Essay on European Union | International Economics

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Essay # 1. Introduction to European Union:

The most prominent development in the field of economic integration has been the organisation of European Economic Community (EEC) now known as European Union (EU). Initially it was called European Common Market (ECM). It was formed on January 1, 1958 on the basis of the Treaty of Rome signed in March 1957 by the countries like W. Germany, France, Italy, Belgium, Netherlands and Luxembourg.

Starting with six member countries, its membership increased to nine when the United Kingdom, Denmark and Ireland joined it in 1973.

Subsequently, Greece joined it in 1981, followed by Spain and Portugal in 1986. During 1990’s, the membership of EU had risen to 15 with some African, Caribbean and Pacific region countries having its associate membership. On May 1, 2004 there was enlargement of European Union (EU) with the joining of 10 new member countries.

With this the membership of EU has risen to 25. The new member countries include Czech Republic, Estonia, Hungary, Slovak Republic, Malta, Cyprus, Poland, and Lithuania. Latvia and Slovania.

Presently, the membership of the EU stands at 28. The estimated GNP of the enlarged EU would be around Euro 9,712 billion with a population more than 455 million. The enlarged EU would represent 20 percent of the world trade, 26 per cent of foreign direct investment and 46 percent of the total outbound investments. As a matter of fact, EU would become the largest trading block in the world. The Intra-EU trade would be over twice of what it would have been in the absence of integration.

Essay # 2. Objectives of European Union:

The EEC had been created on the basis of the Treaty of Rome which specified its objective.

So under the Treaty of Rome, the member countries of EEC are committed to:

(i) The abolition of tariff and non-tariff quantitative and other restrictions in regard to the import and export of goods between the member states;

(ii) The abolition of all restrictions upon the free movement of persons, services and capital between the member states;

(iii) The establishment of common customs tariff and of a common commercial policy towards the non-member countries;

(iv) The establishment of a common farm policy;

(v) The adoption of a common policy in the sphere of transport;

(vi) The establishment of a system ensuring that competition shall not be distorted in the common market;

(vii) The application of the procedures for ensuring the co-ordination of the economic policies of the member states and for remedying their balance of payments disequilibria;

(viii) The creation of a European Social Fund for improving the possibilities of employment for the workers and for ensuring a rise in their standard of living;

(ix) The establishment of a European Investment Bank to facilitate the economic expansion of the community by opening up fresh resources;

(x) The approximation of the legislations of the member states to the extent necessary for the efficient functioning of the common market.

It follows from the above that the fundamental objectives which the EEC sought to realise include the elimination of all restrictions from the free movement of goods, labour, capital and services, maintenance of common external tariffs against the non-member countries, the establishment of common policies in the spheres of transport and agriculture and closer integration in the fields of monetary and fiscal matters in the entire region.

The realisation of these ends will certainly ensure a sustained expansion in trade, improvement in economic performance and a rise in standards of living for the region as a whole.

Essay # 3. Organisational Structure of European Union:

The organisational structure of EU consists of:

(i) The Executive Commission,

(ii) The Council of Ministers,

(iii) The European Parliament,

(iv) The Court of Justice,

(v) The Economic and Social Committee and

(vi) The Monetary Committee.

(i) The Executive Commission:

The Executive Commission of EU is the key institution. It functions autonomously of the national governments of the member countries. The functions of this commission are related to initiation, evolution and execution of the economic policies of the community. The commission ensures the proper compliance of agreed policies by the member countries. The commission’s directives are binding upon all the members. It has the authority to over­rule any such policies of the national governments as are not in conformity to the desired objectives of the EU.

The commission is constituted by 14 commissioners, appointed by the member countries. The commissioners are bound on oath to work independently of the dictates of their respective national governments. The commission has a significant achievement in the field of anti-trust legislations. It brought about successful suits against multi-national corporations charged for adopting monopolistic practices within the geographical confines of the European Union.

(ii) The Council of Ministers:

An important decision-making inter-governmental body is the Council of Ministers. It is constituted by the foreign ministers of the member countries of the EU. This body is responsible for taking major decisions related to political issues which impinge upon the economic and commercial policies.

The Council of Ministers takes decisions also upon important technical matters and lays down the guidelines for political and economic policies. All issues are decided by the Council of Ministers through the majority decision. However, attempts are made to evolve, as far as possible, the consensus among the members.

