Европейский Союз (European Union)

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МИНИСТЕРСТВО ОБРАЗОВАНИЯ И НАУКИ РОССИЙСКОЙ ФЕДЕРАЦИИ

УХТИНСКИЙ ГОСУДАРСТВЕННЫЙ ТЕХНИЧСКИЙ УНИВЕРСИТЕТ

Кафедра «Информационные системы в бизнесе»

Курсовая работа по дисциплине

«Микроэкономика»

натему: The European Union.

Работу выполнил студент группы ЭТК(IMS)-04	Замкова В.О.
Работу проверил Старший преподаватель	Берловская Е.В.

Ухта, 2005.

Содержание

TOC o "1-3" h z u 1.1   An Outline of the EU's Developmen. PAGEREF _Toc105185353 h 3

1.2   The EU's Decision-making Process. PAGEREF _Toc105185354 h 3

1.3   The Budget and Finance. PAGEREF _Toc105185355 h 7

1.4   The Common Agricultural Policy. PAGEREF _Toc105185356 h 10

1.5   The Common Fisheries Policy. PAGEREF _Toc105185357 h 10

1.6   Regional Policies. PAGEREF _Toc105185358 h 12

1.7   Social Policy. PAGEREF _Toc105185359 h 14

1.8   Environmental Policy. PAGEREF _Toc105185360 h 15

1.9   Transport Policy. PAGEREF _Toc105185361 h 18

1.10 R&D Policy. PAGEREF _Toc105185362 h 19

1.1   An Outline of the EU's Development

The modern origins of the EU stem from the events and aftermath of the two world wars, particularly the second, and from the bitter effects of the interwar recession and the 'beggar my neighbour' policies adopted by most countries.

1951 six countries, Belgium, The Netherlands, Luxembourg (Benelux), France, Italy and West Germany, signed the European Coal and Steel Community Treaty and formed the ECSC which still exists and whose treaty has to be redrawn by 2002.

1957 the same six signed the Treaties of Rome to create (1) The European Economic Community (EEC) and (2) Euratom. The treaties came into operation in January 1958. Since then the European Community and its derivative The European Union have consisted of the three bodies, 1. ECSC, 2. EEC (called the European Community since 1987) and 3. Euratom.

1972 Denmark, Ireland and the United Kingdom acceded with effect from 1 January 1973 (The Nine').

1979 Greece acceded with effect from January 1981 (The Ten').

1985    Portugal and Spain acceded with effect from January 1986 (The

Twelve').

1990 the newly unified Germany was incorporated as a single state into theCommunity on 3 October.

1994 Austria, Finland and Sweden acceded with effect from 1 January 1995 (The Fifteen').Other important landmarks are:

1986 The Single European Act (SEA) was signed in February and came into force in July 1987. It established the Single European Market from 1 January 1993.

1991 The European Economic Area (EEA) was formed by an agreement
signed in October. It joined the EC to EFTA (minus Switzerland) and came into force on 1 January 1994. Liechtenstein joined late in 1995.

1991 The Maastricht Treaty on European Union was agreed in December and signed in February 1992. After ratification delays it came into force 1 November 1993.

1996 An Intergovernmental Conference proposed reforms to the Maastricht Treaty. It led to the Treaty of Amsterdam, June 1997.

1.2   The EU's Decision-making Process

The European Union has five main institutions: the Commission, the Council, the European Parliament, the European Court of Justice, and the

European Court of Auditors. Figure 19.1 shows a simplified outline of decision making and institutional relationships in the EU.The relationships in the diagram have evolved over time and will change again as the Maastricht Treaty is revised and as new members join. At the moment, decisions are made by the Council, sometimes in conjunction with the European Parliament. The word Council covers several formats for meetings. It can be the heads of government and/or state meeting twice (or more) a year in what is called The European Council'. Or it can be the ministers for a particular subject such as agriculture or transport, meeting as The Council of Ministers' or it can be 'Council working groups' who are officials from the member states. The term also includes the Committee of Permanent Representatives (COREPER) whose members are senior dip­lomats and civil servants. They meet weekly and aim to smooth the passage of decisions so that only the final or most contentious issues are decided by their political masters.

Some decisions require the Council and the Commission to consult the Economic and Social Committee or the Committee of the Regions which have an advisory role.

Generally speaking the European Parliament's role is also advisory because it is not a law-making body in the way that other parliaments are, but there are two procedures called the co-operation procedure and the codecision procedure that give the European Parliament more say and authority.

In practice, the Commission, which is the executive or civil service of the Union, is the most important of the institutions if only because of the continuity of its existence and the sheer quality of its permanent staff. It currently has 20 Commissioners, two from France, Germany, Italy, Spain and the United Kingdom and one from each of the other states. It has about 15 000 staff and is divided into Directorates General (DG). The Commissioners, who are now appointed for five years, are obliged to be completely independent of their national government. The Commission is the main source of initiatives in the EU and the role of President of the Commission is extremely important, as Jacques Delors showed during his period of office to 1994. He was respon­sible for the Single European Act and for the Treaty on European Union and for the initiatives on European Monetary Union which will lead to a single currency (probably).

When decisions are made they are formulated in different ways. Put simply they are:

• regulations which are directly applied and no national measures are
  needed to implement them;
• directives which bind member states on the objectives to be achieved but
  leave it to the individual government to achieve them through modifying
  their own laws;
• decisions which are binding, in all their aspects, on those they are
  addressed to, whether individuals, firms or member states;
• recommendations and opinions which are not binding.

