland

Advantage of a transnational corporation

Efficient and effective transfer of knowledge about global and local conditions

• Includes tacit knwoledge (experience)

• Incldue explciit knowledge (geographical proximity)

First movers into Central European Eocnomies

firms form Germany and Austria, followed by the US

Why did firms move rapidly into CEE

Proximity

Education Levels

Expected growth of GNP

Benelux deal

Caused other coutnries to consider

Schuman Declaration

Suggested an organized European state

EU vs EEA

EEA is three countries and then all of the Eu

• Iceland

• Liechtenstein

• Norway

EFTA Includes only four countries

• All of EEA

• Switzerland

Norway is not part of the EU

They do not want to give up their oil

Switzerland has not been in a war basiclally ever

Its because they are one of the richest in the world

• Switzerland was giving out loans

• Switzerland was used as a hiding place as a resource from other countries

• If a country invaded Switzerland, its citizens would learn about what the country hid assuming they hid smth in Switzerland

Enlargement Reifnroced

Competitivness

Trade and investment flows

Shared know-how

Innovation and Technological advancements

Job creation

Standards and norms across all of Europe

Eureopean voice in multilateral trade negotiations (because they agreed as a unit of many members)

Enlargment cons

Rising unemployment in less competiitve sectors

Rehtinking of social policy

Reshuffle of important factor conditions