The UK as a member of the EU

Белорусский ГосударственныйУниверситет
Гуманитарный факультет
Кафедра общенаучных дисциплин

Курсовая работа
по страноведению
TheUKasamemberoftheEU
Студентки3 курса
СпециальностиСИЯ-КО
КореньковойН.Н.
Научныйруководитель
Старшийпреподаватель
РябоваИ.В

Минск – 2009

Content
 
Introduction
Chapter 1. History andreasons of the EU creation
1.1 Apeaceful Europe (1945-1959)
1.1.1 The Robert Schumandeclaration, 9 May 1950
1.2Attempts of Britain
1.3Government of M. Thatcher
1.4The Treaty of Maastricht
1.5Government of T. Blair
1.5.1Social Chapter
1.5.2 The Treaty of Nice
1.5.3 Treaty of Accession
1.5.4 Under the ConstitutionalTreaty
Chapter 2. Europeaneconomic integration
2.1 European CommunityBudget
2.1.1The budget as asource of problems among the EU partners
2.1.2 Budgetaryrevenues and expenditures
2.1.3 Reforms
2.2 Common Agricultural Policy
2.2.1 CAP objectives
2.2.2 CAP policies
2.2.3 UK policies
2.2.4 CAPinconsistencies
2.2.5 The 1992and 1999 reforms
2.2.6 The 2003reforms
2.2.7 The 2007-08 CAP Heath check
2.3 Economic and Monetary Union
2.3.1 European Monetary Union:reasons and history
2.3.2 Benefits and costs
2.3.3 The UK case
2.3.4 Summary and conclusions
Chapter 3. Politicintegration the EU and the UK
3.1 Common foreign andsecurity policy
3.1.1 Aims
3.1.2 The Main Players in CFSP
3.1.3 Common Security & Defense Policy(CSDP)
3.1.4 Conclusion
3.2 European constitution
3.2.1 The British Constitutionaloption: No constitution
3.2.2 Option 2: a none cosmeticrevision
Conclusion
References

Introduction
Thetopic of my project is “The UK as a member of the EU”, which I have choose formy course paper. I consider this topic to be very actual and significant,because nowadays the European Union is the greatest political and economiccentre of the world, an intergovernmental and supranational union of 27democratic member states. The Union is constantly pretending to be the leaderin world policy, but it has resistance on the part of several Member States.Traditionally Britain is one of them. Reason of such relations lies in a numberof historical, cultural, political and economic factors. Relations with the EUfor Britain are one of priority directions of policy, but at the same time theUK is craving for soverenity and independence and trying to keep influence onthe political arena. That is why we can say “Britain is in the European Union,but not with it”.
Thepurpose of my project is to examine political and economic role of the UK inEurope.
Ihave established following problems for performance of the purpose of theproject:
1. Reasons of creation the EU andprerequisites for Britain to enter the Union
2. History of relations
3. Political and economic role of the UK inEurope and main problems, connected with it
Mywork includes besides introduction, conclusion and 3 chapters.
Chapter1 describes the history the EU creation, premises of British membership andproblems connected with it.
Chapter2 examines the role of GB in the European Economic Integration basically inmain spheres such as Common Agricultural Policy (CAP), European Community Budgetand Monetary system. Benefits and difficulties in each branch are scrutinizedas well.
Chapter3 considers political place of Britain in the Union, its influence on coming toconclusions and attitude of British government towards European Constitution.