(iii) The European Parliament:

It is a consultative body constituted by 142 members representing the national parliaments of the member countries. Generally, the European Parliament holds eight sessions a year. The members of the European Union (EU) Parliament are now chosen through direct election.

(iv) The Court of Justice:

Any dispute arising out of the different provisions of the Treaty of Rome is settled by the Court of Justice that is based in Luxembourg. This Court has the power to over-rule the decisions taken by the national courts on the matters related to EU policies and actions.

(v) The Economic and Social Committee:

The Economic and Social Committee is constituted by the representatives of workers, employers and professional organisations of the member countries of the EU. This is essentially a consultative body.

(vi) The Monetary Committee:

This committee is constituted by experts and central bank officials of the member countries of the EU. It performs the functions of tendering advice to the Executive Commission and the Council of Ministers on international monetary issues.

The long standing European goal of creating European economic and monetary union could be reached by the end of 1993 when all the member countries ratified the Maastricht Treaty drawn up in 1991. The European Union became fully operational from January 1, 1995. Some countries, however, retained the option not to participate ill certain parts of the agreement. For instance, Britain declined to participate in the integration of social policy.

Essay # 4. Achievements of EU:

It is an undeniable fact that EU has emerged as the most successful integration in the post-war period. It set the common external tariff; ensured free trade in industrial goods within the European community; adopted a common price policy for farm products and; abolished restrictions on the free movement of labour and capital. From the point of view of membership, it is the largest single group of relatively more advanced industrial nations.

Some of the achievements of EU are mentioned below:

(i) Balance of Trade and Payments:

After the formation of this organisation, there has been a substantial rise in its exports and imports in relation to the rest of the world. The intra-trade of the EC as a proportion of world trade rose from 9 percent in 1960 to 14 percent in 1970. Upto 1970’s the EC as a whole maintained a strong balance of payments position with the rest of the world.

In 1987, the EC had surplus on balance of current account amounting to 71.1 billion dollars. In the same year, the United States was having a deficit on the balance of current account amounting to 49.4 billion dollars. In the subsequent years, the same pattern in respect of their respective balance of trade and payments has persisted and there has been an alarming widening of the deficit in the U.S. balance of trade and payments with both the EU and Japan.

(ii) Trade-Creation and Trade-Diversion Effects:

A highly significant achievement of the EU has been a very substantial increase in the trade- creation. The studies conducted by Kreinin (1974) and El Agraa (1980) showed that the trade creation due to EC was 8.4 billion dollars by 1969. In contrast, the trade diversion was only 1.1 billion dollars.

The trade diversion effect due to EC became more significant in agriculture after Britain joined the EC in 1973. The EC has been overwhelmingly trade-diverting association at the expense of the U.S.A., Japan, the British Commonwealth and producers of some tropical products.

(iii) Common Agricultural Policy:

The Treaty of Rome had stressed upon the evolution of common agricultural policy for all the members of the customs union. Before the formation of EC, the different countries were having their separate policies. Some of them had low support prices for the farm products, while others had a structure of relatively higher support prices. The support prices are now fixed by the council in units of account. There is a “green rate” at which the support prices are converted into the national prices.

At the specified support prices, farmers are free to produce as much as they like. There is no barrier on the movement of agricultural products from one member country to another. In the event of internal shortage of farm products, the imports are permitted from the rest-of-the world. To restrict imports of agricultural products from non-member countries, a variable import levy is imposed. It can be raised or lowered to an extent sufficient to offset the price advantage enjoyed by the exporters.

If the production of farm products exceeds the requirements within the EC, the subsidies are offered to the farm producers to export their surplus produce or dispose it off within the member countries at lower prices. Thus the common agricultural policy has contributed in making the EC self-sufficient in respect of agriculture.

(iv) Common Fisheries Policy:

In February 1971, a common fisheries policy was brought into operation by the EC. It is related to the marketing of fresh, frozen and preserved fish. It made provisions related to equal access to fishing areas for all EC countries, off-shore fishing facilities and common marketing standards.

(v) Common Transport Policy:

The Treaty of Rome had laid down the adoption of a common transport policy by all the members of the EC. Such a uniform policy was considered desirable for ensuring unrestricted movement within the common market and general organisation and complete integration of transport system in all the member countries.

In this sphere, the EC has succeeded only in removing the obstacles in transport but the complex problems related to entry controls, rate controls and infra-structural pricing are yet to be resolved for having a uniform and fully integrated transport system.