Member states vary significantly in the speed and effectiveness with which they implement directives and this difference is a major cause of dissension between members. The process of making European Union laws is long drawn out and full of opportunities for consultation, representation and protest, so there is no real excuse for national governments to talk as if they are being overridden by 'Brussels' which is a short-hand term for the Commission. The United Kingdom Government has developed a reputation for being over-pernickety or over-enthusiastic in interpreting the application of directives and for adopting an excessively bureaucratic approach to changing UK law to comply with them.

A high proportion of European Union legislation requires unanimous agreement in Council but the Single European Act introduced a method of qualified majority voting which was extended by the Maastricht Treaty. There are proposals to extend this majority voting system further but the UK Government of Mr Major strongly opposed the idea. The numbers are modified with each accession of new members but, in 1997, were as follows:

	№, of votes
Germany, France, Italy, UK	10
Spain	8
Belgium, Greece, Netherlands, Portugal	5
Austria, Sweden	4
Ireland, Denmark, Finland	3
Luxemburg	2
Total	87

When a Commission proposal is being considered, at least 62 votes must be in favour. In other cases, the Qualified Majority Vote (QMV) is also 62 but at least 10 states must vote in favour. In 1994 only about 14 per cent of the legislation adopted in the Council was passed by QMV. Whether the proposed legislation is subject to a QMV or not depends on the relevant Act or treaty under which it is discussed and which 'pillar' of the European Union it appears under. Items under the first pillar may or may not be subject to the QMV depending on whether they are designated for that under the Single European Act or the Treaty on Union. Items under the second pillar, that is Common Foreign and Security Policy (CFSP) and under the third pillar, that is Justice and Home Affairs (JHA) are not because they rely on what is called 'intergovernmental cooperation'. See Figure 19.2. for the so-called pillar structure of the EU since the Maastricht Treaty.

When EU laws are passed the Commission puts on its hat as 'Guardian of the Treaties' and makes sure that the laws are implemented according to the original intentions. It may take countries or organisations to the European Court of Justice (ECJ) in order to get a legal determination of an issue. The ECJ is an institution with a growing role and importance and is beginning to have a significant impact on national laws through its interpretations. United Kingdom 'Eurosceptics' want its powers curtailed or even abolished because some of its decisions on social legislation and fishing have upset the UK government. The political argument about the ECJ disguises the more important discussion of the relationship between national laws and EU law. So far the ECJ has established the principle, as did the USA Supreme Court in the relationship of Federal and State laws, that national laws must be subordinate to EU law. Incidentally, you should not confuse, as does the UK media from time to time, the European Court of Justice with the European Court of Human Rights whose decisions also annoy Little Englanders.

Subsidiarity

There are several interpretations of this term but, essentially, it means that action should be taken in the EU at the most appropriate level, whether it be at community or national or even regional level. The concept is increasingly applied to European Union decision making. The United Kingdom tends to interpret and advocate it as a way of restraining the growth of the Union's federalist tendency but the idea does work both ways. There are, for example, many occasions when joint action by all members is desirable and more effective.

1.3   The Budget and Finance

The annual budget of the EU (technically of the European Community) is fixed by the Council of Ministers and the European Parliament by a process called 'the shuttle' which begins in June when a preliminary draft budget is published. From this preliminary effort the Council draws up a proper draft budget in July which goes to the Parliament for its first reading in October. It returns to the Council which gives it its own second and final reading in November. When the Council has finished with it the budget goes again to the Parliament for its second reading and final adoption, usually in mid-December.

Some of the expenditure allowed for in the budget is designated as compul­sory expenditure which is defined as such on the basis of whether it results from the European Community Treaty and from acts adopted in accordance with it. The Council has the final say on this type of spending, most of which is agricultural or about half the budget. The Parliament has the final say on most of the remaining expenditure. There is usually some wrangling between the Parliament and the Council over amendments proposed by the Parliament which almost always wants to raise spending.

The annual budget is set up within a framework called The Financial Perspective which is a plan incorporating the four years ahead with ceilings laid down for expenditure on the six main categories within the budget. The 1995 budget, for example, included agriculture, structural actions, internal policies, external action, administrative expenditure and reserves. The commitments will lead to actual payments in the future.

Sources of revenue for the Union

The Community has four sources of revenue which together are called 'own resources'. The history of how the EU came eventually to have these own resources is long and tortuous. The four, with 1995 figures, are:

1. Agricultural and sugar levies, £1546 million in 1995, are placed on
   imports of agricultural products from non-members. They raise the price
   of imports from world price levels to the level of the threshold prices fixed
   for Community agricultural products.
2. Customs duties, £10 187 million in 1995, are received from trade with
   non-members.
3. Contributions based on VAT, £30 973 million in 1995. The calculation
   of this is complex but each member pays over an amount which is
   calculated by applying a notional rate of VAT to an identical 'basket' of
   goods and services in each member state. The amount payable is subject to
   a restriction or cap based on the size of the member's Gross National
   Product.
4. Gross national product (GNP) based contributions, £17 121 in 1995, which are calculated by taking the same proportion of each member's GNP. This source, which is also called the 'Fourth Resource', is used to make up the difference between the EU's expenditure and the revenue expected from the first three sources, and is subject to an overall own resources ceiling.

The total for 1995 for these four sources of revenue was £59827 million. The present system of finances was agreed in 1988, 1992 and 1994. Under these there are maximum contributions or own resources ceilings established until 1999:

% of Community GNP	1993	1994	1995	1996	1997	1998	1999
1,2	1,2	1,21	1,22	1,24	1,26	1,27

The United Kingdom has an 'abatement' on its VAT payments in order to reduce its overall net contribution to the EU budget. Mrs Thatcher spent several years asking for 'our money back' and was partially successful. The abatement is roughly two-thirds of the difference between what the United Kingdom contributes to the EU budget and what it receives from the budget. The repayment is made a year in arrears. The UK's net contribution for 1995 was estimated at £3.1 billion.

