Feb 2, 2012 ... formation of the customs union (establishment and elimination of non-‐tariff ....
Baldwin, R. and C. Wyplosz (2009), The Economics of European ...
James Madison University Master of Arts in Political Science (EU Policy Studies Concentration) SPRING 2012 POSC 641, Section 0001 TOPICS IN ECONOMIC AND SOCIAL POLICY:
EU COMMON MARKET, COMPETITION POLICY AND MONETARY UNION Thursdays 13:00-‐16:00; Room TBA Office Hrs.: Room TBA Thursday 16:00-‐17:00 Instructors: Andrea Wechsler, M.A. (Oxon), LL.M. (Columbia), LL.M. email:
[email protected] Justin Valasek, PhD e-‐mail:
[email protected]
1 Course Essentials 1.1 Course Description The course will introduce students to EU economic institutions and policy; specifically, we will critically examine EU trade policy, the common market, competition policy and the monetary union. Throughout the course, we will focus on the political and economic justifications for EU economic policy and examine the social and economic effects of centralizing policy at the EU level. We begin by covering the foundations of EU trade policy, ranging from the internal market to EU external trade policy and the EU’s relations with the WTO. The course will then discuss the formation of the customs union (establishment and elimination of non-‐tariff barriers) and the creation of the common market (free movement of goods, workers, capital and services). Of particular relevance will be an assessment of the achievements of the customs union and the common market in terms of intra-‐ and extra-‐EU trade, economic growth, economic interdependence, unemployment and competitiveness. Next, we turn to competition policy and analyze business practices and state activities that require antitrust intervention (cartels, monopolies, mergers and state aid) and discuss why competition policy is determined at the EU level. We will also examine the existence of sectors where a liberalization process is necessary to successfully promote competition. Lastly, we cover the monetary union. Specifically, we will examine the adoption of a single currency; the establishment of the European Central Bank, along with the Maastricht criteria; and the Stability and Growth Pact. We will examine this material in the context of current financial and fiscal crisis, and the necessity of further coordination of fiscal policy.
1.2 Learning Outcomes Our overall goal is to provide you with the analytic and conceptual tools necessary for a critical understanding of the EU common market, competition policy and the monetary union. Learning Outcomes: At the end of the course students will be able to •
• •
Understand and evaluate the basic economic and political rationale and tools of EU economic policies and institutions; in particular, competition policy, EU trade, and monetary and fiscal policy. Analyze the effects of EU economic policy on the economic and social outcomes of member nations. Critically evaluate the ability of an economic policy to address a specific policy goal.
1.3 Methodology The course will be composed of ten seminar-‐style sessions of three hours each. Each class will be broken down into two components: the first component will cover theory and institutions, and the second component will cover applications and case studies. The first component will generally be taught using a lecture format, whereas the applied component, which will focus on application of the theory, will be taught using a wide variety of formats, including interactive classroom discussions, case presentations and student presentations. Similarly, the readings will be split into theoretical and applied components: the textbook readings will cover the theory and the institutions, and the applied readings will consist of case studies, policy briefs and high-‐quality journalistic publications (such as The Economist).
1.4 Attendance and Participation We expect you to attend and actively participate in each and every class. For this class to be useful to you, it is essential that you have read the assigned readings and analyzed them from a critical perspective prior to each class. If for some reason you must miss class, notify both of us prior to the class; we will then assign a short (1 page) essay on the readings that you will discuss with a fellow student who attended the class.
1.5 Instructor Availability We will hold regular office hours (at the GMU campus) each week. Of course we will also answer short inquiries via email, but make sure to allow sufficient time for a reply.
1.6 Academic Honesty The JMU Honor Code must be observed at all times. Students may not offer or accept assistance during exams, nor may they consult any sources during closed-‐book exams. In papers, students may not use anyone else’s work without properly citing that work, nor may they attempt in any way, to pass off someone else’s work as your own. All written work that students submit must be original; they may not submit work that they have prepared for another course. If students have questions about the Honor Code, the Honor Council, or the implications of cheating, they should see the Honor Council web site at www.jmu.edu/honor/code.shtml.
