European Integration Revisited

Progress, Prospects, And U.s. Interests

Michael Calingaert

• Publisher: Routledge
• Year: 2018
• Print ISBN: 9780813329536
• eBook ISBN: 9780429980329
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

In this fresh and timely account, Michael Calingaert explores the successes and failures of European economic and political integration, analyzes the factors that will determine its future course, and outlines the directions the European Union is moving in as it approaches the 21st century. Assessing U.S. interests affected by European integration, Calingaert recommends policies for the United States to consider in the face of an increasingly consolidated Europe. With its broad coverage and readable synthesis of a wealth of detailed information, this book will be of interest to students, scholars, and policymakers alike.

PART ONE
Maastricht and Beyond: Consolidating the EU

1
The Changing Scene

The Europe of the mid-1990s is much different from the Europe of the mid-1980s that saw the launch of the European Community's 1992 program. Fundamental changes in the economic and political landscape of Western Europe have altered the setting in which integration efforts have been undertaken, thereby affecting the process of and prospects for European integration. For that reason it is important to describe those changes before assessing of the various programs and actions designed to promote integration in the European Union. The changes—in many respects shocks to the system that prevailed in the mid and late 1980s— fall into two categories: those that were external to the EU and those that were internal.

External Shocks

The End of the Cold War

The seminal event of the post-World War II era was the end of the Cold War, with the collapse of the Soviet empire and the resultant unification of Germany. Following the efforts of Gorbachev to reform and liberalize the Soviet Union, a combination of remarkably rapid events culminated first in the elimination of Soviet control over the "satellite" countries of Central and Eastern Europe—symbolized by the destruction of the Berlin Wall in November 1989—and then in the fragmentation of the Soviet Union—symbolized by the lowering of the Soviet flag over the Kremlin in December 1991. Within only a few years, the overwhelming power of and perceived threat from the Soviet Union disappeared. In its place appeared a politically and economically weakened Russia, still posing concerns and challenges to the West but of a far different nature than before. Concurrently, the unification of the hitherto divided Germany took place, essentially through a takeover of the East by the West, and the slow process of national integration began.

Significance. First, although pre-unification Germany was the most powerful EU member economically, Germany was placed on an equal footing with France, Italy, and the United Kingdom in terms of formal powers, and as a general rule, it acted accordingly. However, with unification, Germany has clearly become the predominant power in the EU, and that will have economic and political consequences over time. Second, the termination of the Cold War, although primarily important for its security implications, also removed one rationale for European integration—the perceived need to build a strong economy in Western Europe as part of the effort to counter the hostile Soviet bloc.

EU Enlargement

As a result of the changing map of Europe, the nature of the relationship between the EU and the other countries of the European continent changed dramatically. Historically, the EC's non-Communist neighbors (i.e., the members of the European Free Trade Association, EFTA), boasting a long tradition of democratic representative government and highly developed market economies, had followed a policy of tightening their economic bonds with the EC but without seeking membership. That policy culminated in the formation at the beginning of 1994 of the European Economic Area (EEA), which in effect expanded the EU's internal market to include Austria, Finland, Iceland, Norway, and Sweden,¹ although these countries did not thereby join the EU or undertake to participate in all its programs and activities.

However, well before the negotiations for EEA had been concluded, the governments of most of these countries had determined that their interests would be best served by membership in the EU rather than through a form of association. Thus, four of the six members of the EFTA that joined the EEA (the exceptions being Iceland and Liechtenstein) entered into negotiations for accession. These were successfully concluded in early 1994, and following positive referendum results, Austria, Finland, and Sweden entered the EU at the beginning of 1995, though without Norway whose voters rejected membership, as they had in 1972.

Significance: Unlike the case of the previous three entrants—Greece (1981), Portugal (1986), and Spain (1986)—these countries joined the EU as economic and political equals. Hence, relatively few adjustments were required. However, although their accession increased the size and strength of the EU only modestly (6 percent by population and 7 percent by gross domestic product, GDP),² it increased the EU's land mass by over one-third, gave the EU a long common border with Russia, added to the urgency for institutional changes, particularly regarding decision-making procedures, and increased the weight of the "northern tier," generally liberal (economically and politically) countries within the Union (see Chapter 5).