The expenditure of the European Union

The expenditure side of the budget is divided into six main categories. The proposed expenditure commitments for 1995 are given with each item:

1. Agricultural guarantee, £29 851 million, which is the largest single
   group and covers the price and market guarantees under the CAP. Great
   efforts have been made to keep this section under control and to reduce it.
2. Structural operations, £20 723 million some of which relates to
   agricultural restructuring but most applies to regional policy. They are
   divided into:
• Agricultural guidance £2956 million
• Regional Development Fund £8338 million
• Social Fund £5072 million
• Cohesion Fund £1694 million
• Other structural operations £2664 million

This is the next largest area of spending.

3. Internal policies, £3980 million, which are a collection of policies such as
   that for the environment:

Other agricultural operations £164 million Other regional operations £40 million Social and educational policies £575 million Energy and environment policies £172 million Industry and internal market £574 million Research and development £2337 million Other internal £118 million

4. External policies, £3842 million, which cover overseas aid:

· Food aid £667 million

· Aid to Eastern Europe and former Soviet Union £1246 million

· Other development aid £1462 million

· Other external £468 million

5. Administration, £3155 million, which is a small percentage of the EU
   budget in relation to the scale of operations:

· Commission £2039 million

· Parliament £664 million

· Council £242 million

· Court of Justice £91 million

· Court of Auditors £42 million

· Committees, Economic and Social, of the Regions £79 million

6. Reserves and payments, £2120

· Monetary reserve £394 million

· Emergency reserve £254 million

· Loan guarantee reserve £254 million

· Repayments £1218 million

The total proposed commitments expenditure for 1995 was £63 670 million which shows a steady increase over previous years: £46000 million in 1992, £54000 million in 1993, £56000 million in 1994.

Figure 1.3 shows how the pattern of EU expenditure has altered in recent years and indicates the degree of success in reducing the dominance of agricultural spending and shifting money to regional and social policy.

The winners and losers

Some countries are net contributors to and some are net beneficiaries from the European Union budget. The largest net contributor over the years has been Germany followed by France, Italy, the Netherlands and the United Kingdom. The Netherlands usually contributes most per head of population. Most of the net contributors see their payments as necessary to raise the overall standard of living in the Union and to create better regional cohesion through the regional and social funds. The United Kingdom has taken a different line and has always protested about being a net contributor. The abatement negotiated by Mrs Thatcher leaves the UK still contributing about £2.5 billion a year net to the Union. Table 19.1 shows contributions/receipts.

Fig. 1.3. Developments in community spending.

Source: European Community Finances, HM Treasury, Cm. 2824, London, HMSO, 1995.

Table 1.1 Contributions to, and receipts from, the European Community budget,^* 1993 (£ billion)

	Contributions	Receipts**
Germany***	14,9	5,6
France	9	8,2
Italy	8	6,8
United Kingdom	5,9	3,5
Spain	4	6,5
Netherlands	3,1	2,1
Belgium	1,9	1,9
Denmark	0,9	1,2
Greece	0,8	4
Portugal	0,7	2,6
Ireland	0,5	2,3
Luxembourg	0,2	0,3

* From the Court of Auditors Report, 1993

** Excludes £4.9 billion which is mainly development aid and administrative expenditure for the other institutions. The receipts are Community payments to both private and public sectors in member states

*** As constituted since 3 October 1990
Source: Social Trends 95, London, HMSO, 1995.

1.4   The Common Agricultural Policy

The details of the CAP are given in Chapter 16 so this section is concerned with the place that it has within the economy of the European Union. The CAP was the first of the common policies and by far the most important because it absorbed so much of the revenues of the original EEC and later the Union. It also had a profound effect on the political development of the Union and on the relationships between the members, especially when new states acceded. The CAP has also influenced the foreign relations of the Union particularly with developing countries and with the USA where it has been a persistent source of grievance. The policy has, in addition, had a significant impact on the redistribution of income between member states and within the various regions of the Union. There have been large transfers of income to the areas of marginal farming and important additions to the prosperity of rural areas. Overall the CAP has added to the price of food for the consumer if EU prices are compared with world market prices and the assumption is made that the food could have been bought abroad. If it had been, of course, there would have been high rural unemployment as a consequence and a higher tax burden to pay for that. It is probably better to pay higher prices for food and directly keep farmers and farm workers in jobs. In the longer term the CAP will be an integral part of the European Union's environmental policy and may change radically as agricultural products are used for fuel and when (if?) world demand for agricultural products exceeds supply.

1.5   The Common Fisheries Policy

The CFP is one of the most controversial policies of the Union and is one that is never likely reconcile the national desires for maximum catches and strong fishing fleets with the desperate need to conserve fish stocks. Every time a new member joins the European Union there has to be a renegotiation of the CFP and the allocation of catches and quotas because, outside the narrowly defined coastal territorial waters, the fish stocks are regarded as a joint resource. The accession of Spain, the second largest fishing country in the EU after Denmark, has caused particular anxiety in the UK because Spanish ships were allocated a quota of some species in the Irish Box which impinged on traditional UK waters. Spanish ships were also registered in the United Kingdom in order to take some of the UK quotas and some UK owners sold their quotas to the Spanish. An attempt by the British Government to legislate against the practice was declared illegal by the European Court of Justice. One of the reasons that Norway's referendums have rejected membership of the European Union is the fear of the impact on their fishing industry.

