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The Evolving Architecture of Europe: Functioning or Dysfunctional for the Twenty-First Century?

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Abstract

From modest beginnings in 1957, the EU has since evolved both by deepening – adding new tasks and responsibilities to the Commission’s remit – and by widening – adding new members in a series of accessions, to arrive at the present 28 member states. A new complication was the UK’s referendum in June 2016 that opted for Brexit. The EU’s evolution by enlargement is examined, followed by an outline of the major EU institutions and the links between them. This includes EU engagement with the wider world via trade deals and aid. The suitability of the EU’s acquis for applicant states and countries in the EU neighbourhood is reviewed, followed by an assessment of the overall EU ‘Model’. Having appeared to function well and deliver significant benefits to the member states, the ‘Model’ has performed far less well since the 2007–2009 financial crisis, revealing major weaknesses in the Union’s capabilities. The EU needs new, more flexible economic models, as well as new modes of engagement, both internally and with its various partners. In addition, the EU’s political model needs reform, both to deal with the democratic deficit and to provide for more effective decision-making.

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Notes

  1. The UK was not one of the six founding members of the then European Economic Community, only joining in 1973, after earlier attempts to join had been rebuffed by the French ‘Non!’.

  2. The ill-judged general election held in the UK in June 2017 left the country with the Conservative Government still in office, but much weakened, creating considerable uncertainty over the UK’s negotiating position on Brexit. Nevertheless, exit negotiations with the EU commenced as planned on June 19, and there will be frequent meetings hereafter, mostly involving technical teams, occasionally involving Ministers.

  3. One referee suggested that Scandinavian concerns over environmental issues might have complicated this enlargement. But the EU became engaged in environmental matters as early as 1973, and DG Environment was already established in 1981. During the 1980s the EU had increasingly centralised environmental policy to Brussels. Eventually, this led to a backlash, with Germany and the UK looking at ways of reducing regulatory burdens on various industrial sectors, other member states appealing to the subsidiarity principle to justify returning environmental matters to the national level. This left Brussels to provide guidelines and framework regulations, supported by voluntary agreement and self-regulation. The late 1990s saw a mixed approach to EU environmental policy, with EU-level legislation and directives based on the notion of sustainability, as well as more attention to deregulation and devolution to member states (see Scheuer, 2005, esp. ch. III).

  4. Germany’s agreement to give up the Deutsche Mark and to support the Euro was also probably helpful in securing France’s acceptance of early German reunification.

  5. Interestingly, the UK Home Office (i.e. the UK’s Interior Ministry) supported this on the basis of a very low projection of the likely number of migrants from the new EU Member States, just 5000–13,000 people per year, or a little more if Germany also restricted these migrants (see Dustmann et al., 2003). In the event, more than 900,000 additional citizens from the new Eastern European Member States had come to live and work in the UK by 2013 (see Migration Watch, 2015).

  6. As has been done over minority rights, independence of the judiciary, and many other issues involving various applicant states.

  7. Interestingly, however, in early September 2016, Luxembourg publicly called for Hungary’s EU membership to be at least suspended, possibly even terminated, as a result of Hungary’s policies regarding the migrant crisis. More recently, having reviewed the new Hungarian Higher Education Law of 4 April 2017, the European Commission concluded that the law is not compatible with the fundamental internal market freedoms, notably the freedom to provide services and the freedom of establishment but also with the right of academic freedom, the right to education and the freedom to conduct a business as provided by the Charter of Fundamental Rights of the European Union, as well as with the Union's legal obligations under international trade law (EC Press Release, 26 April 2017). This recent experience raises a more fundamental question, namely whether and how the original EU members – or the EU institutions acting for them – can take a firmer line over continued fulfilment of the core obligations of EU membership.

  8. Chapters of the acquis are listed at: https://ec.europa.eu/neighbourhood-enlargement/policy/conditions-membership/chapters-of-the-acquis_en.

  9. Though at that early stage they were more like aspirations, since putting the principles into effect and enforcing them took some years. But they are nothing new.

  10. Thus, in the case of the UK it is the Prime Minister (head of government) who attends these meetings, not the Queen (head of state); for France, the President of the Republic attends.

  11. For details, see the relevant websites. Thus, for the European Council, see: http://www.consilium.europa.eu/en/european-council/. For the Council of Europe, see: http://www.coe.int/en/.

  12. To be as clear as possible over this quite confusing terminology, this Council is not that same as either the European Council (also an EU institution) or the Council of Europe (not an EU institution at all).

  13. Further detail can be found in the European Commission website, http://ec.europa.eu/about/index_en.htm.

  14. See the relevant websites. CJEU, http://curia.europa.eu/; ICJ, http://www.icj-cij.org/; ECHR, http://www.echr.coe.int/.

  15. At the end of 2017, the European Commission will publish its first draft proposals for the MFF 2021–2027, on which preparatory work is already being done. Given Brexit – whereby the UK will no longer be a member state by the end of March 2019 – this could prove a difficult exercise, as the UK has always been a large net contributor to the EU.