(vi) Movement of Factors:

A considerable progress has been made by the EU in ensuring free movement of workers, capital and services from one member country to the other. There is not only free movement of workers and their families, they also have equal rights to work and social security. They are subject to same taxation as is applicable to the nationals of that country.

(vii) Integrated Regional Development Policy:

The promotion of equitable, balanced and integrated regional development was one of the prime objectives before the EC right since its inception. For achieving balanced regional development the EC has adopted the policy of providing necessary financial assistance to relatively backward regions within the organisation. The EC or EU provides regional development assistance through such agencies as the European Investment Bank (EIB), the European Social Fund (ESF) and the European Regional Development Fund (ERDF).

(viii) Reduction in Unemployment:

The expanded market, utilisation of productive capacity, adoption of latest technologies and increased investment inflow has brought about a substantial increase in industrial productivity and efficiency. As a consequence, the countries of the EU could reduce the extent of unemployment and raise the level of average earning of the people.

(ix) Common Social Policy:

The member countries of EC adopted the Social Charter in 1989. It specified 12 principles related to the rights of workers and social justice.

Out of them, member countries have adopted the principles of right to work, and live and work at the same wages and working conditions in another state, equal opportunity legislation, regulation of maximum 48 working hours a week, protection of pension and other social security rights, health and safety regulations, creation of European Employment Service (EES) and European information network for vacancies.

(x) Economic and Monetary Union:

In the wake of serious monetary upheavals of 1970’s, the foreign ministers of the member countries of EC agreed to establish an economic and monetary union. Following the Bremen Declaration of the Council of Ministers of the EC in 1978, the European Monetary System (EMS) was established in 1979 initially for a period of two years. The basic objective of the EMS was to maintain stability in the exchange rates of the currencies of the countries of the EC.

The procedure laid down was termed as “European Current Snake” procedure, under which each currency in the system could fluctuate only between ± 2.5 percent against any other currency. This limit applied in the case of the currencies of France, W. Germany, Belgium, Denmark and Ireland.

The Italian Lira was allowed to fluctuate between ± 6 percent. The other members of the EC are not the members of this monetary system. The EMS created the European Currency Unit (ECU) which was a means of settlement between the EC central banks.

The ECU was the basket of all the currencies of the EC. Each member’s currency was allowed to diverge from the ECU central rate by a fixed percentage. There is also the European Monetary Co-operation Fund (EMCF) which acts as a clearing house for the EC central banks. Even those EC central banks, which are not the members of EMS, deposit 20 percent of their gold and foreign exchange reserves on a short term basis in exchange for ECU with the Fund. An important development in this regard has been the evolution of a single common currency for the whole union called Euro.

Essay # 5. The Euro:

The earlier ad-hoc arrangement gave way to more permanent and stable arrangement on January 1, 1999, when 11 out of 15 members of the European Union (EU) adopted a single currency termed as ‘Euro’. Britain, Denmark, Greece and Sweden did not accept the Euro. The countries included in the Euro zone are Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. Presently the number of member countries of the Eurozone stands at 19.

Although banking and trading transactions had commenced in Euro, since January 1, 1999, the circulation of Euro bank notes and coins was started from January 1, 2002. At the same time, member states started the withdrawal of national currencies which were still legal tender. July 1, 2002, was the deadline for the withdrawal of national currencies completely from circulation as they would no longer be the legal tenders.

The internal rate of conversion between the Euro and national currencies of the participating states was fixed at the level the conversion had been taking place during the period of transition (between January 1, 1999 to June 30, 2002). The external exchange rate between the Euro and currencies of countries outside Euro zone was to be market-determined.

The emergence of the single currency is, undoubtedly, a highly significant step in the monetary and financial integration of the member countries which together have a population of 455 million and GDP amounting to 9.71 trillion of Euro units.

Essay # 6. Implications of European Union:

The creation of single currency by the European Union has highly significant implications:

(i) The investors will derive substantial gains in the form of lower transaction costs, increased competition, transparency of prices, and greater degree of certainty and stability of prices. In addition, the creation of single currency will result in uniformity of interest rate, elimination of currency risk and increased scope and liquidity to bond and equity markets.

(ii) The consumers will be benefited by the single currency through greater price transparency in the entire Euroland and possibility of greater price equalisation over the whole region.

(iii) There will be benefit for the commercial and industrial enterprises on account of ease of outsourcing, mergers and take-overs, relocation of production bases, transportation, marketing etc. There would be, undisputably, the increased global competitiveness.