Although the fishing industry employs only 260 000 fishermen in the EU, that is about 0.2 per cent of the working population, it has a much larger impact indirectly by employing four or five times as many on boat building, processing, distribution and so on. It also has a disproportionate importance in less developed regions where there is little alternative employment. Fishing is a term that can be extended to include fish farming, and the collection of shell fish and molluscs.

As territorial waters, or economic zones, have been extended to 200 nautical miles from coasts, the EU fishing fleet has been excluded, except by Treaty and the allocation of quotas for catches, from the old fishing areas off eastern Canada (now almost fished out), Iceland and Norway. The deep-sea fleets now travel further to the warmer waters of the Atlantic, the Indian Ocean and to Africa where agreements have been negotiated with the countries concerned. At the same time there is increasing competition from the former Soviet Union countries and Japan for the dwindling supplies.

The conservation of fishing stocks has led to very controversial decisions, some of which seem to have counterproductive results. The EU has agreed that members should reduce their fleets of certain types of boats by paying the owners to destroy them. The United Kingdom has been rather slow to pursue this policy. At the same time the EU has also had a policy of financing the building of more modern, technologically advanced boats which can stay at sea longer and catch fish more effectively. The attempt to conserve stocks has led to different boats being allocated quotas for specific types of fish. The consequence is that if a boat reaches the quota and then catches more of that species they have to throw the excess back, dead, into the sea. There is a strong temptation to cheat and keep the fish and smuggle it ashore. Another effort to reduce catches is to increase the mesh size of nets and regularly inspect fishing gear and fine defaulters. The most hated method, however, is to limit the number of days in a month that a boat can fish, a regulation that creates all sorts of anomalies and injustices, given the problems of the weather that beset fishing. The final policy is to suspend altogether fishing of certain fish, for example as happened with herring in the North Sea. Governments seem to respond exceptionally slowly to the dire warnings of the conserva­tionists in respect of fish stocks and seem to listen more to their fishing lobbies. Fishermen tend to adapt to shortages of one type of fish by switching to catching other types and by doing so they aggravate the problems. The long-term solution may lie with fish farming but even that is throwing up political problems as Norway is accused of dumping farmed salmon and trout on the European market. Paradoxically there is sometimes a glut of fish, mainly caused by the activities of non-EU boats such as those from Russia, and some fish prices have collapsed at the quay side but not in the shops. An example was in 1995 when such an occurrence resulted in French fishermen staging destructive demonstrations and the EU responded by introducing minimum prices for some species.

It is hard to see how the intractable problems of the CFP can be resolved except, perhaps, by a savage reduction in fishing fleets, draconian imposition of quotas or restrictions on time at sea or a repatriation of fishing policy to each member state and a return to national fishing controls, which is what many nationalists advocate. If this latter policy were adopted it would be a serious breach of the single market concept.

1.6   Regional Policies

The regional policy of the European Union is closely bound up with other policy areas such as agricultural, social, transport and environmental but the main methods of implementing regional changes are contained in the structural funds. There are four of these and their purpose is to reduce regional disparities and increase economic and social cohesion. The four funds are:

1. The European Regional Development Fund (ERDF);
2. The European Social Fund (ESF);
3. The Guidance Section of the European Agricultural Guarantee and
   Guidance Fund (EAGGF);
4. The Financial Instrument for Fisheries Guidance (FIFG).

The ESF was set up by the Treaty of Rome and began to operate in 1961 has been reformed several times, the latest reform being introduced in 19 when it was modified together with the ERDF and the EAGGF. The FIFG was introduced in 1993 to help struggling fishing communities. These funds have been given six objectives in the post-1994 framework:

1. Helping less developed regions that are lagging behind in the sense that they have a GDP per head of less than 75 per cent of the Union average or where there are special reasons for including them in this objective. The regions eligible for aid under this objective are the whole of Ireland, Portugal and Greece, the south and west of Spain, the Mezzogiorno of Italy, the overseas territories of France, one region of Belgium (Hainaut), the Flevoland region of the Netherlands, all the East German Lander, and in the UK, Merseyside, Northern Ireland and the Highlands and Islands. Three funds supply money, the ERDF, ESF and the EAGGF.
2. The economic conversion of declining industrial areas where the
   unemployment rate and the rate of industrial employment are higher than
   average and the rate of industrial employment is falling. The ERDF and
   the ESF provide money for this objective.
3. Reducing long-term unemployment and facilitating the integration into
   work of young people and those socially excluded from the labour market,
   The ESF applies here.
4. Facilitating the adaptation of workers to industrial changes and to changes
   in production systems through preventative measures against unemploy­
   ment. The ESF applies here.
5. (a) Promoting rural development and helping to adjust production, processing and market structures in fishing, agricultural and forestry as part of the CAP reform process. The EAGGF and FIFG apply here, (b) Assisting development and economic diversification in vulnerable rural areas affected by structural decline. Three criteria apply here and two must be satisfied to receive aid. They are a high share of agricultural employment, a low level of agricultural income and a low population density and/or a significant trend towards depopulation. The EAGGF, ESF and ERDF all apply here.
6. Helping regions with a population density of less than 8 inhabitants per square kilometre and meeting certain criteria on GDP. The Arctic and sub­arctic areas of Sweden and Finland will benefit.

Strictly speaking the regional objectives are 1, 2, 5(b) and 6 while the others cover the whole Union.