1.7 Assessment Course evaluations will be based on the following: participation, a research proposal and presentation, peer feedback tasks, a final paper, and a final exam.
1.7.1 Presentation, Comment, Short Essay, and Final Paper In the first week of the course, each student has to select a topic among those proposed by the instructor at the beginning of the semester. On that topic, the student will a) Write a research proposal (no longer than 1,500 words), to be submitted by all students by February 2nd, 2012 at 12.00pm. b) Prepare a short presentation for the class; you will have no more then 10 minutes. c) Prepare a policy or academic paper, possibly combined with a discussion of few case studies (6000 words +/-‐ 10%). Additionally, submit an extended abstract (no more than 1 page) that summarizes the main points of your paper. Presentations will start on the day of Week 4 (February 2nd, 2012) and continue until the end of the course. Students are urged to follow the MLA (Modern Language Association) style to write their paper; more information can be found at: http://owl.english.purdue.edu/owl/resource/557/01/). A solid draft of the term paper is due on Thu. March 15th at 12.00pm. The final paper has to be submitted no later than April 2rd, 2011 at 2.00pm. 1.7.2 Final Closed-‐Book Exam The final exam will be a written closed-‐book exam lasting 2 hours on April 5th, 2011 from 10.00am to 12.00. You will be asked to answer three out of five questions (note, however, that you cannot select a question on a topic similar to the topic picked for the essays and papers). 1.7.3 Peer Feedback Tasks You will be asked to give written feedback on a paper and a presentation. Additionally, you may be asked to meet with peers who have missed a class (see Attendance and Participation). 1.7.4 Grades Grades will be distributed among the tasks as follows: • • • •
Active participation and peer feedback: 15% Presentation and research proposal: 15% Final Paper and Abstract (based on the research prop.): 35% Final closed-‐book exam: 35%
1.7.5 Writing Your ability to communicate, in writing and in person, is at least as important as the quality of your analysis: the best ideas in the world are only useful if they can be communicated. Therefore, while our assessment of your work will not explicitly evaluate writing and presentation skills, it is important that you communicate your ideas clearly and persuasively. (We highly recommend reading a guide on style such as Williams "Style: Towards clarity and grace.")
1.8 Bibliography and Resources 1.8.1 Assigned Textbooks Students should have access to the following textbook for this class (3rd edition) Baldwin, R. and C. Wyplosz (2009), The Economics of European Integration, 3rd Edition, London, McGraw-‐Hill. 1.8.2 Assumed Background It is assumed that the students in the course are familiar with, and have already access to the following text:
McCormick (2011), European Union Politics, 5th Edition, London, McMilllan. Wallace H., Pollack, M.A., Young, A.R. (2010), Policy-‐Making in the European Union, 6th Edition, Oxford University Press. 1.8.3 Other references you may consult In addition to the textbooks assigned for the course, students may also find the following texts useful (reference might be made to the text from time-‐to-‐time during the lectures): Simon Hix and Bjorn Hoyland (2011), The Political System of the European Union, 3rd Edition, Palgrave. Artis, M. and F. Nixson (2007), The Economics of European Union, Policy and Analysis, 4th Edition, Oxford University Press. De Grauwe (2009), Economics of Monetary Union, 8th edition. Further and most topical readings might be assigned during the course as issues in EU economic policy evolve rapidly. Students are further encouraged to follow current issues by reading periodicals such as The Economist and dailies such as The New York Times, The Wall Street Journal and the Financial Times on a regular basis. 1.8.4 Useful websites http://www.europeanvoice.com/ http://voxeu.org/ http://www.project-‐syndicate.org/ http://epp.eurostat.ec.europa.eu http://ec.europa.eu/competition/index_en.html http://www.bruegel.org
2
Weekly Schedule
Week 1 (12/01/2012): The Economics of Economic Integration Instructor: Justin Valasek Economic review. Supply, demand, and welfare. Government intervention. Market power: monopolies, cartels and natural monopolies. International Trade: the benefits from free trade as opposed to protectionism. The Solow growth model. Aggregate demand and supply. Readings:
Baldwin and Wyplosz: pp. 141-‐149, 192-‐200, 218-‐221 and chapter 9.
