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IPS Global Economy Project Lessons of European Integration for the Americas by Sarah Anderson and John Cavanagh February 26, 2004 Institute for Policy Studies 733 15th St. NW, #1020 Washington, DC 20005 Tel: 202 234-9382, Fax: 202 387-7915 www.ips-dc.org About the Authors Sarah Anderson is the Director of the Global Economy Project at the Institute for Policy Studies. John Cavanagh is IPS Director. Research assistance was provided by: Tammy Williams, Michael Borucke, Sara Johnson, and Elinor Douglass. IPS is an independent center for research and education founded in Washington, DC in 1963. Acknowledgements This report is based on a research project conducted by the Institute for Policy Studies (IPS) and supported by the Rockefeller Foundation on the lessons of the European Union for integration in the Americas. Research involved a review of available literature and data on the EU experience, as well as interviews with a broad range of academics, government officials, business leaders, and civil society representatives in several EU member states. The authors would especially like to thank the following individuals for taking time to share their insights and research for this project: Eva Belabed, member, European Economic and Social Committee; Norman Birnbaum, IPS Senior Scholar; Andreas Botsch, Deutsche Gewerkschaftsbund; Nigel Boyle, Pitzer College; Brid Brennan, Transnational Institute; Herbert Bruecker, Deutsches Institut fuer Wirtschaftsforschung; Willy Buschak, European Foundation for the Improvement of Living and Working Conditions; Vasco Cal, Directorate-General, Regional Policy, European Commission; Alejandro Chanona, National University of Mexico; Lance Compa, Cornell University; Jan Delhey, Wissenschaftszentrum Berlin fuer Sozialforschung; Claude Denagtergal, European Trade Union Institute; Alan Dukes, Director-General, Institute for European Studies (Dublin); Carole Garnier, Directorate-General, Economic and Financial Affairs, European Commission; Olivier Hoedeman, Corporate Europe Observatory; Peadar Kirby, Dublin City University; Ronald Janssen, European Trade Union Institute; Clarence Lusane, American University; Geoff McEnroe, Irish Business and Employers Confederation; Christian Weise, Directorate-General, Budget, European Commission; James Wickham, Trinity College. i CONTENTS I. SUMMARY 1 II. INTRODUCTION 3 III. MAJOR FINDINGS 6 A. Development Funds 6 - Ireland Case Study 11 B. Migration 15 C. Agriculture 17 D. Social Standards 21 E. Environmental Standards 25 F. Public Participation 27 IV. CONCLUSION 29 NOTES 31 Boxes and Graphs: Key EU Institutions i Acronyms used in this Report i Key Elements of the EU and NAFTA Approaches 4 A Sampling of Proposals for EU-style Initiatives in the Americas 5 Types of EU Structural Funds 7 Regional Convergence and Non-Convergence 8 Ratio of income of top 20% of population to that of the bottom 20% 9 EU-Speak 16 Mexico: % of workforce employed in agriculture 17 Poor Four: % of workforce in agriculture 19 Structural Funds Expenditure on the Environment, 1994-1999 26 Key EU Institutions European Parliament: Legislature elected every five years by citizens of each Member State. It shares legislative and budgetary authority with the Council and approves the final Community budget. It also supervises the Commission. Council of the European Union: Includes representatives from each Member State and is the main decision making body of the EU. It shares legislative and budgetary power with the European Parliament, coordinates economic policies and judicial matters, and makes decisions regarding EU foreign and security policy. European Commission: Presents and implements legislation approved by the Parliament and the Council. It is the guardian of treaties and works together with the Court of Justice to ensure proper application of Community Law. The Commission does not directly represent national governments but is an administrative body designed to promote the common interest. Court of Justice: Ensures that Community law is uniformly interpreted and effectively applied. It has jurisdiction in disputes involving Member States, EU institutions, businesses, and individuals. Acronyms used in this report CAP: Common Agriculture Policy EC: European Commission ECJ: European Court of Justice EESC: European Economic and Social Committee EU: European Union (used loosely to refer to the alliance that has evolved into the European Union, after several name changes) EURES: European Employment Services EWC: European Works Council FDI: Foreign Direct Investment FTAA: Free Trade Area of the Americas HCP: Hemisphere Cooperation Program ILO: International Labor Organization LFA: Less Favored Areas NAALC: North American Agreement on Labor Cooperation NAFTA: North American Free Trade Agreement i I. SUMMARY As criticism mounts in the Americas over what many perceive to be an overly narrow approach to integration, there is growing interest among political leaders and citizen groups to learn more from the most advanced regional integration project in the world: the European Union. We list below a summary of what we judge to be the most important lessons in five issue areas from the European experience that may be relevant for the Americas. 