The History Of What Is Integration Economics Essay Example

member states for their respective national interests.

According to JovanoviA‡ (2006), integration can be seen as a step towards creating brotherhood and eliminating economic borders between states. This ultimately results in the development of shared economic policies. Pelkmans (1984) argues that integration is what gave rise to the European Union, which has brought many benefits to the states in the region, especially those with slower development. El-Aggra (1988) defines integration as an agreement among states to work towards common goals and policies.

The European Union has received support from various entities and organizations through their involvement in different activities. Its formation and development have been helped by its geographical boundaries and economic integration throughout the region since it was established in 1957. Germany, France, and the Netherlands have played important roles in this expansion process. Currently, there are 27 member states within the Union as of 2012. The use of agreements dating back to 1951, starting with the Treaty of Paris that created the European Coal and Steel Community, has further strengthened its integration. Haas provided additional insights into his Neo-Functionalism theory through subsequent agreement signings.

Economic Reasons Why Countries Form Trade Blocs

Traditional Economic/Trade Additions: Most states that participate in trade axis want to be able to either trade freely or receive grants on trade barriers that normally exist between two or more states even if they are in the same part. Once these grants are in topographic point, market entree will better and all parties involved will be able to profit from the integrating. This ground is major for states in the same part as it grants entree to each other 's market for imports and exports.

Once this is established, it leads to specialization between take parting provinces and it allows them to bring forth more of merchandises that they can bring forth most expeditiously. Leting this free or unrestricted trade can assist states ' economic system to turn thereby taking to merchandise additions. There is besides the opportunity to make more occupations in member state economic systems and hike their economic system ( Whalley 1998 ) .

The integration of member states enables the achievement of economies of scale, which refers to the cost advantage of expanding and producing on a large scale. When states form alliances within regions through unrestricted trade, they can benefit from economies of scale. This justification for integration is based on the need for large markets, so that manufacturers in allied states can produce in large quantities and distribute it to participating states without incurring increased export costs. Another reason for forming alliances like the EU is protection against countries producing cheaper products, such as China and Vietnam. For instance, the EU shoe industry is protected from the competition of cheaper and mass-produced shoes from China.

The European Union safeguards its member countries by blocking Chinese manufacturers from flooding the market with mass-produced goods, which could harm their own member states' manufacturers. Moreover, the creation of a Single Market enables unrestricted movement of goods, services, capital, and people among participating member states. This elimination of barriers between nations ensures equitable trading conditions without favoritism in tariffs, quotas, or trade subsidies (Gordon 2006).

The programme of the European Union (EU) was established in the early 1980s through collaboration between large companies, the committee, and national leaders. This initiative was

formalized with the signing of the Single European Act in 1986 (Whalley 1998). One of the benefits of this organization is that it brings countries together, leading to increased competition among companies in the region. This competition encourages efficiency and results in changes in consumer demand and increased production levels (Economicsonline.co.uk).

Political Reasons for the Formation of Trade Blocs

Trade blocs play a crucial role in preventing conflicts between countries. Within the EU, free trade and a unified market reduce the chances of military conflicts as they increase the opportunity cost of engaging in wars due to the integration of international trade within the region. Furthermore, neighboring countries trading with each other foster mutual reliance and aim to build trust rather than engaging in conflict.

According to Whalley (1998), integration has played a key role in preventing wars between states and increasing security in the region, specifically with France and Germany. To counter the perceived threat from Germany after two world wars, it was decided to incorporate Germany into the other European states as part of the integration process. The goal of this process was to foster cooperation and establish mechanisms for addressing mutual issues. Consequently, regional alliances have significantly contributed to enhancing intra-regional security. Additionally, this level of cooperation has resulted in the establishment of common defense mechanisms, military collaboration, and shared laws. Therefore, through its involvement in forming the European Union (EU website), this integration process has been essential in bolstering global security.

Forming alliances unites the Region: In the case of Europe, states organizing confederations allows effective representation in the world politics more than when representing themselves individually. Forming alliances also helps states to have collective

bargaining power instead of having to individually decide on issues relating to the world politics. This unity in the region led to the end of US hegemony though the country's economy was more booming after the world war when pacts leading to the EU started. The usual approach to external security threats is for states to form alliances independently of any trade preferences.

According to Economicsonline.co.uk, states that were concerned about being absorbed by larger provinces have come together to prevent such coercion. In order to ensure fair competition in international trade, states in an alliance harmonize their national policies, despite having their own individual markets. This avoids uncertainty and unequal production costs and profit margins that could result from differing tax systems. By forming blocs, participating states develop similar policies relating to competition rules, transportation policies, monetary policies, and more. However, having the same policies can also lead to shared problems, as seen in the current economic crisis in the EU where Spain and Greece are most affected. In such situations, all member states must collectively offer solutions instead of leaving the troubled state to handle it alone.

Using the UK as an example, the country seeks to renegotiate its position in the EU to better accommodate its needs. It has become common for member countries to collectively provide financial assistance to troubled states like Greece. It is important to recognize that national control may not be feasible. While European state integration has benefited their economies, concerns about sovereignty have arisen. Should states possess more power at the national or regional level? To participate in integration, member countries often have to relinquish some sovereignty to a

supranational body like the European Union (Whalley 1998). This body makes binding decisions that impact all member states, effectively limiting national legislative and executive power. Consequently, member states may no longer have autonomy in implementing policies tailored to their specific needs and interests, particularly if those policies conflict with regional initiatives.