Week 2 (19/01/2012): EU Trade Policy Instructor: Andrea Wechsler Basic notions of the political economic of trade policy, regulation of trade and industry; instruments of trade policy and patterns of trade. EU institutions for trade policy. EU external trade policy. The global trading system, global trade negotiations and the current state and future of EU’s role within it; multilateralism (e.g. WTO) vs. regionalism. FTAs (EPAs) to which the EU belongs. EU-‐US, EU-‐China and EU-‐developing world trade relations. Refresh:
McCormick: Chapter 9 (sections on Europe’s economic presence, relations with the US, the neighbourhood and development cooperation)
Wallace, Pollack, Young: Chapter 16 Readings: Baldwin and Wyplosz: Chapter 15, pp449-‐468 Artis, Nixson: Chapter 9, pp224-‐243 “A Power Audit of EU-‐China Relations”, European Council on Foreign Relations, 2008
“A Modern Trade Policy for the European Union”, EU Trade Policy Study Group (2010)
Week 3 (26/01/2012): The EU Customs Union (Wechsler) Instructor: Andrea Wechsler
The benefits from free trade as opposed to protectionism. The political-‐economy of free-‐trade and protectionism. The origins of the common market in the European customs union; the establishment of a free trade area, customs union and the elimination of non-‐tariff barriers. EU Customs Strategy, the mission of customs as set out in the 2008 Modernised Customs Code. Selected customs policy issues, e.g. electronic customs, customs and security, trade facilitation, international customs co-‐ operation agreements. Customs policy, the wider EU trade agenda; evaluation and impact assessment. Refresh: Baldwin and Wyplosz: Chapters 4-‐5, pp139-‐188 Readings: Regulation (EC) No. 450/2008 of the European Parliament and of the Council of 23 April 2008 laying down the Community Customs Code (Modernised Customs Code)
Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee, Strategy for the Evolution of the Customs Union, COM (2008) 169 Paris Declaration on the Future Role of Customs, 4 July 2008 See http://ec.europa.eu/trade/analysis/sustainability-‐impact-‐ assessments/assessments/ for assessments we will use for class discussion.
Week 4 (02/02/2012): The Internal Market I Instructor: Andrea Wechsler
An introduction to European industrial policy and the European Economic Area (EEA). The EU’s unified market/single market: its creation and impact. The Single European Act (1986), Mastricht Treaty (1992) and subsequent treaties. Former and extant barriers to the free movement of goods, services, labour and capital (“four basic freedoms”). New strategies for the single market. Refresh: McCormick: Chapters 3 and 7 Readings: Wallace, Pollack, Young: Part II, Chapter 5, pp107-‐132 Baldwin and Wyplosz: Chapter 6, pp233-‐261 Pelkmans, J. (2006), European Industrial Policy, Bruges Economic Policy Briefings n. 15, http://www.coleurop.be/template.asp?pagename=BEEP Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions, Single Market Act, Twelve levers to boost growth and strengthen confidence “Working together to create new growth”, COM/2011/0206 final Suggestion: A New Strategy for the Single Market at the Service of Europe’s Economy and Society, Report by the President of the European Commission, José Barroso by Mario Monti, 9 May 2010, http://ec.europa.eu/bepa/pdf/monti_report_final_10_05_2010_en.pdf
Class 5 (09/02/2012): The Internal Market II Instructor: Justin Valasek Market size, scale effects and growth. Main achievements of the common market. The integration of financial markets. Readings:
Baldwin and Wyplosz: Chapters 6-‐8
Jacques Pelkmans (2008), "Economic Approaches of the Internal Market," BEER paper n° 13.
“How the EU Single Market benefits you” (last update 12/02/2010), European Commission, http://ec.europa.eu/internal_market/top_layer/benefits_en.htm
Toniolo et. al. (2003), "Lessons from Italy’s Monetary Unification (1862-‐1880) for the Euro and Europe’s Single Market."
