Modern Political and Economic Integration Concept

– maintenance of peace (which is achieved by the presence of political alliances, diplomacy);

– the achievement of the multilateral objectives;

– performing special tasks (for example, an increase in GDP); and

– the acquisition of a new image and role identity (can be traced through the behavior of political elites and the people, as well as through the use of common symbols).

As a historical example of successful integration Karl Deutsch (1968) gave the examples like that: England and Wales, England and Scotland, the USA, Germany, Italy, Switzerland, and the Austro-Hungarian monarchy, etc. The process of integration is occurring around a kernel, which has the most political power. As such, Deutsch believes England in the case of the United Kingdom of Great Britain and Northern Ireland, Piedmont in Italy, Prussia in Germany, in the case of the United States – Massachusetts, Virginia, Pennsylvania and New York, and so a significant role in the integration associations in stories played innovation – the Reformation and Reform in Tudor England, the liberal reforms in Italy, Germany and Switzerland in the XIX century, the struggle for independence in the USA and other countries. From the point of view of Deutsch the success of the integration depends on external circumstances and factors, among which he highlights:

– mutual relations of states;

– compatibility of shared values and merits;

– mutual responsibility; and

– a certain degree of common identity and loyalty.

John Peterson (1995) makes a distinction between three levels of decision-making in the EU. The first is the level of decision amending the EU as a political system. The second is the system level, at which is happening the practical transformation of integration institutions. Third is the level of policy.

Alec Stone Sweet and Wayne Sandholtz (1997) consider the EU as a continuum that connects the intergovernmental and supranational policy. Intergovernmental policy is a kind of normal international relations. The supranational level embodies the central control management capacity.

2.2.3.2. New Institutionalism

There are three varieties of new institutionalism: the historical, sociological and institutional, based on the principle of free choice. Supporters of institutionalism guided in this methodology, borrowed by them from microeconomic theory. In their interpretation of the institutions there are the formal and legal structures that impose obligations on political actors. Useful institutions of nation-states as well as establishing common rules facilitate the formulation and implementation of a rational strategy for the implementation of their own interests, as well as reduce the risks and costs of intergovernmental cooperation (Hall and Taylor, 1996).

Supporters of historical institutionalism Kenneth Armstrong and Simon Bulmer (1998) define institutions as formal, informal institutions and conventions, which embodied in these rules and symbols, as well as policy tools and political procedures. It is emphasized the relative autonomy and active political role of institutions. According to this theory, the first integration institutions in Europe were established in certain historical periods with goals. Then created institutions exist today. They structure the political situations and solutions, in particular the emergence of a single market. Feature of sociological institutionalism is that it considers the interests within the institutional system.

2.2.3.3. The Concept of Policy Networks

Political network is the many organizations that interact with each other and share information and resources. It facilitates reconciliation, settlement, compromise between the various interests (Peterson, 1995b). Political network is a partnership which benefits all participants, regardless of the ratio of their power potentials. The EU is a set of political networks. Those advantages for participants make them interest in development of integration, because they would not be able to get this information and resources outside the framework of political cooperation in the network.

2.2.2.4. Intergovernmental Approach Theory

Intergovernmental approach assumes that integration is a transaction between heads of state. Its supporters William Wallace (1990) and Andrew Moravcsik (1997) hypothesize that nation states remain as the key actors in the integration process. They make a distinction between “formal” and “informal” integration. Informal integration is the development of the forms of economic and social interactions that do not need to be authorized by special political institutions. Formal integration is institution, which makes a product of cooperation between national elites (Wallace, 1990). Moravcsik is a representative of the liberal intergovernmental approach. The heart of his concept is based on three assumptions:

– the main actors in the policy are rational, autonomous individuals interacting with each other on the basis of self-interest and to avoid risk;

– governments are the “subspecies” of domestic actors, endowed with interests that deter the interests of other states; and

– a behavior of states in the international arena characterizes the nature of the public interest (Moravcsik, 1997).

2.2.2.5. Economic Integration Interaction Today

Representatives of the concept of “dirigisme” J. Tinbergen, R. Sanvald, I. Shtoler believe that the functioning of the international integrated structures is possible through

the development of their members and the general economic policy of coordinated social legislation. Dirigistes advocate the creation of a supranational political-legal institution or group of institutions for effectively regulating the integration. In practice, this results the creation of “economic union” (Lal, 1997).

Dutch economist Jan Tinbergen (1954) divided the economic integration into the positive and negative. The negative integration defines as the elimination of certain instruments in international economic policy, and the positive is as the introduction of additional measures to carry out the reorganization, i.e. solutions in transition period.

American scholar Balassa (1962) introduces a dual interpretation of the category of integration as a process and as a state. He proposes to distinguish between cooperation and integration. If the process of cooperation offers an action to reduce the kinds of discrimination, the integration process involves the destruction of discrimination.

Balassa systematized dynamic effects of integration and its impact on GDP growth integrating countries:

– savings as a result of expansion of production when market expansion allows production capacity that has no use to the integration process;

– savings arising due to the reduction of costs in the economy;

– polarization effect, the essence of which is to reduce economic activity in one of the participating countries due to benefits of concentrating trade in another country or diversion of inputs;

– impact on the location and amount of investment; and

– an impact on the overall economic efficiency, the free exercise of commercial transactions.

The scheme of Balassa remains a classic, adopted by various international economic organizations. According to Balassa (1967), integration requires the destruction of discrimination and consists of the following forms:

1) Free trade zone – is a zone free of customs, quantitative and other restrictions by the gradual abolition of customs duties. It is liberalized the international trade, ease of transportation of goods. Negative consequences are the adverse effects of imports, lack of competitiveness of the domestic market, etc. In the framework of the free trade area the countries refuse to customs restrictions only in respect with their partners in the

integration associations in relation to third countries they act individually, while maintaining its economic sovereignty. Each country sets its own rates with third countries.

2) Customs Union involves the elimination of duties in trade, pursuing a common foreign trade policy towards third countries. In customs union there is duty-free trade between the member-countries and a common customs tariff in relation to third countries. This leads to the rationalization of production and create stability within the Union. The need for supranational bodies is increased. Great importance for the customs union has presence in its composition of one or two major powers (such as Germany and France in the EU, Brazil and Argentina in MERCOSUR, etc.);

3) Single common market encompasses the five objectives:

– the abolition of customs duties between member-states;

– production of a common trade policy towards third countries;

– the development of a common policy and the development of priority sectors of the economy;

– creation of conditions for free movement of goods, services, capital, labor and information;

– the formation of the general funds to promote social and regional development;

4) Economic Union involves the joint definition of the economic policies of member countries and the implementation of a uniform policy for the Economy. Supranational institutions are created, laws which are binding on all member states. At this stage, it happens the unification of monetary, fiscal and social policy;

5) Economic and Monetary Union provides for the single monetary policy, the introduction of a single currency and the creation of a new central bank;

6) Political Union means carrying out a coordinated foreign policy harmonization in the field of security, interior and justice. The common factor for all stages is the removal of economic barriers. Only the EU passed the five of six stages of the integration, the other integration organizations passed the first or second level.

The statistical effects of integration are:

– “Trade creation” – as a result of the free trade area and a customs union it happens the replace of expensive domestic products to cheaper imports;

– “Trade diversion” – if there is a substitution of cheaper imports from third countries with more expensive imports from the partner-country (Viner, 1950).