The Emergence of Central and Eastern Europe

Even more directly affected in their relationship with the EU by the collapse of the Soviet Union were the former satellite countries of Central and Eastern Europe. These had been controlled until the late 1980s by authoritarian Communist Party regimes, they were largely subservient to the Soviet Union, and they were saddled with highly inefficient, centrally planned economies tied to a system operated by and for the benefit of the Soviet Union. Once they had achieved their independence, these countries instinctively turned to the West for support and assistance, as they began their long and difficult transformation to democratic government and a market economy.

From the outset, the EU clearly recognized that it had a direct interest, if not obligation, in the success of the efforts of the Central and Eastern European countries to transform their political systems and economies. As a result, a substantial aid program was undertaken, and a framework of economic and political cooperation was developed through a series of bilateral agreements, culminating in so-called Europe Agreements with Bulgaria, Czech Republic, Hungary, Poland, Romania, and Slovakia. However, these countries' goal was membership (to take place sooner rather than later), a development they deemed essential for making the transition to a Western-style democratic and market economic system and for obtaining and maintaining the support of and sacrifices from their citizens for that transition. Thus, in mid-1993 the EU accepted the principle of eventual membership by the countries of Central and Eastern Europe, and by the end of 1994 Hungary and Poland had formally applied to join the EU, followed in 1995 by Bulgaria, Romania, and Slovakia, while the Czech Republic was expected to follow suit soon thereafter.

Significance. The countries of Central and Eastern Europe, which had hitherto figured only marginally in the activities and policies of the EU, have become a major object of EU attention and concern. These countries are being progressively drawn into the EU orbit—through aid, trade concessions, political cooperation, and, more generally, prospective membership. Many of these countries will join the EU in the coming years, with the result that the geographical balance of the EU will change, and the EU will be forced to deal with a number of fundamental structural and policy issues (see Chapter 6).

The Balkan War

Another external shock was the civil war in ex-Yugoslavia, which engulfed part of the European continent in bloody warfare for the first time since 1945. The breakup of what had been Yugoslavia challenged the EU to develop and carry out a coordinated foreign policy Although the EU played a prominent role in the early stages in seeking to negotiate a cease-fire and settlement, it proved unable—as did the West as a whole— to halt ex-Yugoslavia's slide from dismantlement of the federation of republics into brutal fratricidal war.

Significance. The EU's inability to contribute to settlement of a conflict in its own backyard, and the subordinate role of the Common Foreign and Security Policy (CFSP) structure to that of the major EU powers operating as members of the "contact group" (see Chapter 4), sharply damaged the EU's credibility as a present or potential international political player. This situation provides a prime argument for forces favoring a strengthening of the CFSP, and at the same time puts into question the ability of the member states to move farther in that direction.

The Clinton Administration

In 1993, a new US administration came to power with a significantly different focus from that of its predecessors. Responding to the demands of the electorate, the Clinton administration consciously and publicly placed domestic, particularly economic, issues at the top of its agenda. Not only did the administration give lower priority to foreign affairs, but its attention internationally was directed more toward Asia and Latin America than Western Europe. Although this was partly due to the paucity of specific outstanding issues between the United States and the EU, the Clinton administration gave the impression during its first year or two that it attached less importance than the preceding Bush administration to developments in the EU and to the US-EU relationship.

Significance. Although the actual situation is less stark than it might appear, the perceived lessened interest and involvement by the United States has tended to support a European view that the EU should seek to assume a stronger global leadership role, particularly politically, and that implies a strengthened CFSP. The perceived US focus has also led some Americans and particularly Europeans to suggest various ways to "improve" or "deepen" the US-EU relationship (see Chapter 10).