(iv) The creation of single currency by the European Monetary Union (EMU) will economise, in a large measure, the cost of hedging against the exchange rate risks.

(v) The emergence of Euro is likely to have a major impact upon the dominance of US dollar in the global economy as the Euro will replace the dollar in several spheres. The share of Euro in the holding of foreign exchange reserves by central banks and governments vis-a-vis US dollar would increase in future. The agreement between the stock exchanges of London and Frankfurt has resulted in integrated Frankfurt-London stock exchange. With an over $ 3 billion market capitalisation, it would be the world’s second largest stock exchange. There would be a strong possibility of a substantial rise in investments in the European security markets.

The dominance of US dollar was essentially on account of two factors. Firstly, dollar became an international reserve currency since 1945. Secondly, it was also a fiat currency, although delinked from gold reserve since 1971, for global oil transactions. The situation is fast undergoing change. Saddam Hussain was the first in the Middle East Region to convert Iraq’s $ 10 billion food for oil currency in Euro. Iran took a similar step with almost half of its reserves.

If other countries of OPEC, particularly Saudi Arabia, decide to make a similar switch, the dominance of dollar will have a body blow. At present the Euro zone has a stronger trade link with the OPEC countries as about 45 percent of total merchandise imports by Arab countries come from the EU. If U.K. and Norway, only oil producers of Europe not using Euro, decide to adopt Euro, the balance will decisively tilt in favour of Euro and against the US dollar.

Although the US experts do not recognise the possibility of decline in the dominance of dollar, yet it is clear that importance of Euro will grow and it will eventually become a reserve currency because Europe is likely to become a simpler place to do business providing a strong stimulus to world growth and inducing the market operators to hold Euro balances in a much greater measure.

Essay # 7. Implications for India:

The adoption of a single currency in Europe has important implications for India. Firstly, the products from India will become cheaper in the Euroland. 15 product groups, including foodstuffs, fats and oils, textiles, chemicals, base metals, vehicles, vegetable products, gems and stones, wood products, plastics etc., in the export basket of India have a price elasticity that will enable the expansion in their market share quite significantly on account of lower prices.

Secondly, the possible reduction in the transaction costs due to adoption of Euro will bring about greater integration of capital markets. It will not only promote growth in Euroland, but the aid flow to India will also increase.

Thirdly, the computer software industry is likely to have greater business opportunities in the European Union.

Fourthly, greater price transparency and uniform pricing strategy will make the Indian exporters also to redesign their export pricing strategy.

Fifthly, if Euro becomes a strong international currency, the imports from Euroland to India are likely to become costlier but this possibility can be averted by European business firms through greater integration and consequent higher levels of efficiency and productivity. The emergence of Euro is, indeed, both a challenge and opportunity to India that must be fully exploited for her maximum benefit.

Essay # 8. EU and the Developing Countries:

A unique feature of the EC, presently the EU, is that it has remained intimately linked with the LDC’s right since its inception. Some countries of Africa, Caribbean and Pacific regions have been accorded the status of ‘associate members’. After the signing of the third Lome Convention in 1984, apart from 12 member countries of the EC, there were 66 associate members. The associate members generally fell in the category of LDC’s. These countries had been provided with preferential treatment in foreign trade.

As regards the other LDC’s of Asia, North Africa, Gulf and South America, a link between EC and them could be established through a General System of Trade Preferences (GSP) on 1st July 1971. Under the GSP, the developing countries were permitted free entry for certain categories of their manufactured products in the markets of the EC countries. All such countries, as a matter of tact, have entered into agreement of commercial and economic co-operation with the EU.

The EU has also gradually emerged as an important source of multilateral assistance for the LDC’s. For meeting the demands for development assistance from the developing countries, the EU has constituted European Development Fund (EDF) and the European Investment Bank. Although it was originally conceived as an agency to finance the development projects in the economically depressed regions of the EC, yet it has increasingly financed the development projects even outside the territories of the member countries. Between 1963 and 1986, the lending operations of EIB had reached 5600 million ECU.

Since 1964, the EC financed over 1200 projects in the less developed countries. These projects have been in the fields of telecommunications, science, technology, energy and human resource development. The EC also undertook the joint research projects in the spheres of health, environment, material sciences, energy, agriculture, food technology and biotechnology. The EC provided assistance to the developing countries in the promotion of trade, stabilisation of export earnings and the promotion of regional co-operation.

