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CHAPTER 15CHAPTER 15The European Union and Other The European Union and Other Regional Trade AreasRegional Trade Areas

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ModelsModels

• Federal Model.• Free Trade Area: two or more countries agree to

eliminate or phase out customs duties and barriers to trade among the member countries.

• Customs Union: there is free trade in all goods that come through union members.

• Common Market: common rules & currency. See the Commission of the European Communities v. Italian Republic (the “chocolate substitutes”) case.

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CompatibilityCompatibility

• How can members of an FTA treat its members more favorably than other GATT/WTO members?

• Isn’t this practice discriminatory, and a violation of GATT?

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European UnionEuropean Union

• Treaty of Rome (1957) creates European Community.

• Single European Act (1987) set 1992 deadline of achieving single market.

• Maastricht Treaty (1993) created European Union and set path for monetary union.

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European UnionEuropean UnionEuropean UnionEuropean Union

• Treaty of Amsterdam (1999), incorporated the principle of freedom of movement from the Schengen Agreement.

• Treaty Establishing a Constitution for Europe (2004), that was ultimately rejected.

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Structure of the EUStructure of the EU

• Council of the EU, sits in Brussels, Belgium, the “capital” of the EU.

• The Commission of the EU is the executive body carrying out the decisions of the council.

• European Court of Justice in Luxembourg is the final arbiter of EU law.

• European Parliament’s members are elected by European citizens.

• European Central Bank.

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Monetary Union CriteriaMonetary Union CriteriaMonetary Union CriteriaMonetary Union Criteria

• Budget deficit no greater than 3% of GDP.• Public debt no greater than 60% GDP.• Price stability (inflation controlled).• Long term interest rates within 2% of the best 3

countries.• Exchange rate stability

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Harmonization: Directives Harmonization: Directives and Regulationsand Regulations

• Treaty of Rome identifies four principal means:– A regulation shall have general application.– A directive shall be binding as to the result to be

achieved.– A decision shall be binding upon those to whom

addressed.– Recommendations and opinions have no binding force.

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PrivacyPrivacy

• Directive on Privacy and Electronic Communication (2002) as well as data protection described in the case European Parliament v. Council of the European Union and Commission of the European Communities.

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Common Agricultural Policy (CAP)Common Agricultural Policy (CAP)Common Agricultural Policy (CAP)Common Agricultural Policy (CAP)

• What is it?• What conflicts have occurred?• How are the goals described now?

“transparency, quality and safety and a farm sector in tune with the environment and animal welfare.. A sustainable farm and food sector for the future”

• How does the expansion of the EU affect this?

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National Farmer’s UnionNational Farmer’s Union (France) (France)National Farmer’s UnionNational Farmer’s Union (France) (France)

• The Commission adopted emergency measures to protect against BSE ( Bovine spongiform encephalopathy) or mad cow disease. The UK was temporarily prohibited from exporting beef to the Continent.

• The Court found that since there was a procedure in place to protect the public upon the resumption of exports.

• France could not invoke Article 30 to block imports.

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HarmonizationHarmonization

• Harmonization by Enforcement of the EC Treaty.• The EC can harmonize national laws that may

be inconsistent with EU laws.• The Commission is acting more and more like

U.S. Executive Branch and courts, striking down legal barriers to free commerce. See the Commission of the European Commission v. Italian Republic case.

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Business Implications of the EUBusiness Implications of the EUBusiness Implications of the EUBusiness Implications of the EU

• What are the ramification for business of the expansion of the EU?

• What impact does the trade friction between the U.S. and the EU have on business ventures?

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Other Regional Trade AreasOther Regional Trade AreasOther Regional Trade AreasOther Regional Trade Areas

• Mercosur: Argentina, Brazil, Paraguay, Uruguay.• CAFTA-DR: Central America.• Andean Common Market: Bolivia, Venezuela,

Colombia, Ecuador, Peru.

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• African trade areas (AEC, COMESA, SADC).• Caricom: Caribbean Community. See the case

Barbados Rediffusion Service Limited v. Mirchandani (2005).

• ASEAN: Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Myanmar, Laos, Cambodia, Vietnam. Arab League.

Other Regional Trade AreasOther Regional Trade AreasOther Regional Trade AreasOther Regional Trade Areas

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Other Regional Trade AreasOther Regional Trade AreasOther Regional Trade AreasOther Regional Trade Areas

• Commonwealth of Independent States Free Trade Area.

• Gulf Cooperation Council.• Greater Arab Free Trade Area.