HIS&FACTS

-after ww2- Who to blame?(Germany, capitalism, or nationalism)

-Marshall Plan- US attempt to assist EU integration
--OEEC (Org of Eu Econ Cooperation)- gave aid & push trade
liberalization
--EPU ( Eu Payment Union)- facilitated trade pmnt plans for trade w/in
EU
-2 strands of EU integration
1-Intergovernmentalism- power stays in nations hand & decision done
on unanimous
2- Federalism- integration into supranational gov
--ECSC-Eu Coal & Steal Community)
-Single Market Program- (SEA 1987) create area w/out internal
barriers where free trade and movement is possible
--Goods trade liberalization
--Factor trade liberalization- remove capital controls
-1961- Berlin wall cements division in Europe( West berlin provide
better life)
-1989 Berlin wall falls
-Maastricht Treaty- 1992- commit EU nations to achieve monetary
union by 1999 & single currency by 2002
--set the 3 pillar organization structure
-pill 1- EU community
-pill 2- Common Foreign & Security Policy
-pill 3- Justice & Home Affairs
-1993- EU sets Copenhagen criteria for countries to join EU )politically
stable, functioning economy, accept EU law)
-Treaty of Rome (AKA Eu Econ Comm)- laid out all EU integration until
Maastricht Treaty
--create unified economic area w/ 4 freedoms (goods, services, labor, $
$)

FACTS
-the Big 5 institutions
1)EU Council- highest political body
-consists of leader from each state, pres of Eu council, pres of Eu
commission
-no formal role in law making

2) EU Commission- executive branch, enforces treaties, drives

integration
-proposes legislation to council & parliament
-consists of 1 commisioner from each state
-votes on simple majority
-manages EU budget
3) EU Parliament- two main tasks
-share legislative power w. council and commission
-oversee EU institutions

4) EU Council- main decision making body

-consists of 1 rep from each state
-responsible for pill 1 things
--pass laws w parliament
--admin and implement policy
--final judgment on international agreements
-2 voting schemes
1 unanimity
2 qualified majority voting

5) EU Court of Justice- settle disputes

DECISION MAKING
-level of gov responsibility
--Exclusive Competence-EU decides alone
--Shared Competence- shared btw EU & member state
--Supporting Competence- EU pass law that supports member state
--National Competence-member state decides alone
-2 guiding principles for task allocation
1) subsidiarity- keep decisions as close to people
2) proportionality- EU take minimum actions
-Theory of Fiscal Federalism- how to allocate tasks based on trade
offs
--Diversity/local info advantage- need decentralized
--Scale Economy- centralized saves $
--Spillover- externalities of state decisions means centralized needed
--Democracy- argues decentralization
--Jurisdictional Competition-people can force decisions argues for
decentralized
-EU legislative Process
-Commission has monopoly to start process
-Commission proposal sent to Council for approval
--ORDINARY legislative procedure (80%)
parliament (simple majority) council (qualified majority)
--CONSULTATION procedure
parliament only power
--CONSENT procedures
council power with consent from parliament

MICRO TOOLS
-supply(margnl cost)/demand(margnl utility)
-consumer surplus= under demand, above price
-producer surplus= over supply, under price
-IMPORT DEMND CURVE
-home d and home s, import the difference
-Border Price Effect- higher p for imported goods
-Import Volume Effect- loss from increase import
-EXPORT SUPPLY CURVE
-foreign s & d for supply of exports
-Border Price Effect- higher p for imported goods
-Import Volume Effect- gain from increase exports

PREFERENTIAL LIBERALIZE
-3 basic elements
1 Smith Certitude- foreign firms gain when tariffs dropped
2 Haberlers spillover- those excluded must lose
3 Vineras ambiguita- might harm nations

-Free Trade Agr- no tarrifs btw members

-Custom Union- FTA + common nonmember policy
-Common Market- CU + free move labor/capital
-Economic Union- CM + common fiscal/monetary policy

-most economic integration in EU has been from removal of frictional

trade barriers

MARKET SIZE&SCALE EFFECT

-integration leads to more competition
-Monopoly- mr=mc
-duopoly- firms split d

COMMON AGG POLICY

-to increase ag productivity thro more technical progress
-to make fair standard of living standards for ag
-stabilize market
-provide supply certainty
-reasonable prices
-Treaty of Rome dictated common market should have establishment
CAP among members