In the field of rural development of the less developed countries, the projects funded by the EC include rural electrification, irrigation, primary education and community development. The assistance provided by the EC to the developing countries, except the bilateral assistance, has been in the form of grants. Therefore, the EC assistance does not increase the burden of external debt upon the recipient countries.

The EC or EU assistance to the LDC’s has been criticised on the following main grounds:

Firstly, the EU assistance programme is largely confined to the territories of the associate member countries. The other countries have continued to suffer on account of excessive protectionism of the EU.

Secondly, the GSP has not proved to be of much help to the developing countries because only 10 percent of the imports of the EU are covered by the GSP.

Thirdly, no doubt the EU countries have substantial bilateral assistance programme but the EU assistance programme is of a very small magnitude due to serious budgetary constraints faced by it.

Fourthly, the EC or EU has remained outside the UNCTAD. Consequently, its assistance programme for the less developed countries has remained woefully meagre.

Essay # 9. India and the EU:

Britain’s entry into the EC in 1973 was a matter of deep concern for India. Under the Commonwealth System of Preferences, India enjoyed easy access for her exports in the British market. Before British entry into the ECM, 37 percent of her tea, 26 percent of her woolen carpets, 24 percent of cotton piece goods and 21 percent of leather goods enjoyed duty free entry in that market. It was naturally a matter of anxiety that Indian exports to her most important trading partner would suffer a very serious setback.

In order to deal with this grave development from Indian viewpoint, this country decided to enter into commercial and economic co-operation agreement with the EC to derive some benefit from the Generalised System of Preferences. India is represented by an ambassador at the Indo-EC joint commission. In 1970-71, Indian exports to the EC were 18.4 percent of her total exports. In 1992-93, this proportion stood at 28.2 percent.

As regards India’s imports from the EC or EU the ratio has risen from 19.6 percent in 1970-71 to 39.7 percent in 1992- 93. The proportion of Indian exports to and imports from the EU stood at 2.5.2 percent and 23.0 percent respectively in 1997-98.

Thus India could salvage her exports and imports to some extent through making the agreement of commercial and economic co-operation with the EU. India faced a trade deficit with the EU of the magnitude of Rs. 3003 crore in 1997-98. In 2001-2002. Indian exports to the EU were Rs. 45.524 crore and imports were Rs. 46,711 crore.

The trade deficit of India in that year was of the magnitude of Rs. 1,187 crore. The proportion of India’s exports to and imports from the EU in 2001-02 stood at 21.8 percent and 19.1 percent respectively. In 2009-10, Indian exports to the EU stood at Rs. 170,427 crore and imports at Rs. 181,937 crore so that trade deficit was of the magnitude of Rs. 11,510 crore in that year.

The share of EU in India’s exports and imports in 2009-10 was 20.2 percent and 13.3 percent respectively. In 2013-14, India’s exports and imports from the EU amounted to Rs. 313, 144 crores and Rs. 301, 284 crores respectively. It had a trade surplus with this region in that year of the size of Rs. 11,860 crore. The share of EU in India’s exports and imports in 2013-14 was 16-4 percent and 11.1 percent respectively.

A more dynamic export-oriented strategy has to be adopted to further improve the trade balance with that region. With the break-up of the Soviet Union and the significant political and economic developments in the Eastern Europe, culminating in several of erstwhile Soviet block countries joining the EU on May 1, 2004. India is required to develop more constructive and expanded co-operation with the EU for the enlargement of her trade.

Another element of India’s relations with the EU is concerned with the development assistance. The EU has been rendering development assistance to this country in the fields of science and technology, human resource development and energy. It has been providing food aid in the form of the supply of skimmed milk powder and butter oil.

The assistance is also given for the purchase of fertilisers. The EU has been assisting in the setting up of rural development projects in the areas of rural electrification, irrigation, elementary education and rural health.

With the objects of bringing about technological improvements in production upto the European standards, reduction in production costs and acquisition of know-how of European business practices and culture, the EU has been funding the programmes of scientific, technical and managerial training. The wide ranging contacts are being fostered in a variety of sectors including the engineering goods, machine tools and medical and surgical equipments through the European Commission.

In the matter of development assistance, it has been observed that contribution of those members of Aid India Consortium who are a part of the EU (including Belgium, Denmark. France, Germany, Italy. Netherlands and the U.K.), has declined over the years.

