terça-feira, julho 14, 2015

Cecchini and others ignore divergence within the EU

The most shocking aspect of the studies of the impact of European economic integration is how they seem to consistently ignore trade imbalances and the distributional effects of bringing together export powerhouses with small fragile economies.  

A "Union" that agravates divergence is a union that cannot long survive, or that can survive only at the expense of the sacrifice of some of its members, as early "wins" have given away to disastrous and very asymmetric losses and unsustainable intra-Eurozone trade imbalances. 

1988 - The underlying economic justification for the single market programme came from Paolo Cecchini's 1988 report. It estimated that total potential gains of the 1992 single market programme for the EC-12 would be 4 to 7%  of their GDP and would increase their employment by 2m-5m jobs.

1993 - The EU internal market began with the free movement of goods, persons, services and capital is ensured”, offi cially began on January 1, 1993.

2003 - Remarkable "success" was seen according to "estimates" by the European Commission and that in many cases the poorer regions had benefited the most by the resultant increase in intraCommunity trade.  

2013 - Some European expectations came to be seen as unrealistically high. Growth has been less pronounced than predicted in the Cecchini Report of 1988. "Empirical analyses" show that the Single Market has increased GDP in the EU by some 2-3%.  The reduction of barriers to intra-EU trade supposedly made some countries in the EU more attractive for investment by foreign firms.  In other countries,  companies saw more risks than opportunities. And citizens were seen to have reaped "enormous" benefits in terms of jobs, consumer choice and the lower prices. 

One has to wonder about the quality of these  studies,  when clearly the EU did not create enough new jobs to prevent and reduce the double digit unemployment rates in the net importing countries.  

Averages are like that, they can hide more than they reveal.  It reminds us of the not-so-funny joke about the two people who ate half-a-chicken each on average.  
One had the whole chicken, the other had none.

Sources: Gargani* The Internal Market Ten Years On
The Single European Market 20 years on - Deutsche Bank