Week 6
Strasbourg Trip
Week 7
Spring Break
Week 8 (01/03/2012): EU Competition Policy and State Aid Policy I Instructor: Andrea Wechsler The monopoly problem: static and dynamic loss for society, the economics of anti-‐competitive behavior. EU competition policy as corner stone of the internal market: forbidden agreements between companies, abuse of a dominant position, mergers and acquisitions. State Aid (effect of public funding on competition). Agencies and implementation by DG COMP, European Competition Network and cooperation with national courts. Refresh:
McCormick, Chapter 7 (sections on competition policy) Wallace, Pollack, Young: Part II, Chapter 5, pp133-‐156
Readings:
Baldwin and Wyplosz: Chapter 14 (esp. pp. 432-‐448) Artis and Nixson (2007), Chapter 5 (pp. 105-‐127) Wallace, Pollack, Young: Part II, Chapter 5, pp146-‐150 on agencies and implementation Report from the Commission, Report on Competition Policy 2010 SEC(2011) 690 final (except pp1-‐23) “Of Emperors and kings” – The Economist, November 12th, 2011 “Well-‐dressed thieves”-‐ The Economist, February 21st, 2008 Browse information on the European Competition Network on http://ec.europa.eu/competition/ecn/index_en.html
Week 9 (08/03/2012): EU Competition Policy and State Aid Policy II Instructor: Andrea Wechsler EU competition, competition enforcement and industrial policy: privatization and liberalization, enforcement. Sector developments and the liberalization process in the EU (e.g. financial services, energy and environment, ICT, pharmaceutical industry, transport). Competition policy as regulatory policy, 2008 Index of Economic Freedom. Readings:
Report from the Commission, Report on Competition Policy 2010 SEC(2011) 690 final (except pp23-‐40) European Commission, “Antitrust: Commission fines 11 air cargo carriers EUR 799 million in price fixing cartel” (9th November 2010), http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/1487&format=PDF &aged=0&language=EN&guiLanguage=en
“The airmiles-‐high club” – The Economist, November 12, 2011 “Open the Skies” – The Economist, November 12th, 2011 “Power Games” – The Economist, February 26th, 2009 “Power to the European Market” – The Economist, November 11th, 2010 Executive Highlights, 2011 Index of Economic Freedom, http://www.heritage.org/index/pdf/2011/Index2011_ExecutiveHighlights.pdf Browse the 2011 Index of Economic Freedom, http://www.heritage.org/index/ and examine the rankings of some EU member states (old and new), candidate countries (Croatia, Macedonia, Turkey), compare them to the US and Asian countries. Terry Miller, The Limits of Government, 2011 Index of Economic Freedom http://www.heritage.org/index/pdf/2011/Index2011_Chapter1.pdf
Week 10 (15/03/2012): Monetary Integration: History and Principles Instructor: Justin Valasek History and principles of exchange rate regimes. Optimal currency areas; benefits and costs of monetary integration. The holdup problem: Why fiscal and monetary integration need to be linked. Readings:
Baldwin and Wyplosz: Chapters 10-‐11, 18.
European Commission (2003), "Revisiting the Stability and Growth Pact: Grand Design or Internal Adjustment?"
Buti, et/ al. (1998), Fiscal Discipline and Flexibility in the EMU," Oxford Review of Economic Policy, 14(3), pp. 81-‐97.
Week 11 (22/03/2012): Monetary and Fiscal Policy in the EU Instructor: Justin Valasek From the EMS to the EMU: monetary institutions in Europe. Readings:
Baldwin and Wyplosz: Chapters 16-‐17, 19
Additional readings TBA.
Week 12 (29/03/2012): The Crisis and the Future of the Eurozone Instructor: Justin Valasek This class will address a number of questions regarding the Eurozone crisis: Why did the crisis occur in the first place? What are the ways out of the crisis? How will another crisis be prevented? Readings:
EC (2011), "Green paper on the feasibility of introducing Stability Bonds."
Yves Merch (2011) "Optimal Currency Area Revisited."
Additional readings TBA.