In 2009-10 out of the total authorisation of Rs. 49,926.4 crore, the contribution of the EU member countries stood at paltry Rs. 2508.6 crore. In 2014-15, the contribution of the countries of EU out of total authorisation of Rs. 20,7909 crore stood at woefully small amount of Rs. 1011.6 crore.

Even in the matter of trade, Indian exports still remain restricted due to excessive protectionism by the EU. No doubt, Indian exports are entitled, on paper, to receive preferential treatment under the GSP, yet about 60 percent of Indian exports remain subjected to stiff non-tariff barriers.

The Indian exports of agricultural and marine products, chemicals, garments and engineering goods have been suffering greatly on account of trade restrictions enforced by the EU.

There is definitely scope for expanding trade and assistance programme for the promotion of development programme in India, provided the EU which tends to become more inward-looking, adopts some measure of liberalisation in line with the liberalisation policies being emphasised by various multilateral organisations.

In order to impart powerful thrust to trade with the EU, the negotiations were launched in July, 2007 to work out a free trade Agreement (FTA) between India and the EU. The specific areas to be covered under FTA would be trade in services, goods, investments, Trade facilitations, public procurements, technical regulations, intellectual property rights, geographical indication, competition policy and dispute settlement.

India supports an asymmetrical deal in respect of tariff cuts on account of the differences in their respective levels of developments. India has proposed an exclusion list of about 150 agricultural and 250 manufactured products. The EU, on the other hand, has brought forward an exclusion list of 226 products including chemicals, petro chemicals, plastics, ceramics and glasswares. The agreement was to be clinched by the end of 2012 but it has not materialised so far.

Essay # 10. Critical Appraisal of European Union:

The formation of the EU has been the most significant development during the latter half of the 20th century from the point of view of the Western Europe. The EU has successfully realised the objectives for which it was created. It has brought about an expansion in the market for the products of member countries. It has facilitated free movement of products and factors throughout the common market.

It has ensured higher rates of investment and growth for the member countries. It has led to an improvement in the balance of payments situation for the whole grouping. It has successfully overcome various international financial crises such as crisis of ‘Black October’ in 1987 and global economic recession of 2008-09. The member countries of the EU have effectively faced the United States threats related to trade and exchange rate adjustments.

They have been able to create the common currency and have made far-reaching changes in the structure of financial and stock exchange market. Still these countries have maintained cordial political relations with the countries of North America. At present, the EU has been trying to move ahead on the path of achieving a more enlarged and well-knit economic and monetary union in the face of grim debt crisis involving at least seven countries of the Union.

No doubt, the EU has registered highly significant achievements but it has been criticised on several grounds mentioned below:

Firstly, the EU has certainly resulted in a large expansion in the member country trade. But it has a disturbing feature. While the trade involving new members has increased rapidly, the expansion of trade among the original members got slowed down in last few decades.

Secondly, the member countries of the EU have not succeeded in harmonising properly their transport, monetary and fiscal policies. That is why the rumblings of economic and monetary crises are sometimes heard in this regional grouping.

Thirdly, the formation of the EU resulted in considerable trade diversion especially in the case of farm products. The policy of high farm prices has sacrificed the interests of the consumers. The EU trade diversion has been at the expense of the countries of Latin America, Asia and Middle East apart from the U.S.A and Japan.

Fourthly, the farm policy pursued by the EU has led to huge agricultural surpluses and high storage costs. The EU has been reducing these surpluses through heavily subsidised exports. The farm subsidies proved to be a major irritant in the world trade negotiations among the United States, the EU and developing countries at the W.T.O. Ministerial Meet at Cancun in September, 2003 and even thereafter.

Fifthly, the EU has failed in one important respect that regional economic disparities have been exacerbated. Some of the regions such as Southern Italy, the south of France and south and east of Germany have lagged behind the other regions in the matter of development.

Sixthly, the EU is presently engaged in highly complex task of transforming itself into a more closely integrated economic union with single currency. Apart from protracted negotiations on this issue, the member countries are required to sacrifice some of their sovereignty in economic decision making. Some of the member countries have ratified the Maastricht Agreement but have declined to participate in some parts of this agreement.

Finally, the EU has not succeeded fully in achieving a complete economic and political union.

Inspite of certain deficiencies, it must, however, be admitted that the EU has largely succeeded in realising its objectives and it has made a definite positive contribution in the rapid economic advance of its member countries.