1.1.1 Concept of the European Integration
To describe the concept of European Integration, we can start with explanation of its core essential – the European economic integration. The theory of economic integration studies how and at what cost countries can pass from a situation of total protectionism to a situation of free trade (Altomonote, Nava, 2005, p.31). There are several ways in which protection (par-tial or
total) of a market economy can be achieved. The most commonly used method is to impose a tariff on imported goods. Other measures include quotas which means a quantitative re-striction on the total volume of imports that are allowed to enter a given market. Another method is represented by non-tariff barriers: rules and regulations on the product characteris-tics, for example in respect of given production standards or certificates, without which the good or service cannot be legally imported. A country economic integration is a strep-by-step process to reduce all different kinds of barriers for international trade.
A comprehensive answer to the question of barriers restrictions implies considering at least four dimensions. (1) The degree to which free trade is achieved: restrictions to trade can be totally or only partially abolished. (2) The geographical coverage which implies to enlargement or disintegration processes of the zone. (3) The extent of free trade: removal of restrictions to trade can be applied for certain goods and/or services in case of sectorial integration. (4) The range of effects like possible gains from integration: impact of integration on allocation of resources, on exploitation of economies of scale, on input productivity, of profit margins, on economic growth and income distribution etc.
The first dimension of economic integration is related to different forms (degrees) of econom-ic integration:
• In a free trade area (level 1), the members remove all trade impediments among them-selves but retain their freedom to determine their own policies vis-à-vis the outside world (the non-participants).
• In a customs union (level 2), the participants conduct and pursue common external commercial relations like adoption of common external tariffs on import from third countries.
• In a common market (level 3), free factor mobility (i.e. capital, labour,) technology and enterprise) across participating countries is allowed.
• In a complete economic union (level 4), the participants introduce a central authority to exercise control over monetary and fiscal policies.
• In a complete political union (level 5), the participating countries become literally one nation, the central authority should be paralleled by a common parliament and other necessary institutions needed to guarantee the sovereignty of one state.
The main objectives of an integrated area in Europe could be seen in (1) facilitating cross-border domestic and foreign business activity, (2) reinforcing European business opportunities abroad, (3) giving Europe and its corporations a positive role internationally and (4) supporting collaboration on complex challenges for a healthy, safe and prosperous region. On the basis of these objectives, one aim of integration in Europe was to annihilate nationalism in Europe. The other aim was to deal with the geo-political and economic aspirations of both the USA and the Soviet Union, which led to the subsequent bipolarity in Europe. Such a bipolarity was pre-sented in Europe until post-1989 and led to shaping all aspects of the socio-economic envi-ronment.
In general, one should further point out that the integration can produce positive, as well as negative effects. Among the positive effects, one can identify: trade creation (resources allo-cated according to comparative advantage), trade diversion, reducing monopoly power, reduc-ing level of X-inefficiency – overmanning, excessive holding of stocks and other types of slack management practices, economies of scale, learning effects, strengthened bargaining position with external partners etc. On the other hand, the opponents of integration are dealing with following arguments: integration hurts third countries, ‘Spaghetti bowl’ of various principles, regional industry-specific lobbies, administrative costs, trade wars among regional trading blocks, increasing protection of business areas etc. The opposition to European integration can lead to a negative costruction concept – the Euroscepticism. Eurosceptic movements can operate effectively at the regional, national or European levels across the continent. To avoid these movements, one of the recurring issue is to bring the EU closer to its citizens.
1.1.2 Brief historical overview of European integration
The oldest postwar experiment in regional integration in western Europe was the agreement between Belgium, Luxembourg and the Netherlands – creating BENELUX (1943).
It is acknowledged that the start of the process of European integration can be identified in the so-called Schuman Declaration representing an important institutional innovation. Robert Schuman, the French foreign minister, in his speech on 9 May 1950, proposed that France and Germany, and any other European country wishing to join them, pool their coal and steel re-sources. This Declaration was a way to guarantee a peace in Europe and to allow economic recovery. Coal and steel were not only important economic resources, but they were also stra-tegic resources for any possible programme of rearming. Thus, the beginnings of cooperation between pioneering countries wanted to bring peace in Europe.
