Section A
How uful is neo-functionalism as a theory of European Integration?
Neo-functionalism has been developed in 1950s and 1960s to explain process of regional integration, mainly Western Europe. It depicts integration as a process, or quence of steps in time: each on following on from the previous one.
Spillover is the main notion of neo-functionalism, where integration of one aspect of policy necessitates integration of connected aspects in order for the policy to work effectively. Take European Single Market for example, neo-functionalism may argue that the creation of a single market necessitated the introduction of the social chapter, such as free movement of workers, to stop firms in different EU countries competing on costs simply by cutting corners on working conditions.
Federalism relates to the notion of achieving a balance in governing roles between the central authority and the decentralized authority. The issue of whether this means centraliza
tion or decentralization of power depends on whether the federalism is being pursued at the level of the nation or the level of the regional bloc. With federalism at the national level, this means a fairly decentralized form of government, with sub-national, e.g. state authorities having a good deal of power. Take USA for example, each state has its own rules to a certain extent, but ultimately come under the president. Federalism at the level of the regional bloc involves the shifting of substantial decision making power away from the countries and to the central supranational authority.
According to neo-functionalism, integration between states in one economic ctor will quickly create strong incentives for integration in further ctors; in order to fully capture the benefits of integration in the original ctor. Treaty of Paris is a starting point of European Integration. In this treaty six countries established European Coal and Steal Community, some of the enemies during the war were sharing the production of coal and steal, this was en as foundational in bringing together Europe in peace after Second World War. Furthermore, one of the problem lies in the costs of transportation, each country has obstacle on transportation against other countries, therefore, more effective p
roduction of coal and steal require taking away the obstacle on transportation, in other words, the countries need free movement, this will lead to another integration on free movement. This example has highly supported the above point.
The Treaty of Rome provide infrastructure for European Union, federalist agenda could be that the aim was to shift the power away from individual nations to a more centralized supranational power and authority. This treaty brought together a ever clor union.
Neo-functionalism talks about a kind of snowball effect which begins with Coal and Steal Community, then comes to transport, free movement. The factors are all social chapter, in Single European Act; it established the single European market and the European Political Cooperation. Leaders from the business and political worlds were eager to harmonize laws between countries and resolve policy discrepancies. The goal was to remove remaining barriers between countries, increa harmonization, thus increasing the competitiveness of European countries. With all the analysis and evidence, we can e that the European integration is actually a form of snowball effect, one integration c
tor will lead to other integration in the connected ction, and therefore, neo-functionalism can explain the European Integration in some extent.
Section B
The theory of comparative advantage is no longer uful for explaining international trade patterns. Discuss:
The principle of comparative advantage explains how trade is beneficial for all parties involved (countries, regions, individuals and so on), as long as they produce goods with different relative costs.
The principle of comparative advantage shows that even if a country has no absolute advantage in any product (i.e. it is not the most efficient producer for any good), the disadvantaged country can still benefit from specializing in and exporting the product(s) for which it has the lowest opportunity cost of production.
This theory tells us that trade is good becau it would rai world total production in all s
ectors.
However, according to the question, this theory is no longer relevant in today’s world. We need and want a variety of products.
Comparative advantage predicts inter-industry trade. Inter-industry explained that trade means one kind of product being exchanged for another kind of product. For example, in today’s society, Saudi Arabia specialize in oil and Japan specialize in technology, according to this point of view, this type of theory still has relevance today. But now we face another problem, China specialize rice a hundred year age, if China only produce rice and we have no rice production becau of bad weather, then we would suffer from curity issue. Therefore, comparative advantage is not uful to this extent.
According to the above analysis, we need to look at another trade theory, intra-industry trade. Intra-industry trade refers to trade between two countries of the same industry. Take car industry for example, France, Germany and UK all import and export cars such as Citroen, BMW, and Mercedes to each other. We know that we only specialize in the pr
oduct we have comparative advantage in, and therefore, only trade on product for another, so comparative advantage theory can not explain intra-industry trade but must be explained in terms of relative profitability. Krugman developed this theory and its veral conditions: Rich countries, sophisticated products (e.g. wine, cars), internal economies of scale, and demand for variety. It is impossible for one country to produce all; there is a huge demand for variety, so we need a lot of countries producing the same product. Therefore, cars are imported and exported back and forth to all countries. International economies of scale and demand for variety mean lots of producers of cars needed. Old theory is bad on opportunity cost, but clustering can make an industry more efficient.
