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  Part II: The stages of the multinational integration process

  1. Customs union
  2. The EU common market
  3. Economic and monetary union
  4. Towards a political union in Europe

Although the multinational integration process is continuous, four large stages may be distinguished: customs union, common market, economic and monetary union and political union. Such distinction is useful, not only for analytical purposes, but because the passage from one stage to the other necessitates a fundamental decision of the participating member states to transfer new parcels of sovereignty from national to supranational level, sanctioned by treaty agreed by their governments and parliaments [see section 1.1.2]. The EC/EU is clearly following this evolutionary pattern.

In the isolationist period, usually following a devastating war, like the Second World War, states erect high protection barriers against foreign trade and therefore against international competition. These may be customs barriers (tariffs, quotas and measures having equivalent effect), fiscal barriers (higher levels of taxation for goods largely manufactured outside the country), administrative barriers (complicated bureaucratic procedures for imports) or technical barriers (concerning, for example, environment or human health protection) serving in one way or another to discourage or even prohibit imports [see section 6.2]. This is the zero point in the scale of multinational integration.

Totalitarian regimes apart, such a protectionist system cannot last for long. It leads to great dissatisfaction on the part of consumers, whose choice is very restricted, and on the part of the most dynamic and/or less protected businessmen, who find their field of activity limited by the barriers. Dissatisfied citizens, as consumers and voters, and progressive businessmen, as influential interest groups, press the political elite to reduce external protection. Under the sine qua non condition that the latter were susceptible to such pressures and were sincerely seeking the maximisation of national interests - two prerequisites that exclude authoritarian regimes - they would normally start discussing the possibilities of trade liberalisation with like-minded elite in neighbouring countries. Indeed, by its very nature, trade liberalisation cannot be decided unilaterally but can only be envisaged in a multinational context. If the economic and political elite of several states were to agree on the desirability of mutual trade liberalisation, they would still have the option to pursue it either within a framework of bilateral or multilateral intergovernmental cooperation, which does not necessitate loss of national sovereignty, or in the framework of a multinational integration process requiring a great number of common policies and, therefore, the transfer of segments of national sovereignty to common institutions [see section 1.1.2].

A free trade area is based on intergovernmental cooperation. In such an area, member countries abolish import duties and other customs barriers to the free movement of goods manufactured in the territory of their partners. However, each country retains its own external tariff and its customs policy vis-à-vis third countries. It also retains entirely its national sovereignty. Compared to isolationism, trade liberalisation is a common policy of a group of states, but, since without concessions of sovereignty, there can be no spillover from this unique common policy to other policy areas [see section 1.1.1], a free trade area should be placed at a low level of multinational integration, before the commencement of the evolutionary process.

By contrast, in a customs union, which is the first stage of the evolutionary multinational integration process, free movement concerns not only products manufactured in the territory of the partners, but all products, irrespective of origin, situated in the territory of the member countries. Furthermore, the latter lose their customs autonomy and apply a common external customs tariff to third countries. In order to manage the common customs tariff, the members of a customs union must have a common commercial policy. In addition, trade liberalisation has in this case spillover or multiplicative effects on other common policies, notably, agricultural, taxation and competition. There is therefore, already at this stage - completed by the original six countries of the EEC in July 1968 - some concession of segments of national sovereignty to the common institutions that run the customs union [see chapter 5].

If the implementation of these initial common policies linked with the customs union gave satisfactory but not optimal results, it would reveal the necessity for more common policies inside a common market and would consequently have a multiplier effect on the process. In fact, if the members would like to turn a customs union into a real internal market, they would need to ensure not only the free movement of goods and services, but also the free movement of production factors, namely labour and capital. In order to obtain these fundamental freedoms of a common market, the member states had to develop a great number of common policies in pre-established and in new fields, such as social, environment and consumer protection, calling for further sharing of national sovereignties [see chapter 6]. Several amendments of the original Treaties, through the Single European Act, were needed to bring about this evolution [see section 2.1].

However, even if all the freedoms of a common market were achieved, the single market would still not resemble a genuine internal market, if currency fluctuations and the exchange risk could create new barriers to trade, restrict the interpenetration of the financial markets and impede the establishment of businesses in places where the factors of production would appear to be most propitious for their activities. In order to optimise the conditions of trade, investment and production, the member states of a common market would need, therefore, to move forward to the next stage of economic integration, viz. economic and monetary union (EMU). This would imply a single monetary policy, necessary for the management of a single currency, and the convergence of national economic policies, with a view to achieving economic and social cohesion. A new Treaty, the Treaty of Maastricht, was needed to place the foundations of this new stage of European integration [see section 2.2 and chapter 7].

Even before that integration stage was wholly completed, the member states of a multinational integration scheme would have developed so many economic and political links between themselves that they would feel the need to step forward into the final integration stage, that of political union, by harmonising their justice and home affairs policies, in order to protect efficiently their area of freedom, security and justice, and their foreign policies, so that the economic giant that they had created through economic integration would have a voice commensurate with its size in the international arena [see section 1.5.3 and chapter 8].

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Your roadmap in the maze of the European Union.

Based on the book of Nicholas Moussis:
Access to European Union law, economics, policies
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Translated into 14 languages


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