Effects of Economic Cooperation

The effects of economic cooperation are diverse. For example, the macroeconomic effects of the implementation of a common market (within the European Community, EC) can be observed. According to the so-called Cecchini Report (Cecchini 1988, p. 97), the following macro-effects had been expected:

■ relaunch of economic activity, adding on average 4.5% to GDP

■ deflation of consumer prices by an average of 6.1%

■ improving the balance of public finances by an average equivalent to 2.2% of GDP

■ boosting the EC's external position by around 1% of GDP

■ creating 1.8 million new jobs.

An interim balance (a report entitled “20 Years of the European Single Market: Together for new growth“) identifies many important advantages which could be attributed to economic integration (European Commission 2012, p. 2):

■ The GDP of the EU-27 in 2008 was 2.13% or 133 billion EUR higher than it would have been without the Single Market. This can be equated to an average additional income of 500 EUR per EU citizen.

■ During the period from 1992 to 2008, 2.77 million new jobs have been created.

■ Trade between EU countries rose from 800 billion EUR in 1992 to 2,800 billion EUR in 2011.

■ Exports to third countries (non-member) have increased from 500 billion EUR in 1992 (8% of EU GDP) to 1,500 billion EUR in 2011 (12% of EU GDP).

■ The Single Market has become much more attractive for foreign investors. The flow of foreign direct investment (FDI) between EU countries rose from 64 billion EUR in 1992 to 260 billion EUR in 2010.

Table 7.3

State

Quote

State

Quote

Austria

69

Latvia

66

Belgium

70

Lithuania

57

Bulgaria

60

Luxembourg

81

Cyprus

58

Malta

42

Czech Republic

81

Netherlands

76

Denmark

63

Poland

75

Estonia

71

Portugal

70

Finland

55

Romania

69

France

59

Slovakia

83

Germany

57

Slovenia

69

Greece

46

Spain

63

Hungary

76

Sweden

58

Ireland

59

United Kingdom

44

Italy

53

Source: EUROSTAT 2014.

The effects of the common market with regard to trade within the European Union (intra-EU trade) are shown in Table 7.3. The majority of member states of the EU-27 had an intra-EU trade share in 2013 of at least 60%.

Impact of Economic Integration on Firms

The political efforts of GATT/WTO to liberalise trade and foreign direct investment and the different regional alliances eliminating trade barriers, adopting a common external trade policy and allowing factors of production to move freely between members, have led to new markets with regard to sourcing, and selling and to new sites for production, logistics and so on (see Part V). Firms can reduce their production costs by capturing economies of scale when expanding their customer base within the trading bloc. The lower cost structure will also promote the firm's international competitiveness outside the trading blocs. “However, elimination of trade barriers also exposes a firm's home market to competition from firms located in other member countries, thus threatening less efficient firms” (Griffin/Pustay 2013, p. 288).

 
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