There has been a major shift of European Union money from agricultural guarantees towards regional policy and the Social Fund since 1985. In the current five-year plan, 1994 to 1999, about 142 billion ECU at 1992 prices will be spent on the structural funds. About 70 per cent of this will go on Objective 1. By 1999 about 36 per cent of expenditure commitments will be on structural funds. Over the years since the accession of Greece, Spain and Portugal there have been special Integrated Mediterranean Programmes to spend extra money in those countries and in southern Italy.

When the Maastricht Treaty on European Union was agreed it included provision for additional funds to be channelled to four members in order to bring them more in line with the other members so that they would be readier for the introduction of a single currency or would suffer less if they did not immediately join. This provision is called the Cohesion Fund.                     The fund is aimed at the four countries mentioned above and they will receive, between 1993 and 1999, ECU 15.1 billion or ECU 16.223 billion in adjusted prices. The aim is to shift resources from the 'rich' north to the 'poorer' south and to remove the excessive economic and social differences between those areas. Each country must have an approved plan to meet the monetary union criteria and will receive these funds only after the projects, costing above ECU 10 million, are vetted by the European Investment bank. The money will only be given for environment and transport projects or for the trans-European Networks schemes. Spain will receive between 52 and 58 per cent of the total, Portugal 16 to 20, Ireland 7 to 10 and Greece 16 to 20 per cent.

The principles behind the allocation of structural funds

In 1989 a set of four principles was established to determine what action should be taken through the structural funds. They were modified in 1993 to produce the following:

1. Action must concentrate on the six objectives.
2. There must be partnership and close cooperation between the Commission
   and the local, regional and national bodies concerned.
3. The principle of additionality must apply, that is the member state must
   not reduce its own spending but should use the structural funds to supple­
   ment it.
4. There should be proper programming through partnership over a specified
   number of years.

The United Kingdom has sometimes come into conflict with the Commis­sion because it has not always observed the third principle of additionality and has tried to substitute Union funds for United Kingdom money. There are a large number of programmes applied by the European Union itself and about 9 per cent of the structural funds are spent on those. They have names that are often acronyms such as ADAPT, RECHAR, KONVER and RESIDER that all deal with adjustment to industrial change. These programmes are occasionally upgraded and modified and may be renamed. The remaining 90 per cent of the money goes on national programmes agreed with the Commission and local and regional authorities. In the United Kingdom we shall see the impact of such programmes on Merseyside over the next five years since it now qualifies under Objective 1 for very large sums of money.

The regional policies have been the subject of intense study over the years and of much criticism. It is hard to isolate the effects of the regional policy from the concurrent macroeconomic climate. The conclusions are usually that the creation of new jobs costs a huge sum per job (akin to the £1 million per job of the UK Eurofighter programme announced in September 1996) or that the firms who relocate would have been forced by market pressures to relocate anyway. The bureaucracy of the system is also accused of absorbing too high a percentage of the funds and there are frequent allegations of corruption. There is no doubt, however, that many remote rural areas and declining industrial regions have benefited from the regional funds.

1.7   Social Policy

The European Union's social policy stems from the original Coal and Steel Community and the need to create jobs to replace those being phased out by technological change and the consequent plant and pit closures. Part of the approach was to promote geographical and vocational mobility. The ESCS pursued these policies to find new work for large numbers of unemployed coal miners. The ESF followed similar lines after 1961 and its role has expanded since into areas such as equal pay for equal work and health and safety at work. Progress was very slow in the 1980s because decisions in Council had to be unanimous unless the proposal could be 'smuggled' through under the Single Market rules of health and safety at work. The United Kingdom was usually the only member to vote against social legislation and in 1989 refused to sign the Social Charter or, to give it its proper title, The Charter of Fundamental Rights of Workers. As a result the other members incorporated a new Social Chapter into the Maastricht Treaty on Union and the UK opted out of it. In practice the other members, now 14, took the Social Chapter into a protocol of the Treaty and ran it using qualified majority voting without the UK having the right to participate in the voting. They removed this anomaly when the Amsterdam Treaty was agreed in June 1997 and the new UK Government signed the Social Chapter. Some social policy matters require unanimity because they still come under the Treaty of Rome and later treaties. The areas covered by social policy include:

• Free movement of workers;
• Social security for migrant workers;
• Promotion of workers' geographical and occupational mobility;
• Equal pay for men and women;
• Safety at work;
• Health protection in the nuclear industry;
• Working hours and holidays;
• Vocational retraining;
• Handicapped persons, elderly persons;
• Youth unemployment;
• Full and better employment -  co-ordinating national policies;
• Redeployment of workers in declining industries;
• Leisure of workers, housing;
• Accident prevention and health protection;
• Integration of migrant workers;
• Help for the neediest -homeless, old, vagrants, one-parent families;
• Industrial democracy, workers' participation;
• Rights of working women.

The United Kingdom Government up to May 1997 had trouble accepting the elements concerning industrial democracy and workers' participation and resolutely opposed the Works Councils that have been accepted by the other members under the Social Chapter protocol. In practice many large British multinational companies that operate in other member states introduced Works Councils despite the objections of the Government. The UK also opposed the Social Charter and Chapter on the grounds that it would commit the UK to introducing a national minimum wage, but there is nothing specifically in the Chapter on this subject so it was something of a bogeyman. The Labour Government elected in May 1997 committed itself to signing the Social Chapter and to introducing some sort of national minimum wage. There has been a very confused and not very illuminating debate about the potential effects of a minimum wage and other social legislation. The Conservative Party argues that the general effect of the Social Chapter is to raise the costs of employing people and thus it contributes to reducing the international compet­itiveness of the European economy and 'destroys jobs'. Their opponents say that that is not the case and that a minimum wage at certain levels would not raise unemployment and that workers' morale and productivity would rise.

