Economic Union

A group of countries committed to (1) the removal of all barriers to the free flow of goods, services, and factors of production between each other; (2) the adoption of a common currency; (3) the harmonization of tax rates; and (4) the pursuit of a common external trade policy.

The move toward economic union raises the issue of how to make a coordinating bureaucracy accountable to the citizens of member-nations. The answer is through political union in which a central political apparatus coordinates the economic, social, and foreign policy of the member states. The EU is on the road toward at least partial political union. The European Parliament, which is playing an ever more important role in the EU, has been directly elected by citizens of the EU countries since the late 1970s. In addition, the Council of Ministers (the controlling, decision-making body of the EU) is composed of government ministers from each EU member. The United States provides an example of even closer political union; in the United States, independent states are effectively combined into a single nation. Ultimately, the EU may move toward a similar federal structure.

Political Union

A central political apparatus that coordinates economic, social, and foreign policy.

• QUICK STUDY

What are the differences among a free trade area, a customs union, a common market, and an economic union?

At what level of regional economic integration does a degree of political unification become desirable?

The Case for Regional Integration

LEARNING OBJECTIVE 2

Understand the economic and political arguments for regional economic integration.

The case for regional integration is both economic and political, and it is typically not accepted by many groups within a country, which explains why most attempts to achieve regional economic integration have been contentious and halting. In this section, we examine the economic and political cases for integration and two impediments to integration. In the next section, we look at the case against integration.