European Economic Integration and the Changing Structure of European Trade
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European economic integration (EEI) is the process of dismantling trade barriers that has been unfolding in Western Europe since the end of the Second World War. While having only made concrete gains in the economic sphere, the ultimate goal is the political integration of the Old World. Economic integration is seen as a first step on the road to a federation of European states. This paper surveys the history of EEI and tracks the changes in Western European export shares, both in aggregate as well as those of the EEC and EFTA, to see the effects of integration on international trade. The European Economic Community (EEC) has come to represent the process, all but eclipsing its rival the European Free Trade Association (EFTA). Much has been accomplished towards formation of the Common Market between EEC member states - internal tariffs have been eliminated, non-tariff barriers such as national subsidies to industry have been addressed, the legal framework for the fulfillment of the four freedoms of the Community is taking shape. The 1992 initiative has taken the process into a new phase, the final steps of economic integration and the first concrete ones towards formal political integration. And the end of the Cold War provides an opportunity for integration to extend to the whole of the Continent, making the process truly European. The analysis of export shares showed the dependence of them upon the general economic situation. The export share of the developed world follows the economic situation directly so that when the economy is doing well, as in the 1960's and second half of the 1980's, its share rises. When times are bad, as in 1970's and early 1980's, its share falls. The developing world faces the opposite situation. When times are good their share declines, but when they are bad their share rises. This reflects the relatively inelastic demand for the developing worlds products, in the main raw materials and other primary goods, as opposed to the more cyclical demand for the finished and capital goods coming from and going to the developed world. Besides this, however, there has been a definite increase in the share of exports coming from European countries destined for other European countries over the last thirty years, with the greatest increase during the 1960's when tariffs were being eliminated. The most striking statistic which demonstrates this intensification of intra-European trade is the flip flop between intra EEC exports and extra EEC exports as a percentage of total world exports, from 15% intra and 20% extra to the opposite.
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