One area in which the European social policies have had a considerable impact on members' economies is in establishing the rights of women to equal pay and conditions and much of the progress in the UK is attributable to rulings of the European Court. The Court has also had a great impact on the rights of part-time workers and on pensions. In all of these changes the UK has been, to say the least, reluctant and often very obstructive until the Court ruling has been made. The accession of Sweden and Finland has shifted the balance of the Union further towards social intervention and the raising of standards of social provision. In September 1996 a conflict developed between the UK and the EU over the Working Hours Directive which limits the working week to 48 hours and its extension to hitherto excluded occupa­tions such as hospital medical staff and transport workers.

1.8   Environmental Policy

The European Union has over the years evolved a reasonably coherent policy on the environment through the medium of action plans. The Maastricht Treaty on Union raised environmental action to the status of a policy and replaced unanimity by the QMV in Council on most environmental affairs. The latest action plan, the fifth, is called Towards Sustainability and runs from 1992 to 2000. The previous plans were subjected to regular reviews and one such review in 1988 had a big impact because it led to an increased emphasis on energy efficiency through programmes such as Thermie which provides money for spreading technological information on energy efficiency, renewable energy sources, clean coal technologies, and oil and gas pros­pecting and development. The programme is now in its second phase, 1995 to 1998. In December 1991, 45 nations signed the European Energy Charter which aims at exploiting Eastern European energy sources more efficiently after EU nations have installed modern, environmentally cleaner power stations and equipment. A new version of this was signed in 1994 and there are now 48 nations involved including the USA, Japan, Canada and Australia. One important aim is to modernise the energy industries of the former Soviet bloc, many of whose plants were appallingly harmful to the environment. Part of this policy includes shutting down the remaining reactors at Chernobyl which were still being used in late 1996.

The early Community policies began as early as 1972 and were intensified after the Single European Act of 1986 which established legal requirements in the environmental sphere. By 1993 over 200 directives had been approved on improving air and water quality, controlling waste disposal and monitoring industrial risk. Many of the measures were aimed at the protection of nature, that is flora and fauna. In general the approach to improving quality was based on prevention via the setting of standards and the prosecution of defaulters. This approach underwent a major change after 1992 when the Towards Sustainability action programme was adopted. This now concentrates on prevention and on the control and management of growth. The new action plan incorporates environmental considerations into the basic agricultural, social, regional, transport and economic policies. In many instances, for example the building of new major roads, an environmental impact study has to be made. Another example of the application of the policy is the Cohesion Fund mentioned above under Regional Policy, which incorporates the environmental dimension into part of the allocation of funds. The new programme is in accordance with the 'Earth Summit' held in Rio de Janeiro in

1992,   that is the UN Conference on the Environment and Development which adopted the Agenda 21 aimed at achieving international co-operation in the twenty-first century.

In 1989 the Commission issued detailed proposals for the setting up of a European Environmental Agency (EEA) and it came into being in late 1993.    It is based in Copenhagen and the hope is that it will become an interna­ tional agency and not just a European one. Its job is to provide reliable data, objectivity and the information needed to monitor the application of European laws on the environment. The EEA is the culmination of a programme called CORINE that lasted from 1985 to 1990 which collected information on an experimental basis. In pursuit of the aim of making sure the public is properly informed on environmental matters, the EEA is setting up a European Information and Observation Network. To begin with it will concentrate on air quality and atmospheric emissions, water quality, resources and pollutants, the state of the soil, flora, fauna, and use and natural resources, waste manage­ ment, noise emissions, chemical substances harmful to the environment and coastal protection. The Commission says it will 'give special consideration to transfrontier, pluri-national and global phenomena and the socio-economic dimension'.

There has been a long-running debate in the European Union on the question of how to 'make the polluter pay'. Several ingenious schemes have been suggested but all rely eventually on the state creating a very effective inspection, supervision and monitoring service whose cost, if it worked properly, would fall on the taxpayer rather than the polluter because polluters would stop their bad practices and cease paying 'fines'. Another solution to some environmental problems associated with excessive or inefficient use of fossil fuels is the 'carbon tax'. This proposed tax has been at the heart of the Commission's attempts to reduce carbon dioxide emissions and it began as a serious and potentially effective measure. It turned out to be much too bold for the average politician, however, and the final measure is a much watered down one. The United Kingdom led the opposition to the detail of the scheme although it accepted the principle. The plan required the other major users of carbon fuels, the USA and Japan, to follow suit and would have put $10 on a barrel of oil in AD 2000 after an initial $3 in 1993. Other taxes would have been cut to compensate for the rise in the price of industrial coal of about 60 per cent, of petrol by 6 per cent, of domestic heating oil by 17 per cent and electricity by 14 per cent. The final decision, made in December 1994, was a feeble compromise. The Environment Council decided that the Commission should draw up a framework for members to apply a carbon tax in their own country if they wished. Sweden, which already had a version of such a tax, has been left looking very lonely because the other members are frightened to follow suit in case they anger their motoring lobby. They seem to believe that the public would not understand that other taxes would fall to compensate for the rise in carbon fuel taxes.

One of the main purposes of the proposed tax was to help the European Union meet its self-imposed targets for maintaining carbon dioxide emissions at 1990 levels in the year 2000. (The UK set itself the year 2005 as a target date.) Only Germany and Belgium are anywhere near reaching their targets and the Commission has recommended more efforts to curb vehicle emissions and improve energy efficiency. There is great opposition to these suggestions from vested interests on the grounds that costs of production will increase. The poorer member states who cannot afford the energy price rises or the technological improvements necessary to achieve the suggested improve­ments in efficiency also object.

