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USC IR 369 - IR 369 EXAM 2 Study Guide

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Customs union to single market to single currency1950s—common market became focusreflected growing reality of econ interdependence1980s—single market program1990s—single currency^Economic and Political motives for all 3Customs union, competition policyabolished tariff and quota barriers between 1958-68 and created common external tariffstrict competition policy—resulted in European Competition Network (national authorities share info and regulate investigations)harder to control govts then firmsProgramme to complete the single market by 1992Delors and Lord Cockfield worked together on project to remove non-tariff barriers**; it required a vast programme of community legislation. Programme was to take 8 years and the “single European act” to be completed by 1992. HUGE SUCCESS; even struggling countries (Greece, Portugal, Ireland, Spain) who feared stronger competitors had extra help and benefited**Non tariff barriers include regulations of goods and services in the different states, frontier controls on goods and people; discriminatory indirect taxes; and national preference by public purchasing authoritiesRemaining areas of difficulties: liberalization of servicesThe ERM and monetary stabilityERM establish in 1979; required central banks to intervene in currency markets to keep fluctuations in exchange rates down, by the end of the 1980s, reached monetary stability (German Bundesbank as anchor)black Wednesday=British pound forced out of ERMERM had positive effect in other member-most powerful commitment=France because they wanted to both challenge the US dollar and keep down a newly unified Germany-Germany weary to replace Deutschmark with unproven currencyThe aim of Economic and monetary unionEuropean central bank (ECB)Completely independentThe ECB and central banks of members states is the European System of central banks (ESCB)Primary objective=maintain price stabilitySole right to authorize issue of notes & to approve quantity of coins issued my states’ mintsOnly states with monetary stability could participate in the Euro (convergence criteria were established)Stages of Monetary Union1st stage: accept ERM2nd stage: make enough progress to satisfy convergence criteria3rd stage: irrevocable fixing of exchange rates (jan 1999) which lead to euro notes and coins replacing states’ existing currencyEuro ZONE are the states with the common currency (not all states in Euro Union are in Euro zone but by 2002 a large majority of member states were) UK, Sweden, Denmark remain outside of EurozoneQuestions raised by EMU (Economic and Monetary Union)Emu’s macroeconomic effects on EurozoneStability and growth pact allowed sates to be fined for poor economic management (the pact has since weakened)Concerns about differing economic cycles (which cannot be influenced by government policy) in EurozoneQuestions ECBs accountabilitySuggestion that EMU will inevitably lead to a Federal state (control of armed forces)Chapter 5: Agriculture, regions, budget: conflicts over who gets whatAgricultureOpening market to trade in manufacturers was much simpler than creating an agricultural common market; would have been easier to confine the common market to industry but French feared German industrial competition and French had competitive agricultural sector. Result= common agricultural policy (CAP)High Process and Thatcher’s ‘money back’When UK became member, tensions rose because the CAP negatively effected them—triggered 5 year battle when Thatcher was prime minister in her method called ‘getting our money back’^resulted in annual rebate for British on 2/3rds of its net contributionStages of reform1988 money ran out again in CAPCAP remained heavy burden for the community b/c half the budget was supporting a sector that only employed 5% of populationRecast CAP as “rural policy”, extending it to social and environmental dimensions that surround farmingSingle Farm Payment (SFP); farmers now paid to look after land rather than to produce (often over-produce) goodsLooks like CAP will experience even MORE change in the futureItaly and Britain: Social Fund and Regional Development FundItaly: “Social fund” that helped their workforce adaptBritain: European Regional Development Fund (ERDF): initial impact weak, but has become main source of financing for cohesion. Helped Britain who had fallen behind economicallyEnlargement and Structural FundsWhen Spain, Portugal and Greece entered Community, their much lower average incomes forced doubled budget for structural fundsMost funds were going towards new members states, rather than existing—needed to be a change, but this has effected the budget as a wholeTaxesPayment of tax revenue to the community is a legal obligationNet contributionsGermans accepted their role as largest net contributor b/c they realized benefits of membershipBUT since 1990s, member states became much more aware of cost of membership (net contributors footing the bills of lesser states); reform was inevitable and in 1999 Germany, Netherlands, Austria, Sweden’s amounts paid to British rebate was reducedChapter 6: Social Policy and Environmental policySocial PolicySocial policy concerns matters relating to employmentEx: article on equal pay (between men and women) in the treaty of RomeEx: single European act: health safety at work and encouragement of communication between management and workersFlexibility or regulation in labour marketsBritish emphasized deregulation and flexibility; saying it would make European econ more competitive and increase employmentGermany emphasizes labour markets focusing on regulationThe French stress social protection and rely more on govt leadership and regulation; however Sarkozy began to lighten regulatory burden after high unemploymentEnvironmental Policycant prevent pollution by moving from one state to another because they’re all interconnected in European union so there is a strong interest in controlling pollution at its sourceover 300 environmental measures have been enacted (responding to air and water pollution, waste disposal, noise limits on aircrafts, wildlife habitats, quality standards for drinking water)Pinder ch 4 Single Market, Single CurrencyEuropeans wanted common market, this in fact reflected the growing reality of economic interdependence the EEC’s original project which had been abolishing tariffs in a customs union among member states and creating a common external tarifftariffs and quotas


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