  16. Developed jointly by the European Commission (Directorate General for Economic and Financial Affairs – DG EcoFin) and the Commission’s Joint Research Centre. See Ratto et al. (2008) for a technical account of this dynamic stochastic general equilibrium modelling framework. For a critical overview of recent work on DSGE models used for policy analysis, see Gürkaynak and Tille (2017).

  17. The five convergence criteria.

    What is measured:

    Price stability

    Sound public finances

    Sustainable public finances

    Durability of convergence

    Exchange rate stability

    How it is measured:

    Consumer price inflation rate

    Government deficit as % of GDP

    Government debt as % of GDP

    Long-term interest rate

    Deviation from a central rate

    Convergence criteria:

    Not more than 1.5% points above the rate of the three best performing member states

    Reference value: not more than 3%

    Reference value: not more than 60%

    Not more than 2 percentage points above the rate of the three best performing member states in terms of price stability

    Participation in ERM II for at least 2 years without severe tensions

  18. Widening the discussion to encompass poor adjustment to stagnation in the global economy, but also focusing strongly on needed reforms in the Eurozone, see Sinn (2014). For some interesting thoughts about the need for ‘creative destruction’ in the Eurozone, see Sinn (2016).

  19. African, Caribbean and Pacific Group of States. There are 79 countries, all except Cuba being signatories to the Cotonou Agreement (see EC, 2014), essentially an EU–ACP Partnership Agreement.

  20. Thus, an Economic Partnership Agreement (EPA) with 16 West African states has been initialled by the EU but not yet ratified by the states concerned. It only covers goods trade and development cooperation as agreement on investment, services and other matters could not be reached. For a group of Central African countries, negotiations have been under way for over a decade without agreement.

  21. Briefly, it seemed that the EU might be unable to adopt CETA, the Comprehensive Economic and Trade Agreement, due to opposition from the parliament of the Walloon region of Belgium. Later, it seemed that a Belgian compromise could be reached by adding some ‘clarifications’ to the draft agreement; these then had to be agreed by all other member states. CETA was finally signed in Brussels on 30 October 2016. It is an illustration of the dysfunctionality of the EU that a potentially important trade agreement, after years of negotiations, could come close to being vetoed by a sub-national assembly in this way.

  22. HS refers to the Harmonized System of product classification used around the world to classify exports and imports of goods, administered by the World Customs Organization. The 6-digit level (hence HS6) means that each product is identified by a six-digit code.

  23. This is terminology used by the World Trade Organization (WTO). What it means is the tariffs offered to any WTO member if the member does not enjoy any special preferences. The point is that WTO members cannot pick and choose the tariffs they offer to various partner countries.

  24. At that time this was, of course, West Germany, properly known as the German Federal Republic.

  25. Indeed, one cannot help wondering just how good the translation into Ukrainian is, and how many Ukrainian officials and politicians really understand what they have signed up to. Signing up, for some, might even have been a symbolic act, rather than meaning a great deal substantively.

  26. Strictly, this should still be named FYROM – Former Yugoslav Republic of Macedonia.

  27. Formerly, DG Enlargement.

  28. One could argue that the principal response to Russia’s actions in Crimea and eastern Ukraine should have come from NATO, and to some extent it has. However, the response has appeared weak and hesitant. EU economic sanctions aim to signal the EU’s strong disapproval of Russia’s military actions in Ukraine.

  29. Russia has been a WTO member since 2012, an accession that was generally supported by the EU; reportedly, Russia continues to experience problems over complying with its agreed WTO obligations. In fact, though, both Russia and the EU have trade disputes with each other proceeding through the WTO dispute settlement process.

  30. See Treaty on the Eurasian Economic Union that came into force on 1 January 2015 (TEEU, 2014). The key institution to implement this Union is the Eurasian Economic Commission (EEC), located in Moscow. Interestingly, Article 63 of the TEEU defines ‘economic sustainability’ in a similar manner to the Maastricht conditions for the euro, discussed above. However, there is no plan at present for a common currency.

  31. And based on essentially the same product nomenclature as that used by the EU, using the Harmonized System as defined by the World Customs Organization. However, parts of the document are quite confusing, with some tariffs in US$ (e.g. in chapter 17, sugar), some in euros (e.g. in chapter 9, coffee, tea, etc.). Most are, as normal, expressed in ad valorem terms, as a percentage.

  32. Though, of course, the failure to take a decision is itself a sort of decision.

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Acknowledgements

We thank Conan Fischer and Richard Pomfret for helpful comments on an earlier draft of the conference version of this paper, participants at the Warsaw Conference where the paper was presented, and three anonymous referees for very detailed comments that have enabled us to improve this final, journal version. Paul Wachtel, editor of the journal, also provided detailed comments and suggestions for which we are most grateful. Remaining errors and infelicities are entirely our own responsibility.

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Hare, P., Stoneman, R. The Evolving Architecture of Europe: Functioning or Dysfunctional for the Twenty-First Century?. Comp Econ Stud 59, 433–471 (2017). https://doi.org/10.1057/s41294-017-0031-7

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