In December 1995 the Commission adopted what it calls a 'landmark' White Paper entitled 'An Energy Policy for the European Union'. The pape follows on from a Green Paper issued for consultation in January 1995. The White Paper says that the future energy policy will be based on three pillars, overall competitiveness, security of energy supply and environmental protection. It says that the policy will be implemented mainly by means of integration of the market, management of the external dependency, promotion of sustainable development and support of energy research and technology. There will be a programme for the Commission to follow accompanied by a two-yearly updating process. A basic assumption of the policy is that European energy use will increase. The integration of the market will take place on the foundation of a liberalised internal market for gas and electricity backed by 'an efficient monitoring tool in order to analyse and understand market developments and to ensure that structural and technical changes are not in conflict with energy policy goals'. In other words there will be a regulated market because monitoring on its own would be ineffective. As far as possible the intention is to make policy decisions neutral in their effect on the energy market and investment.

Another main thrust of the policy is to 'internalise external costs as far as possible'. This means that producers and presumably users of energy will, in the medium term, be subjected to fiscal tax measures that make them bear the external costs of the pollution and other environmental disbenefits that they create. The environmental aspect would also be approached through the promotion of renewable energy sources and support for energy efficient technologies. All of these aims will be the subject of a five-year Work Programme so we can expect a stream of Commission initiatives.

In September 1996 Eurostat published a report on the rising demand for energy and land in the context of 'sustainable mobility'. It revealed that transport now consumes more energy than industry in the European Union and that road transport is responsible for over 80 per cent of the transport consumption. The price of fuel in relation to disposable income has fallen significantly between 1980 and 1994. In 1994 the proportion of disposable EU income per head needed to buy 1000 litres of a weighted mixture of fuel was 4.9 per cent compared with 7.7 per cent in 1980. Needless to say, consumption has increased. The other gloomy fact is that emissions of carbon dioxide and particulates are continuing to rise despite the tougher controls on exhausts and higher fuel standards. Moreover, emissions of sulphur dioxide continue to rise in almost all member states. The report also says that the fall in lead emissions has been caused mainly by regulation rather than by the price differential in favour of lead-free petrol. It casts doubt on the benefits of the price differen­tial in favour of diesel fuel which has stimulated the rise in demand for diesel vehicles because of the growth in output of particulates and oxides of sulphur that has resulted.

1.9   Transport Policy

Strictly speaking, there is not yet, in late 1996, a European Union transport policy. There is an attempt to achieve one and there are many EU aids to transport investment and development but the full policy will probably take until AD 2000 to emerge. In 1992 the Commission published a White Paper The Future Development of the Common Transport Policy'. The Maastricht Treaty marks the beginning of a Common Transport Policy (CTP) because it set the goal of further development of the single market together with sustain­able growth which respected the environment and improved safety and quality in the infrastructure of the Union. The Treaty incorporated decisions for the finance of trans-European Networks or TENS as they came to be called, the first 14 programmes of which have already begun.

The White Paper was followed by a debate and the Commission then published its CTP Action programme for the years 1995-2000 which will contain a number of initiatives. The three objectives of the programme are:

1. improving the quality of transport systems in terms of competitiveness,
   safety and environmental impact;
2. improving the functioning of the tret market to promote efficiency and choice;
3. broadening the external dimension by improving links with third world
   countries.

Improving the quality will be achieved under the fourth R&D framework programme by setting up four task forces to target and co-ordinate R&D. The task forces will work on The Aircraft of the Future', 'The Car of the Future', 'The Trains and Railways of the Future' and Transport Intermodality of the Future'. The TENS programmes will also serve this objective. Their aim is to develop integrated, efficient, and interconnected transport systems across the Union and into neighbouring countries. This requires the co-ordination of investment, the promotion of partnership between public and private bodies and the convergence of technical standards. In the first 14 TENS and four other large traffic management projects, over 80 per cent of the finance will be spent on rail-related developments.

The Commission is also trying to improve the public service passenger networks and published a Green Paper called The Citizens' Network' in November 1995. This was the first time the Commission had issued a policy document on public transport and its central theme is the provision of attrac­tive alternatives to the private car. Another future publication is likely to be on 'intermodal freight transport', that is transport by different modes, say road to canal or rail to road. The Commission published a short document in July 1995 on the development of short distance sea shipping which it concludes is underutilised in some countries. In August 1996 a White Paper was published on 'A New Strategy to Save Europe's Railways from Extinction' which contains a proposal for rail 'freeways' for freight, where freight would be given priority and administrative delays minimised at frontiers. The problem of different technical standards such as loading gauges would be tackled so that large containers and full height road vehicles could be transported by rail easily throughout the Union.

The initiatives on safety will include ones on roll-on, roll-off ferries and a single, fully unified Air Traffic Management System for Europe. In July 1995 the Commission published a review of methods of overcoming air traffic congestion. Some nations have proved very dilatory or even obstructive in previous attempts to create a unified air traffic control system in Europe. Even the United Kingdom has been less than co-operative.

The Single Market objective will be based on the liberalisation of markets. Road freight has already gone a long way in that direction and there will be proposals on coach transport and a third package for air transport. Rail transport and inland water transport are also due for further liberalisation. In this context the Commission intends to hold a debate on transport pricing, so that member states can no longer give their own transport companies unfavourable advantages by charging differently for infrastructure use or allowing extensive cross subsidisation of services. In December 1995 a Green Paper called Towards Fair and Efficient Pricing in Transport' was published to start this debate.

