Regional Integration in Europe

The European Community (EC) has evolved considerably since the Treaty of Rome was first implemented in I958. To use the Euro-jargon, there has been much 'deepening' and 'widening'. From a mere customs union with six members, it has been transformed into a fully fledged Single Market with twelve members sharing common microand macro-economic policies. And by the end of the century, the Community should become an Economic and Monetary Union with fifteen or more members. The foundation of European economic integration is internal trade liberalisation. The process of trade liberalisation within the EC has undergone three major phases. The first, starting in I 958, was the elimination of customs duties and quantitative restrictions. It was completed in I968 with the introduction of a common external tariff. The second, between I 973 and I 986, witnessed successive enlargements from six to twelve members (see Table i), but also reduced fervour for the elimination of internal trade barriers. The last, ending in I992, is the completion of the internal market for goods, services, capital, and labour. The purpose of this paper is to analyse the effects of European integration on trade and welfare. Analysis focuses entirely on merchandise trade. The remainder of the paper is divided into three parts. Section 2 examines the effects of EC integration on the extent and type of trade inside the Community. Section 3 studies the impact of EC integration on welfare and distribution both within and outside the Community. Section 4 concludes.