In the “Swinging Sixties”, the European Union marked an important economic growth with further economic integration in Europe and the beginnings of international cooperation.
The next decade of 1970s was marked by the first addition of new members, European elections and a regional policy with an objective to boost poorer areas. In this decade, the first attempts of the euroscepticism appeared – as an aswer, the EU institutions proposeed more deppened integration.
In the 1980s, the Europe has changed its face by the collapse of communism. The European Union developed with more countries joining, the Erasmus programme and the start of the single market.
The main motto of European integration in the 1990s was to build Europe without frontiers. The European Union developed with more expansion, and the development of the single market, border-free travel and the birth of euro as a new and common currency.
At the begginng of the new century, Europe continued in it expansion. 12 new countries joined the EU, the euro became legal tender and another legal framework – the Lisbon Treaty – was signed.
During a very challenging period from 2010 to 2019, the EU was responding to the financial crisis, terrorist strikes and over 1 million asylum seekers have arrived in Europe, many fleeing civil war in Syria and in need of international protection. In a referendum in June 2016, 52% of voters in the United Kingdom voted for the UK to leave the European Union after more than 40 years as a member. The UK departed on 31 January 2020.
Since 2020, the EU is acting as more united and more resilient framework, responding to unprecedented challenges such as the COVID-19 pandemic, Russia’s war of aggression against Ukraine, and fighting climate change.
What is coming out from this brief historical outline, the EU was trying to achieve its political objectives by mostly economic instruments – from trade barriers reduction to common curren-cy, leading to increased welfare. Through the trade exchange across frontiers, nations came to expand their knowledge of different economic systems and trade mechanisms, but even more about different societies and cultures. Interaction between people and their economies has indeed maintained peace for longer than in any other region in the world.
1.1.3 Enlargement of the European Union
Over the years, the EU has progressively enlarged from the original group of six Member States to the current 27 Member States. As a results, population has grown from 170 million to million. The different waves of enlargement are as follows:
1958: Founding Members: BE,FR,DE,IT,LU,NL
1973: 1st wave: DK, IE, UK
1981: Southern wave 1: GR
1986: Southern wave 2: PT, ES
1995: 4th wave: AT, FI, SE
2004: 5th wave 1: CZ, EE, CY, LV, LT, HU, MT, PO, SK, SI
2007: 5th wave 2: RO, BG
2013: HR
2020: – UK (Brexit)
The different waves were not only enlarging population and land area but were also bringing new challenges and opportunities for European integration and business environment. We can add that the EU Member States are the integral parts of the European Economic Area. This area enables also member states of the European Free Trade Association (Iceland, Liechten-stein, Norway and Switzerland) access to the EU´s Single Market which represents another opportunity in the dynamic European business environment.
It is important to underline that the EU Member States have the right to withdraw from the integration project. The UK has become the first country to apply this right in 2020. However, the process of EU enlargement continues after Brexit. The next waves can include current candidate countries: Albania (AL), Moldova (MD), Montenegro (ME), North Macedonia (MK), Serbia (RS), Türkiye (TR), Ukraine (UA). Eventually, the potential candidate countries can integrate in the future: Bosnia and Herzegovina (BA), Georgia (GE) and Kosovo (XK).
To integrate, a country needs to meet the Copenhagen criteria which are the rules that define whether a country is eligible to join the European Union. The criteria require that a state has the institutions to preserve democratic governance and human rights, has a functioning market economy, and accepts the obligations and intent of the European Union. The Copenhage crite-ria should not be confused with another set of criteria: the Maastricht criteria. Convergence criteria (or „Maastricht criteria“) are criteria, based on economic indicators, that European Un-ion (EU) member states must fulfil to enter the euro zone and that they must continue to re-spect once entered.