NAFTA and the Uruguay Round

Two events brought significant changes to the world trading system: conclusion of the North American Free Trade Agreement (NAFTA) in 1992 and of the Uruguay Round of world trade negotiations in early 1994. NAFTA established a free trade area comprising Canada, Mexico, and the United States that covered a population of 370 million with a combined GDP of more than $7 trillion. Building on the-Canada-US Free Trade Agreement of 1988 but going beyond it in many respects, NAFTA represents a major step in the reconfiguration of the world trading system—the establishment of a wider and deeper market, to use a European term, though liberal in outlook. In many respects, it also provides a North American free trade parallel to the customs union of the EU, whose population and GDP is roughly equivalent.

At least as significant was the agreement reached by the members of the General Agreement on Tariffs and Trade (GATT) in the Uruguay Round, which sharply expanded coverage of the rules of the international trading system (adding trade in services, the trade effects of investment policy, and intellectual property protection); contained the first significant agreement on agricultural trade in the history of GATT rounds; established a new international institution, upgrading the GATT into the World Trade Organization (WTO); and introduced a new, more effective dispute settlement mechanism.

Significance. Although these events do not directly impinge on integration in the EU, they represent important changes in the world trade scene: resolution of a number of outstanding issues; establishment of the WTO, which offers at least the prospect for less contentious trading relations; and further development of trading blocs within the multilateral system.

The Telecommunications and Information Technology Revolution

A final shock, although a secular trend rather than a time-specific development, was the telecommunications and information technology revolution, primarily due to stunning progress in microelectronics and digitalization. This revolution, which progressively accelerated and facilitated the transmission and exchange of information, is, according to the experts, still in its early stages. As a result, the world has seen an increase in economic globalization, in which information and transaction barriers have been progressively lowered and the ability of an individual country or region to isolate itself from economic developments, and competition, elsewhere in the world has been sharply reduced. As the pace of globalization has accelerated, companies have increasingly felt the competitive need to develop global structures.

Significance. The competitive pressures generated by these developments constitute a strong force for continuing the process of European integration because of the recognized contribution of integration to enhancing the competitiveness of European firms.

Internal Shocks

Recession and Unemployment

Inside the European Union the major development of recent years was the sharp economic downturn of the early 1990s, in which Europe experienced one of its most severe recessions since the end of the World War II. An important adjunct of the recession has been the high level of unemployment, which rose steadily in the 12 member states from an already high 8.8 percent in 1991 to 9.6 percent and 10.9 percent in the two succeeding years, to 10.8 percent in 1994, and to 10.6 percent in the second half of 1995.³ The number of unemployed in the EU during 1994—more than 17 million—roughly equaled the combined population of three member states: Belgium, Denmark, and Ireland. These totals mask substantial differences among the member states, in particular the extremely high unemployment in Ireland and Spain (both over 18 percent), as well as the high incidence of long-term and youth unemployment: 48 percent of the European unemployed have been out of work for over a year, one-third have never been employed, and youth unemployment remains over 20 percent.⁴

A worrisome feature of the EU's unemployment situation is the virtual unanimity among forecasts that the level of unemployment will not fall substantially before the late 1990s, even with a healthy economic recovery.⁵ Accordingly, the view is increasingly expressed that European unemployment is a more serious, and more intractable, problem than in the past, requiring a more targeted response than simply awaiting the benevolent effects of economic growth.

Significance. It has long been evident that public receptivity to economic integration, and thus progress toward that objective, has been greatest during periods of economic prosperity. Indeed, the Commission's optimistic estimates of the effects of the EC 1992 program were predicated, at least implicitly, on an assumption of continued economic growth (see Chapter 2).⁶ However, the downturn in the economic cycle inevitably put a damper on member states' willingness and ability to move forward as rapidly and comprehensively as had been envisaged. Although that situation changed with the economic recovery beginning in 1994, the persistent problem of unemployment continues to temper enthusiasm for the further removal of economic barriers.

The Collapse of the ERM

While the economic situation in the EU reflects in part the economic effects of developments elsewhere in the world, the collapse of the exchange rate mechanism (ERM) was essentially a...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Preface
• Acknowledgments
• Introduction
• PART ONE MAASTRICHT AND BEYOND: CONSOLIDATING THE EU
• PART TWO FACING THE FUTURE
• PART THREE US INTERESTS AND POLICIES
• Selected Bibliography
• Index
• About the Book and Author