The European Union and Other Regional Trade Agreement
- WTO’s underlying philosophy – ‘the removal of trade barriers between countries leads to
- Slow pace of global progress towards trade liberalization and economic cooperation is
one of the factors that lead to greater activity in the area of bilateral and regional trade
agreement, thus the formation of European Union.
5 Stages of regional trade groupings
a) Preferential tariffs: The countries involved offer each other lower tariffs.
b) Free Trade Area: Two or more countries agree to remove substantially all tariffs, and
non-tariff barriers but maintain their own external tariffs.
c) Customs Union: Countries involved eliminate trade barriers among themselves and
impose a common external tariffs.
d) Common Market: The countries agree to common policies for the internal operation and
integration of the combined market that has been created.
e) Economic and Monetary Union: Countries agree to create a single central bank,
coordinate monetary policy, and adopt a common currency in addition to creating a
GATT’s Role play in Agreements Amongst nations
GATT allows for countries the form an agreements amongst other nations,
notwithstanding the most-favored nation principle; a provision for customs union and
trade areas is included in the GATT. GATT provision has an exception, arrangement
amongst nations must be trade creating, not trade restricting or diverting (there must be
no increase in trade barriers against third-party members of the GATT. Parties must also
notify the GATT before agreement is implemented.
Treaties in EU’s development:
The Single European Act
1. Majority voting system, as opposed to unanimous voting scheme as set out by
Treaty of Rome. Treaty of Rome was the first Act which set out the EEC,
European Economic Community.
2. Establish Single Market, by 1992. Single Market – An area without internal
borders to goods, services, capital and people. Involved in abolishing barriers,
harmonization of rules, legislation and tax structures, strengthening of monetary
cooperation, and encourage European firms to work together.
3. Four Freedom of the Single Market:
Unrestricted movement of goods: - ensures that imports move freely
within the EC once they enter any member state.
Unrestricted movement of Capital – enhances competition and choice in
financial services, gives borrowers access to more diverse and cheaper
financing, and permits more competitive financing for investment and
trade within EC.
Unrestricted movement of Services: - frees the movement of services
among member states.
Unrestricted movement of People: - allows labor to move freely within the
EC. 4. Eliminate Trade Barriers, once a product meets the technical standards of any
EC member, it may have unrestricted distribution to all EC countries.
5. Removal of Fiscal Barriers, reducing the differences in indirect taxes that distort
trade among member states.
6. Opening procurement market to competition from firms from other countries,
(within the EU)
The Maastricht Treaty or, TEU (Treaty of European Union)
- Treaty changed the name from European Community, to European Union.
- Concept of Three Pillars (distribution of responsibilities in the EU):
1. The First Pillar, areas where member states have relinquished some of their
sovereignty to EU institutions). Included customs union and the single market for
four different sectors:
Competition and trade policy
Fiscal and monetary issues (common currency)
2. The Second Pillar, matters managed on a intergovernmental basis)
3. The Third Pillar, matters relating to police and judicial cooperation in criminal
matters, - managed on an intergovernmental basis)
** Two more which followed were, The Treaty of Amsterdam, The Treaty of Nice
The Charter of Fundamental Rights
- Made in 2000. The rights are divided into six categories.
1. Dignity, Freedoms, Equality, Solidarity, Citizen’s rights, and Justice
- The legal Status of the document is not clear, but it is nonetheless influential.
- As of yet, 12 countries who have adopted the common currency are: Belgium, Germany,
Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, Finland
- European Central Bank, located in Frankfut, has responsibility for ensuring that member
states conform to the common currency rules.
The Institutions of the EU European Council
- Unofficial body, not technically one of the EU institution.
- Made up of presidents/ and or prime ministers of all the member countries. It provides
the high-level political direction for policy in the EU.
- Does not create law in any sense. These Meetings are referred to as EU summit
The Council of the European Union
- Official law making body within the EU.
- Each member state sends one (1) representative to council meetings.
- Governments may vary their ministerial representation according to the subject matter to
- Nine areas of Interest in where the council divides up:
1. General Affairs and external relations
2. Economic and financial affairs
3. Justice and home affairs
4. Employment, social policy, health and consumer affairs
5. Economic competitiveness
6. Transport, telecommunications, and energy
7. Agriculture and fisheries
8. Environment; and
9. Education, youth, and culture.
- How the council Operates:
1. Presidency of the Council rotates every six months, with individual from a
different EU country assuming the role for each period.
2. Each EU country has a permanent team headed by the country’s ambassador to
3. Voting in council is based on member countries’ population.
The European Commission
- The term is used on two ways, a) to describe its commissioners, and b) to describe its
- Four Main roles:
1. Proposing new legislation
2. Implementing EU policies and the budget
3. Enforcing European Law
4. Representing the EU internationally
- A new Commission is appointed every 5 years with member nations agreeing upon a
new commission president.
- Once approved by the EU parliament, the commission president will select other
members of the commission, and once again, the choices must be approved by the EU
parliament. Any members of the Commission are acting in behalf of the EU as a whole
and not as a single government entity.
- The commission remains politically accountable to the EU parliament, which has the
power to dismiss the whole Commission by adopting a motion of censure. The
commission attends all the sessions of the EU parliament, where it must clarify and
justify its policies and reply to oral and written and oral questions posed by members of
the EU parliament.
Proposing a new legislation - The commission has the right of initiative, - it alone is responsible for drawing up
proposals for new European legislation, which it presents to the EU parliament and the
council, (the interest should be for all of EU, and not for any specific nation)
- Once a legislative proposal is in draft form, it is placed on the agenda of the next
commission meeting and, if at least 13 of the present 25 commissioners approve the
proposal, it is adopted and sent to the Council, and the EU parliament.
Implementing EU Policies and the Budget
- The Commission is responsible for managing and implementing the EU budget.
- National and local authorities actually spend the budget, but the Commission is
responsible for supervision alongside the Court of Auditors.
- Commission also has the responsible in managing policies in these areas:
1. Common Agricultural Policy
2. The competition policy
3. Cross-Border Partnership/Regional partnership
4. Europe-wide student exchanges.
Enforcing European Law
- Commission oversees the implementation of laws and policies.
- If an EU country is not applying an EU law, the commission will send an official letter
stating the details of the infringement and setting a deadline for a response.
- If the response is unsatisfactory, then Commission will refer the matter to the EU Court
** Commission also represents EU international forums such as WTO, and also as the
responsibility of negotiating international agreement on behalf of the EU
The European Parliament
- Elections are held every five years for the 732-member chamber.
- Three main roles: to pass European laws, to provide democratic supervision, and to
approve the budget.
- EU Parliament can sometimes refer to the Commission to put forward proposals if
- Democratic Supervision :- EU parliament has to approve the nomination for the EU