European Union occupies a special position in the comity of regional economic blocs. It is one of the most successful regional blocs and accounts for a large proportion of world trade and output.
It has evolved out of a small beginning and is still in an evolutionary process. It is a prime example of member countries successfully overcoming mutual differences even historically-created animosities for the sake of their collective good.
In the process, it has created even super-national institutions with decision-making powers for member economies to the extent the process is seen as beneficial for the entire community. Its integration process is gaining strength and may eventually result in a complete political integration of the region.
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Inspired by the success of the Zollverein, occasional mention of a Pan Europe had been made since 1923. Benefits and practical possibilities of mutual cooperation were demonstrated in the post-War collective efforts at reconstruction and defence.
This experience provided an incentive for the signing of the Treaty of Paris in 1951 under which European Coal and Steel Community was established. This was followed by six countries (Belgium, France, Germany, Italy, Luxembourg, and Netherlands) signing the European Defence Treaty in Paris in 1952.
The same six countries (also called the Benelux countries) signed, in 1957, the famous Treaty of Rome which provided the basis for the establishment of a common market called the European Economic Community (EEC) and the European Atomic Energy (Euratom).
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In 1958, in a conference held in Stress (Italy), the basis of a Common Agricultural Policy (CAP) was laid. It is noteworthy that CAP has proved a major hurdle in developing a regime of barrier-free international trade and has been a leading cause of budgetary deficits of some member States.
The EEC worked towards creation of a customs union. The member countries rapidly dismantled tariff barriers against each other and by 1966; they had abolished all internal tariff barriers on industrial goods. Simultaneously, they also created a common external tariff which was equal to the unweighted arithmetic average of the 1957 level.
EFTA:
Meanwhile, seven other European countries (namely, Austria, Denmark, UK, Norway, Portugal, Sweden, and Switzerland) which did not want to join EEC for one reason or other formed their own European Free Trade Association (EFTA) in 1959 by signing the Stockholm Treaty.
EFTA only aimed at abolishing duties on imports of industrial goods from each other. Each country was free to retain its own separate tariffs against imports from non-member countries. This objective was achieved by 1967.
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However, in 1967 itself, UK, Norway and Denmark applied for full membership of EEC. Ireland also applied for membership of EEC in the same year.
EFTA was left with the remaining members plus Finland as an associate member. A negotiated free trade in industrial goods between the two associations was achieved in 1977. However, overtime, EFTA effectively faded away.
Growing Membership:
Membership of EEC, in its march towards the present European Union, has swelled from time to time. In 1973, UK and Denmark left EFTA and were accepted as members of the EEC. Ireland also joined EEC at the same time.
Later additions increased its membership to fifteen, viz., Sweden, Finland, Denmark, UK, Ireland, Belgium, the Netherlands, Luxembourg, France, Germany, Austria, Italy, Spain, Portugal, and Greece.
Ten more countries (Cyprus, Czech, Estonia, Hungary, Latvia, Lithuania. Malta, Poland, Slovak and Slovania) joined EU in May 2004, raising the membership to 25. With this, EU population increased to 453.90 million, and trade increased to $5,090 billion p.a., though per its capita income declined to $24,169.
Towards European Union:
European Union is a comprehensive association of some European countries and goes far beyond a conventional customs union.
It aims at a full or near-full integration of the economies of member countries with a common currency, a common central bank, coordinated fiscal and monetary policies operating within prescribed parameters, and other super- national institutions to effectively monitor and administer the Union.
It is successively achieving complete integration of the markets for goods, services, labour, capital and other productive resources. Of course, the process of European Economic Community evolving into its current status of European Union has passed through a number of steps.
It should be noted that, from time to time, along with this evolution, various super-national institutions have also been created, restructured, replaced or abolished.
The active process of converting EEC into a European Union started in 1984 when European Parliament passed the Draft Treaty for the establishment of the European Union.
This was followed by the passage of the Single European Act, 1986, which modified the Treaty of Rome. In 1991 the Maastricht Treaty on the European Monetary System was signed. This was followed, in 1992, by the signing (also in Maastricht) of the Treaty on the European Union by the member states.
The process of economic integration has been extending over ever new sectors of the member economies, such as taxation (the leading example being the adoption of a uniform value added tax), a common central bank, a common external tariff, development of common goods and factors markets, and so on.
The European Union, as a single entity, is also negotiating trade agreements with other countries and blocs. A significant achievement of EU is the launching of a single currency, EURO, on January 1, 1999, to replace national currencies of the member countries.
Euro currency came into circulation on January 1, 2002. But till January 2005, only twelve countries had given up their national currencies viz., Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxemburg, the Netherland, Austria, Portugal and Finland.
Outstanding Problems:
EU has not been free of difficulties. It is still facing several serious problems but hopes to overcome them with appropriate and realistic steps. These problems include repeatedly excessive budgetary deficits by some governments, though the justification for these deficits lies in persistent high level of unemployment.
Similarly, EU is faced with the problem of agricultural subsidies which are difficult to abolish. Induction of ten new members in May 2004 is proving a double-edged sword and has created several additional short-run economic and political difficulties. Tussles and inter- country conflicts keep surfacing.
In the long-run, however, the Union is likely to gain tremendously in economic strength. In the process for meeting the changing situation the EU is writing and adopting a new Constitution and may even restructure some of its institutions. This Constitution, once adopted, will replace thousands of pages of existing treaties.