The document discusses the evolution of the European Union from a customs union to a common market. It outlines some key EU institutions and policies around agriculture, regional development, competition, taxation, and social policy. It then discusses the removal of non-tariff barriers through the Single European Act of 1987 to create a true common market. Potential benefits included reduced costs through greater specialization and economies of scale, while critics argued it could exacerbate economic inequality and corporate power within Europe.

1. The European Union from customs union to a common market Notes from Economics Through Diagrams pp. 107-9 Handouts from Sloman On Historical Development Key Institutions Membership Gains in Trade EMU

2. EU as a Common Market Common Agricultural Policy – sets high prices for farm products through imposing import taxes and subsidising domestic production. Common Regional Policy – providing grants to firms and local authorities in relatively deprived regions of the Union. See case study handout Competition Policy – applied primarily to companies operating in more than one member state e.g. ECC can investigate agreements between firms which will adversely affect competition in trade between member states. Harmonisation of Taxation – VAT is the standard form of indirect tax (tax on expenditure) through the EU. But there are differences in VAT rates between member states as with other tax rates. Social Policy – 1989 Social Charter – worker and social rights – took UK until 1997 to sign up to it (and we got our minimum wage)

3. Non Tariff Barriers 1980s saw growth in non tariff barriers between member states. Subsidies or tax relief to domestic firms Licences or permissions to favour domestic firms (national airlines and domestic routes) Government giving domestic firms contracts Recognising only national qualifications (legal, medical etc) Regulations – health and safety, technical regulations on technology.

4. Single European Act 1987 Sought to remove these barriers and form a genuine common market by the end of 1992. Benefits Hard to quantify and can occur over a long period – also hard to determine if changes that are occurring are due to there being a single market. Trade Creation – costs and prices have fallen as a result of a greater exploitation of comparative advantage – firms can specialise more. Reduction in the direct cost of Trade barriers - admin costs, border delays and technical regulations. Economies of Scale Greater Competition especially in newly liberalised service sectors such as transport, financial services, telecommunications and broadcasting.

5. Single European Act 1987 Critics – in a Europe of Oligopolies, unequal ownership of resources, rapidly changing technologies and industrial practices and factor immobility the removal of internal barriers have only exaggerated the problems of inequality and economic power.

6. Radical economic change is costly – to achieve all these EoS : redundancies – depending on mobility of labour and pace of economic change. Adverse regional multiplier effects – firms move to the centre of markets and supply. Leaving midlands UK and setting up in France for example. Depressed regions – no investment in infrastructure etc Development of Oligopoly or Monopoly power – giant ‘Euro Firms’. Single European Act 1987

7. New Member States They gain increased competition, technological transfer, inward investment (from within and outside the EU) Next.. Single Currency.