1. Development Funds portion of aid to be channeled into the poorer regions of the richer countries. From Europe there is strong evidence that regional economic arrangements can include 2. Migration mechanisms to reduce disparities among member nations. The EU invested €324 EU citizens enjoy the right of freedom of billion in development grants to reduce movement from one member state to disparities between and within its member another. In response to fears of massive states between 1961 and 2001, most of it since flows of migrants into the richer countries, the mid-1980s. Accordingly, poorer the EU has focused aid and other assistance European countries have made progress in to lift up living standards in poorer countries catching up with their neighbors, and there is to mitigate migration pressures. As a result, widespread consensus that EU aid grants were when the EU lifted borders with Portugal and an important factor in that region’s trend Spain, out-migration was negligible. Even towards reduced disparity. By contrast, the though the EU is confronting wider income European funds were roughly ten times the gaps in the current round of enlargement, amount of U.S. economic assistance grants to countries scheduled to join the EU in May all of Latin America during the same period. 2004 are slated to enjoy full rights to freedom And, NAFTA contained no mechanisms of movement within seven years. By contrast, whatsoever to reduce inequalities. As Ireland NAFTA side-stepped the migration issue, and the other formerly poor European aside from offering limited visas for nations have surged forward, Mexico has professionals. There is a great deal the fallen further behind its NAFTA partners. Western Hemisphere can learn from the EU approach in adopting a long-term plan for The general lesson for the Americas is that leveling the playing field among nations and trade and investment liberalization alone do working towards increased labor mobility. not guarantee a narrowing of the economic divide. This said, there are many questions 3. Agriculture that should be explored regarding the most appropriate approach to resource transfer in The lessons of the EU on agriculture are the Americas. It may be that debt reduction, mixed. For the first two decades or so, the or a combination of debt reduction and aid EU approach centered on boosting yields and would be a more appropriate approach. production levels. This exacerbated a problem of massive surpluses that drove The EU also offers lessons on how to down world market prices for many develop and maintain support for commodities. It also encouraged intensive development aid in the richer countries. This farming practices that had substantial negative has been accomplished by “de-politicizing” environmental impacts. And despite massive aid by assigning responsibility for spending (€672 billion between 1963 and administration to a supra-national body (the 2001), the EU also experienced a rapid decline European Commission) and by allowing a in small farms, since subsidies disproportionately benefited large producers. Lessons of EU Integration for the Americas 1 Even if the results had been more positive, it 5. Public Participation would be unrealistic to propose such an expensive approach to agricultural policy in The EU offers several avenues for civil the Americas. However, more recent society input in policymaking. Two of the attempts to reform the EU agricultural policy, most significant are: 1) the European while too early to judge, may prove more Economic and Social Committee, which is fruitful. These changes have focused on de- made up of representatives of employers, linking subsidies from production and workers, and other civil society sectors from conditioning them on respect for each member state and provides input to the environmental and other standards. The EU European Commission, and 2) the social is also planning to cut payments to large partnership process, in which trade unions farmers. These reforms can inform the and employer groups develop proposals for debate in the Americas region, where small- EU initiatives, including some that have led to scale agriculture remains highly significant in legislation. EU employees of multinational terms of employment, as well as social, companies also have rights to consultation at environmental,
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