Chapter1. History and reasons of creating the EU
 
1.1A peaceful Europe (1945-1959)
Thehistorical roots of the European Union lie in the Second World War. Europeansare determined to prevent such killing and destruction ever happening again.Soon after the war, Europe is split into East and West as the 40-year-long ColdWar begins. West European nations create the Council of Europe in 1949. It is afirst step towards cooperation between them, but six countries want to gofurther.
economic government integration european
1.1.1The Robert Schuman declaration, 9 May 1950
9May 1950 – French Foreign Minister Robert Schuman presents a plan for deepercooperation. Later, every 9 May is celebrated as “Europe Day”
18 April 1951
Basedon the Schuman plan, six countries sign a treaty to run their heavy industries– coal and steel – under a common management. In this way, none can on its ownmake the weapons of war to turn against the other, as in the past. The six areGermany, France, Italy, the Netherlands, Belgium and Luxembourg. Building onthe success of the Coal and Steel Treaty, the six countries expand cooperationto other economic sectors.
The1957 Treaties of Rome established the European Community (EC) and the European
AtomicEnergy Agency (Euratom). The EC set out
1. to create a common market encompassingthe elimination of customs duties between Member States, free movement ofgoods, people, services and capital;
2. the removal of distortions incompetition within this market;
3. To coordinate transport;
4. establish common agricultural andeconomic policies.
Euratomwas set up to develop a common market in the peaceful uses of atomic energy.Under the Treaties of Rome, the Member States granted the European Commission amandate to negotiate international trade agreements on their behalf.[5]
 
1.2 Attempts of Britain
Unlike other members, Britain had not suffered invasion inWorld War Two and unfortunately retained the illusion that it could play therole of a great power in its own right in partnership with the US,coincidentally up to the moment the EEC was born. The Britain's initiallyattempted to sponsor an alternative organization to the EEC with the creationof the European Free Trade Area in 1959 as a result of the Treaty of Stockholm.In numerical terms at least, the seven EFTA members (Austria, Britain, Denmark,Norway, Sweden, Portugal, Iceland), outnumbered the six EC member states(France, Germany, Italy, Belgium, the Netherlands); it was the EC countriesthat were the fast growing core of the European economy. This was clear in amemorandum sent by Prime Minister Harold Macmillian to his Foreign Secretary,Selwyn Lloyd, in 1959.
For the first time since the Napoleonic era the majorcontinental powers are united in a positive economic grouping with considerablepolitical aspects, which, although not specifically directed against the UnitedKingdom, may have the effect of excluding the UK both from European markets andfrom consultation in European policy [2,p.136-137]
These economic and political implications motivated the firstapplication for membership lodged by the UK in 1961 under a Conservativegovernment. But British opponents drew on two substantial political argumentsagainst accession.
The first related to the United Kingdom’s world role.Opponents of EC entry felt the UK should align itself with the Commonwealthcountries and the USA, linking those nations to the EC, rather than riskmerging into a ‘European super-state’.
The second argument focused on ’sovereignty’. The principleof supremacy alarmed a small number of British politicians. The faction fearedthat some of Parliament’s powers would be irretrievably lost to Communityinstitutions. Opponents of entry argued that such a transfer of political powerwas undesirable. But they also argued that it was constitutionally impossiblefor the UK to honor the obligations EC membership entailed, since it had alwaysbeen assumed that Parliament was a sovereign law-market, unable to bind eitheritself or its successors as Costa would require. [3, p.39]
However, new states could be admitted only with the consentof all the existing members, and on both occasions the French government,headed by De Gaulle, vetoed British entry. In many ways, De Gaulle’s vision ofEurope accorded with what in later years would be seen as a distinctlyThatcherite position. De Gaulle adopted a distinctly nationalist position,distrusted EC institutions such as the Commission, and wanted to see the memberstate holding the upper hand. However, where he differed from Thatcherite viewson Europe was that De Gaulle wanted to maintain the Franco-German axis as a keyrelationship within the EC with France as a dominant partner. De Gaulle alsosaw Europe as a third force between the US and the Soviet Union, with France atthe helm. His opposition to UK membership was based on the fear that the UKwould be a Trojan horse for US influence and would lead to the creation of anAtlantic Community dependent on America. Despite other member states favoringUK membership, De Gaulle imposed a unilateral veto in January 1963 based on hisconcern about US influence and his anger at a US-UK deal on nuclear weaponsmade at Nassau in July 1962 under which the US agreed to supply Polarismissiles to the UK.
