Economic integration theory revolves around the development stages which tells more on its relevance in both economical and political aspects. The beginning stage of the theory is called the static analysis or the classic theory. Moreover, it comprises of the traditional theories that address the importance and the advantages of economic integration. The other stage of the economic integration theory is the dynamic analysis. This stage conjectures about the new integration thesis on economic arrangements. Nonetheless, other than the two stages of the integration theory, there is the third stage that addresses the effects and the constraints of the economic arrangements of both the least developed countries and the developing countries. However, economic integration can be described as the inclusion of many national economies to form a larger unit of trade. Secondly, it means that the economic borders that existed between countries have faced elimination. The economic borders refer to the various obstacles that cause the limitation of the mobility of services and goods, also on the factors that help in production among countries. Economic integration differs in varying degrees such as economic union, custom union, trade union and common market (Balassa, 2013).
Implications of Economic Integration Theory
Economic integration requires coherence of policies in terms of tax, social policies and customs. This is applied on the integrated states. The coherence policy then results to the equal economic space in the integrated regions. Secondly, economic integration requires permanency of the stages to the joint states in form of customs union, free trade area, political and economic union. However, economic integrates is stagnant and hence, resulting to the end of the economic unions like the case of Luxemburg-Belgium union. Thirdly, economic integration results to the pareto-reallocation of production factors such as capital and labor. Labor is transferred to the regions of high wages whereas capital is transferred to the regions with high returns. Moreover, what is noted with economic integration is trade diversion and creation implications. The trade flows shift in a given direction that has been caused by the shift of tariffs in and out of the economic union (Balassa, 2013). Economic integration creates trade terms and this translates to the countries within the economic union have a better chance to negotiate when trading. The benefits of economic integration depend highly on the development level of the integrated states. For example, for two economically integrated states, then the greater is the size of their economy received from the integration. The reason as to why states integrate is to have access to markets freely.
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Chart 1: Forms of Economic Integration.
History of the UK's membership in the EU
The membership is traced back since 1940 up to the current day. The apparent issue today is what has always caused the problematic journey of the integration for UK. Notably, sovereignty matters mattered the most to the UK as they were related to their perception of being victorious during World War II. This is in difference to other European nations which had already been occupied. The UK had the notion that they played a very vital role in the world. UK can be categorically stated as being ambitious economically. This is so because they nationalized steel and coal production and thus saw that there was little importance to enter into the European Steel Community. The sovereignty standpoint was also observed during the period of 2016 referendum. Other countries in Europe have also impacted on the EU-UK relations (Copsey, 2014). What can be recalled is the previous attempts by the UK to enter into the European Community, in 1967 and 1963, were dismissed by Charles Gaulle- French President. He has a strong attitude towards the issue of the UK joining the community. The policies that were given by then were very harsh for the UK even though they were enacted. The policies were for Common Fisheries, Common Agriculture and Common Budget. It should be noted that the UK entered into the integration under Edward Heath, the Prime Minister, who was also divided on the matter even though he regarded himself to be pro-EU. During the June, 1975 referendum, some were biding their time in the integration compared to the 2016 referendum that saw a different result. The decision for the referendum by PM David Cameron was to bring close the parties that were divided over the matter. Later the anticipated took place, UK yearned for exit from the EU.
Why did UK want to change the terms of membership?
The UK wanted to alter the terms because they saw the EU as a hampering tool towards the trading blocs they had created. The UK wanted to create a different economic bloc around the globe. UK needed to open up their trade with other countries that also were non-members though the policies that were formed by the EU were a major setback for them. Hence, they needed an opt-out as fast as they could. Moreover, on the issue of legal redress, the UK saw it difficult for the Human Rights Court of Europe to address the issue concerning deportation of criminal foreigners. Nonetheless, the UK wanted to control their currencies without the engagement of EU.
Should the United Kingdom remain a member of the European Union? Why?
No. UK should not quit the EU. The reasons for remaining are beneficial. Firstly, there are benefits in trade. The EU as a market charges no tariffs on both exports and the imports among the integrated states. It is evident that 50% of the UK’s exports are taken into the EU states. The UK highly depends on the integration given that the 12.6% of their GDP is as a result of exports compared to 3.1% of the 27 other member states derived from the same exports. The trading bloc within the EU helps improve the trade deals among other world powers. Secondly, employment opportunities are achieved faster. This is because the trade liberalization results into better market expansion, greater technological enhancements and inter-border flows of investment (Dhingra et al., 2016). Moreover, the reason of staying in the EU, concerns political stability among the various member countries. The improved and joint political goodwill helps in conflict resolutions and maintenance of tranquility and stability. With reference to sovereignty, the integration fosters the democratic power of each and every citizen of the EU such that it cannot be replaced with permanent interests of empires in big businesses.
What are the risks of leaving? How could a "Leave" vote affect the rest of Europe? Explain.
There are several risks involved. The “Leave” vote will affect the other states of Europe. This is because the major sectors of the economy will be adversely impacted upon. Major risks are on the employment opportunities of different persons in different sectors (Hobalt, 2016). 20.79% of the labor force in the UK bring about 53.2% of the exports realized. The sectors of the economy that will be affected are the automobile sector that employs 0.42%, pharmaceutical sector that employs 0.52%, the aerospace sector that sees 0.34% employed, the machinery and capital goods’ sector employing 0.61%, the food, tobacco and beverage sector employing 3.7% and the professional services employs 11.6% of the labor force.
Moreover, there are risks of the citizens who reside in the EU. The number to be affected by the Brexit would be those living permanently in EU who are about 1.4-1.8 million. This translates to a greater number of the nationals getting back to the pensions in the UK services meaning more burden in the health department. Thirdly, the UK would lose on security matters in that there will be no more cooperation in the NATO, defense capacities and the European securities. In addition, there will be problems of other countries in terms of migration. The freedom to move as well as the mobility of production factors, for example, labor will not enter the UK.
Source of the Table: E.S.R.C Economic & Social Research Council
Source of the Chart: E.S.R.C Economic & Social Research Council
Link source: https://whatukthinks.org/eu/questions/should-the-united-kingdom-remain-a-member-of-the-european-union-or-leave-the-european-union-asked-after-the-referendum/#
References
Balassa, B. (2013). The theory of economic integration (routledge revivals). Routledge.
Copsey, N., & Haughton, T. (2014). Farewell B ritannia? ‘Issue Capture’and the Politics of D avid C ameron's 2013 EU Referendum Pledge. JCMS: Journal of Common Market Studies , 52 , 74-89.
Dhingra, S., Ottaviano, G. I., Sampson, T., & Reenen, J. V. (2016). The consequences of Brexit for UK trade and living standards.
Goodwin, M. J., & Heath, O. (2016). The 2016 referendum, Brexit and the left behind: An aggregate ‐ level analysis of the result. The Political Quarterly , 87 (3), 323-332.
Hobolt, S. B. (2016). The Brexit vote: a divided nation, a divided continent. Journal of European Public Policy , 23 (9), 1259-1277.
Inglehart, R., & Norris, P. (2016). Trump, Brexit, and the rise of populism: Economic have-nots and cultural backlash.
https://europeanmovement.eu/wp-content/uploads/2016/05/EMI_16_PolicyPosition_Brexit_17_VIEW_FINAL.pdf
https://whatukthinks.org/eu/questions/should-the-united-kingdom-remain-a-member-of-the-european-union-or-leave-the-european-union-asked-after-the-referendum/#
