1. European Union: Basic Facts
Jan Fidrmuc
Brunel University

2. History 1951: European Coal and Steel Community
Motivation: preventing another war in Europe
Coal/steel critical inputs for industry and military
1957 (Treaty of Rome): European Economic Community (EEC) and European Atomic Energy Community (Euratom)
Members: F, D, I, NL, B, LUX
Aims: customs union and CET by 1969
CET set as average of national tariffs; CET revenue to accrue to European Commission

3. History 1960: European Free Trade Association (EFTA)
Response to formation of EEC and to threat of trade discrimination
Members: UK, S, N, DK, P, CH, A
Aim: free-trade area, not customs union
No tariffs or quotas on intra-EFTA trade
But no CET
Agricultural products excluded from liberalization

4. Non-overlapping circles: 1960-1973IS
EFTA-7 NL B D L N S
FIN F I DK
EEC-6 UK
IRL A P CH E GR

5. History Domino Effect: Customs union  intra-EEC trade rose
Imports from non-EEC Europe stagnant
GDP of EEC6 double that of EFTA7
EEC6: faster growth than EFTA7
Integration with EEC more attractive than EFTA
1973: 1st enlargement (UK, DK and IE)
Staying out even less attractive
1973: Free trade area between EEC & EFTA

6. Market Size (GDP): EEC vs EFTA, 1960-70.

7. Concentric circles: from 1973GR I D F B L NL
IRL P UK CH A
FIN N S IS DK
EEC-9
EFTA-6

8. History Non-tariff barriers to trade despite customs union
Technical standards and regulations, capital controls, rules for public procurement, border formalities, etc.
Single European Act of 1987
To create "an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured".
Single Market Programme effective from 1992
Decision making: QMV instead of unanimity

9. History Domino Effect II:
Deeper integration in the EEC strengthened the incentive to join
This incentive rose with further enlargements

10. History 1992: Maastricht Treaty EEC  European Union (EU)
Monetary union and ECB by 1999
Single currency by 2002
‘Three pillar’ structure: division of power between national governments and EU
1st: Economics: Single Market, Competition Policy, Common Agricultural Policy, EMU/ECB
2nd: Security and Foreign Policy
3rd: Justice and Home Affairs
EC law applies to 1st pillar

11. History Attempts at reform of EU institutions
Motivation: streamlining decision making before further enlargements
Amsterdam Treaty (1997): minor changes
Nice Treaty (2001)
Paved way for enlargement by assigning new votes for EU members and candidate countries
Failed to implement significant reform of institutions

12. History Constitutional Treaty (2004)
Reformed QMV with expanded application
Introduced President and Foreign Minister
Reduced European Commission to 15 members
EU would become a legal entity
Rejected in referenda in France and the Netherlands in 2005

13. History Lisbon Treaty (2007) Reforms QMV and expands its application
Introduces President and High Representative for Foreign Affairs
Reduced European Commission to 18 members
EU to become a legal entity
Rejected in referendum in Ireland in 2008
2nd vote due on 2 Oct 2009

14. Founder Countries of EEC
1958

15. 1st enlargement: 1973
1973
1958

16. 2nd Enlargement: 1981
1973
1958
1981

17. 3rd Enlargement: 1986
1973
1958
1986
1981

18. 4th Enlargement: 1995
1995
1973
1958
1986
1981

19. 5th Enlargement: 2004
1995
1973
2004
1958
Cyprus
1986
Malta
1981

20. 6th Enlargement: 2007
1995
1973
2004
1958
2007
Cyprus
1986
Malta
1981

21. Facts: Population

22. Facts: Income per capita

23. Facts: Size of Economies

24. Elements of EU Integration
Free trade in goods
No tariffs, quotas or any other barriers to trade
Common trade policy vis-à-vis ROW
Undistorted competition
State aid regulated by Commission and anti-competitive behaviour regulated by Commission
Approximation of laws (i.e. harmonisation)
Taxes: weak restrictions aimed at preventing subsidies via lower tax rates for some firms; no explicit harmonisation

25. Elements of EU Integration
Unrestricted trade in services
Single European Act, 2006 EU Services Directive
Some barriers persist (e.g. banking regulation may raise barriers to foreign banks)
Labour and capital market integration
Free movement of workers (not people)
Free movement of capital (but many loopholes initially, until Single Market implemented)

26. Elements of EU Integration
Exchange rate and macroeconomic policy coordination
Matter of common interest – but only informal coordination
Common agricultural policy (CAP)
Set up only in 1962
Social policies
No explicit coordination
Exception: equal pay and prohibition of labor-market discrimination

27. Elements of EU Integration
Single currency
First (failed) attempts in 1970
Maastricht Treaty: commitment to common EU-wide currency
Opt-outs for UK and Denmark

28. Institutions European Council
Prime minister or president of each EU member plus the President of the European Commission
Sets broad guidelines for EU policy
Meets at least twice a year (June and December)
No active role in EU law-making: decisions must be translated into action via Treaty changes or secondary legislation

29. Institutions Council of Ministers
Representatives at ministerial level from each Member State: minister for the relevant area, e.g finance ministers on budget issues
EU’s main decision-making body
Two main decision-making rules:
Unanimity (most important issues), e.g. Treaty changes, enlargement, multi-year budget plan
Qualified majority voting (QMV): most issues (about 80% of all Council decisions)

30. Institutions European Commission (‘EU government’)
Proposes legislation to the Council & Parliament
Administers and implement EU policies
Monitors and enforces EU law
Represents EU at international negotiations
Nice Treaty: each member one Commissioner
Lisbon Treaty: 2/3 of members get rotating Commissioners
May be amended
Commissioners not intended as national representatives but in charge of specific area of EU policy

31. Institutions European Parliament
Oversees EU institutions, especially Commission
Formulates legislation and proposes budget, together with Council of Ministers and Commission
785 members (MEPs), directly elected in special elections every 5 years
Number of MEPs per nation varies with population but rises less than proportionally
MEPs represent local constituencies, organized along the left-right dimension, not national lines

34. Institutions EC Law: Autonomous: Independent of national law
Directly applicable: has the force of law in member states
Supranational: EC law takes precedence over national law

35. Institutions EC Law: Sources Primary legislation: EU Treaties
Secondary legislation (EU Law): Regulations, decisions, directives, recommendations and opinions
Case law: ECJ decisions

36. Institutions European Court of Justice:
ECJ settles disputes between Member States, between EU and a Member State, between different EU institutions, and between individuals and the EU
Supranational power: ECJ rulings cannot be overturned by national courts

37. The Budget: Expenditure (2009)

38. Evolution of Spending Priorities

39. Evolution of Spending, Level

40. Evolution of Spending, Level

41. Funding of EU Budget EU’s budget must balance every year.
Financing sources: four main types:
Tariff revenue and ‘Agricultural levies’ (tariffs on agricultural goods)
‘VAT resource’ (in essence 1 per cent value added tax)
GNP based (tax paid by members based on their GNP).
Miscellaneous (e.g. taxes paid by EU employees)

42. Evolution of Funding Sources

43. Contribution vs GDP

44. Funding of EU Budget
Member’s contributions approximately 1% of GDP regardless of per-capita income.
EU contributions not ‘progressive’
e.g. richest nation, (L) pays less of its GDP than the poorest nation (P).
Net contributions more in line with economic development of countries
Not perfectly so
E.g. Ireland.

45. Net Contribution by Member