1 Course Essentials - mwp

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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  

 

 

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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.