Unit 8: Economics in a European context
Economic integration
Economic integration is the combining or two or more economies in some characteristics, the movement towards the creation of a single global economy. Economic integration has a number of distinct stages.
- Trade preference agreements are bilateral agreements on tariff levels between economies, often former colonies.
- Free trade areas are agreements for free trade between members of the free trade area, where economies are given freedom to have their own policy against economies not within the free trade area.
- Customs unions are free trade areas where external tariffs have been harmonised.
- Single markets are an extension of customs unions allowing for the free movement of labour and capital and the removal of non-tariff barriers and indirect tax harmonisation.
- Monetary union is the adoption of a common currency leading to uniform monetary policy.
- Economic union is the harmonisation of direct taxes but can also be used as a vague term for further economic integration as no union has yet reached this stage.
The European Union was set up as a Customs Union in 1957 in the Treaty of Rome. The Single European Market was created by the Single European Act of 1986 and the movement of some member states toward Monetary Union was started in 1993 in the Maastricht Treaty.
Common policies
With the creation of the SEM to address market failures four common policies were implemented.
- Competition policy
- Regional policy
- Social policy
- Agricultural policy