Furthermore, there may be confusion surrounding the election process for representatives of regional organic structures, which can contribute to a perceived lack of democratic control and accountability.

Theories of Integration

Neo-functionalism: Developed by Ernst Haas in the 1960s, this theory aims to explain the formation of the European Coal and Steel Community (ECSC) and the European Economic Community (EEC), both precursors to the EU. It builds on functionalism by illustrating how economic integration in specific sectors can lead to broader economic integration in related areas. The concept suggests that economic integration will drive political integration and establish supranational institutions that transcend national interests and borders. According to Lindberg (1963), "spill-over" occurs when taking action towards a particular goal creates circumstances where achieving the original goal necessitates further actions, resulting in an ongoing cycle of action and demand for more action.

The theory argues that the integration and creation of supranational establishments can aid in accelerating the process of economic integration. While Neo-functionalism theory gained popularity in the 1950s and 1960s, it lost favor in the 1970s as integration stalled. Federalists criticized this theory for being too additive, vague, and lacking clarification on spill over issues (McCormick 2002). There was a need for change or further explanation due to new pressures on integration, such as shifts in public and political attitudes influenced by patriotism and economic changes and threats

from other regions (Haas 1968). Functionalism, on the other hand, focuses more on cooperation between countries in Europe.

According to David Mitrany (1966), the most suitable individuals to establish cooperation are skilled experts rather than representatives from local authorities. Mitrany (1943) additionally argues that if countries within a region can collaborate effectively to oversee a formed cooperation, they can also work together in other areas through an unseen integration process. This theory further suggests that if countries can form alliances, they will not only create a body that fosters a common market but also enable the development of policies relating to the politics and economy of member states. The advantage of this supranational body is that it eliminates concerns about individual interests being prioritized (Dinan 2000).

Functionalism aims to bridge the gap between member states by establishing functional administrations instead of tackling broader concerns like economic or defense policy. According to functionalists, peace can be achieved by concentrating on less controversial sectors such as the Postal service (Lindberg and Schengold, 1971). After the EU's formation, more countries in the region have become part of it. Despite its drawbacks, most members are hesitant to withdraw because they acknowledge that staying entails relatively low costs compared to leaving (George et al., 2001).

The UK is reconsidering its rank in the European Union as a result of the recent economic crisis and the requirement for member provinces to bail out affected states. The UK Prime Minister, David Cameron, is seeking to renegotiate the country's rank through referendums in order to avoid leaving the union (Reuters online). Critics argue that functionalism, which suggests that technical experts should handle state functions instead of

state representatives, is too technocratic (Dinan 2000).

Discussion

In essence, the integration of war stricken Europe aimed to rebuild economies and establish free trade markets to withstand global economic challenges. The European Commission is widely regarded as a model of regional integration, with various stages of integration (Bilal 2005).

The EU, led by a regional axis formed by states, aims to manage economic and other activities of participating member states. Despite criticisms mentioned in the findings section, Functionalism and Neo-functionalism theories are still applicable to the development of the EU. These theories primarily explain why states form regional alliances like the EU. Additionally, attempts have been made to apply neo-functionalist theories in other regions, particularly Latin America (Haas, 1961; Haas and Schmitter, 1964; Haas, 1967). The EU operates a single economic market within its region and European countries that use the Euro currency are referred to as Eurozone members. While not all European countries are part of the EU, there exist economic relationships between them through agreements within the European Economic Area (Europa.eu).

The European Economic Area (EEA) allows countries like Norway, Iceland, and Liechtenstein to benefit from the single market without joining the EU, which some may consider unfair to participating nations. Additionally, the EU has established a Customs Union within its integration process, eliminating trade tariffs and charges on goods produced and imported in this region. Another aspect of integration is the creation of a Federal Union that shares similarities with an alliance but possesses federal union characteristics. Although President Jose Manuel Barroso denies that the EU is moving towards a United States of Europe, I argue that common economic policies, defense strategies, and foreign policies suggest

it resembles a federal union. The Union's authority over member states has also resulted in some loss of sovereignty; however,this can be advantageous as it ensures decisions made within the union are not solely driven by individual interests of member states.

Decision

After analyzing the various plants on regional integration, it is evident that the EU aims to unite its member states during periods of prosperity and adversity. While there have been successful integration efforts in the region, there have also been challenges such as underdevelopment in certain countries and economic crises, which question the reasons for forming regional alliances. Additionally, the integration of European countries has resulted in a loss of sovereignty for member states, as they must rely on collective policies formulated by the union for major economic activities within their borders. It has been argued that the EU cannot solely derive its legitimacy from its member states and must establish its own grounds for legitimacy, ultimately reducing the powers of individual states.

An example of this is the "on the job clip Directive" that employers must comply with in terms of hours and paid vacations that employees are entitled to. Regardless of whether the employers like it or not, they must adhere to these guidelines as long as they operate in the region.