The external dimension objective will include policy initiatives on further development of bilateral links for road, rail and air with Central and Eastern European states. It will also include working via the World Trade Organisation to negotiate maritime liberalisation. There will be another effort to reach an air transport agreement with the USA.

1.10 R&D Policy

There is considerable variation among the members in their spending on R&D. There are differences between their sectors, industries and, within their own borders, between regions. Data on R&D can be hard to collect or collate because of problems of definition but in 1991 about 2 million people were engaged in R&D in the EU, about 1.33 per cent of the labour force. There were great variations in expenditure as a percentage of GDP as Table 19.2 shows. All members except Germany and Sweden spent a lower percentage of their GDP on R&D than the USA (2.65 per cent) and Japan (2.87 per cent) in 1991. The UK spent 2.1 per cent.

Table 1.2R&D Input by Member State in 1991

	R&D expenditure as % of GDP	R&D personnel as % of labour force
Belgium	1,67	1,46
Denmark	1,69	1,43
Germany	2,65	1,87
Greece	0,46	0,57
Spain	0,87	0,77
France	2,42	1,77
Ireland	1,04	0,88
Italy	1,24	0,75
Netherlands	1,92	1,39
Austria	1,74	1,05
Portugal	0,56	0,34
Finland	2,07	1,69
Sweden	2,86	1,72
United Kingdom	12,13	1,30

Source: Eurostat, Europe in Figures, 4th edn, Luxembourg Office for Official Publications of the European Communities, 1995.

Most of the funding by governments in the EU goes on three types of research:

1. research carried out by universities;

2.specific technological objectives such as exploration and exploitation of
the earth and space and into energy use and distribution;

3.defence.

The European Union began to apply its own policy in the mid-1980s although there had previously been programmes for energy research. It created framework programmes and specific programmes within them. The Single European Act was a stimulus for these and the Maastricht Treaty continued them, but put the job of proposing programmes in the hands of the Commission and their adoption in the joint hands of the Parliament and Council of Ministers. Currently the fourth framework programme (1995- 98) is spending about ECU 3.1 billion a year which is a huge jump from the paltry ECU 280 million in 1980. The framework targets key sectors rather than spreading the money thinly over many areas. Table 19.3 shows how the priori­ties have changed over the years. The latest programme adds two new areas, transport policy and socioeconomic. Within this, the specific programmes are on three areas, technology assessment, education and social exclusion.

Table 1.3 Changes in R&D priorities between framework programmes

Field of research	Framework programmes
1984-87	1987-91	1990-94	1994-98
Information and communications technology	25	42	38	28
Industrial and materials technology	11	16	15	16
Environment	7	6	9	9
Life sciences and technologies	5	7	10	13
Energy	50	22	16	18
Transport	0	0	0	2
Socioeconomic research	0	0	0	1
International cooperation	0	2	2	4
Dissemination and exploitation of results	0	1	1	3
Human capital and mobility	2	4	9	6
Total %	100	100	100	100
Total amount (million ECU)	3750	5396	6600	12300

Source: Eurostat, Europe in Figures, 4th edn, Luxembourg Office for Official Publications of the European Communities, 1995.

There are three main ways of implementing the specific programmes:

1. The most important is on a shared cost basis where the Commission generally provides 50 per cent of the total costs for industrial partners and 100 per cent of the marginal costs for other partners. The rest of the money comes from the members of the private consoitia. The partnership is usually universities, public research centres and large firms and small and medium-sized enterprises (SMEs), often across several countries.
2. The Community has its own Joint Research Centre (JRC) which has eight
   institutions in six countries. In 1993 it had a budget of ECU 272 million and
   employed 2000 staff. It also acted as host for over 200 visiting scientists.
3. The Union operates through concerted actions and networks. In the
   former, the EU provides the money only for co-ordination which may also
   include the costs of meetings, travel and publications. In the networks, the
   EU begins with the aim of co-ordination but may provide money for
   research by members of the network.

The three methods of financing programmes referred to above are the most significant but there are special methods for projects such as the Joint European Torus (JET) used for fusion research and for money spent on training and dissemination of information such as CORDIS which is a database, as well as fellowships. In addition there are many other schemes conducted in co-operation with other countries, such as CERN for nuclear research. They spawn acronyms such as EMBL, ESO, ESA, ESRF, ILL, and COST. Some of these have subsidiary programmes which also have acronym titles or clever plays on words such as Eureka. ESA is the European Space Agency which is responsible for the Ariane satellite launching system. COST is 'European cooperation in the field of science and technical research' which has 25 members for whom the EU provides the Secretariat services. You can award yourself a prize if you can find out what the others mean!

Most economists would agree that R&D is a vital component for economic growth and many would argue that, other things being equal, more is better. The European Union still has some way to go to catch up with the USA and Japan and, for example, Singapore, in the percentage spent in relation to GDP. But economists will also want to look at the detail of the figures and see how the money is spent, because the indications are that expenditure on defence R&D is less valuable in contributing to economic growth than other types. There is also some conflict about state intervention in R&D. Some argue that it is absolutely essential because of the huge sums of money involved and because of the co-ordination needed. In the case of the EU there is also the need to make R&D multinational. Others argue that the state (or Commission) is too bureaucratic and ponderous and too insensitive to market forces and may waste money on spotting 'winners' that turn out to be duff runners. This argument tends to ignore the many ignoble failures of private enterprise R&D.