Harold Wilson’s Labour Government, elected in 1964, alsopursued EC membership. Wilson sought to modernize the UK economy and to adaptto the ‘white heat’ of the technological revolution. However, the applicationlodged by Wilson’s Government was again rebuffed by De Gaulle who expressedhimself unsure of Britain’s European vocation.
The political complexion of Europe changed in 1969 when DeGaulle was replaced by George Pompidou. Although a Gaullist, Pompidou wasprepared to agree to British accession. The new Social Democrat West GermanChancellor, Willy Brandt, also supported British membership. This combined withthe election in Britain in 1970 of Edward Heath’s Conservative Government.Heath was a committed European who had made his maiden speech in the House ofCommons in favor of ECSC membership. Negotiations began in June 1970 and in a1971 White Paper outlined the implications of membership, which would includehefty budget contributions and an increased cost of living amounting to 3 %over six years, mainly linked to a 15 % increase in food prices because of theCAP.
The British negotiating team led by Geoffrey Rippon was notin a strong position. Some concessions were wrought on Commonwealth trade, butessentially, the British were forced to sign up to the 13,000 pages of EC lawas it then stood (it has since risen to around 80,000 pages). Parliamentaryapproval was secured in October 1971 by 356 votes to 244, but only because 69Labour MPs defied a three-line Whip to support membership. The Treaty ofAccession was signed in Brussels on 22 January 1972 with Britain becoming amember of the EC on 1 January 1973. [2, p.142]
In the meantime the French Government succeeded in gettingprinciples established for the CAP and for the financing of the Community (theown resources system) which were highly favorable to France and which Britainhad to accept. In the entry negotiations the most that could be achieved was aseven year transitional period with gradually increasing financialcontributions and an assurance that «if an unacceptable situation shouldarise, the Institutions would find equitable solutions».
When Mrs. Thatcher came to power in 1979, the 7 yeartransitional period was almost over and the British net contribution was indeedunacceptable. It took nearly five years and innumerable Council meetings tofind the equitable solution. In most EU negotiations it is usually possible tofind a solution which gives at least something to every one, even if some arenot fully content. In the budget negotiation Britain was bound to be isolatedbecause all other member states would either pay more or gain less from thebudget if the British net contribution was reduced. It was a true zero sumgame. After much aggravation, agreement was reached in 1984 and the Britishcame within two thirds of a percentage point of their opening position. By nowthey understood better how the EC really worked and insisted that the solutionshould be enshrined in a revised «own resources» decision, thusensuring that it can only be changed by ratification in all member states, (theprovision originally secured by France to protect its own favorable budgetposition).
The European Parliament became directly elected. Steps weretaken to establish policies for Research and for the Environment and forRegional Development, all favored by the British. The political cooperation(foreign policy cooperation) machinery was set up, Association Agreements weremade with the African, Caribbean and Pacific countries (ACP) and some otherimportant countries, the Common Fisheries Policy took (unsatisfactory) shapeand, at the end of the 1970s, the European Monetary System (EMS) was created,with Britain not joining the Exchange Rate Mechanism (ERM) but having the rightto join later. Progress with putting into effect the Single Market was veryslow, except in the field of tariff reduction.
 
1.3 Government of M. Thatcher
MargaretThatcher began her campaign for the completion of the Single Market inCopenhagen in 1982. It was finally rewarded with success in Luxemburg in 1986with agreement on the Single European Act. The key elements to this importantAct were:
· Increasethe EEC to 12
· Develop the Exchange Rate Mechanism(ERM), Britain did not join this until 1990
· Increase the EEC’s control onenvironmental issues and other areas of national governments.
· Develop a free internal market forgoods, labour and capital by 1992. This restricted the ability of individualmember states to control these areas of activity.
· Increase the role of the EuropeanParliament, thereby decreasing the role of individual national parliaments.However, UK citizens would elect MEP’s to sit in the European Parliament atStrasbourg.
The next six years were spent agreeing nearly 300 directivesto create the Single Market with Jacques Delors and Arthur Cockfield (theBritish Commissioner) keeping Ministers hard at work. The consequences havebeen wholly beneficial economically, with the elimination of barriers to tradeand the scrapping of restrictions on millions of firms. It has, however, hadsome negative side effects, as the regulations essential to create a realsingle market provided ammunition to those hostile to the EU, particularly inthe UK.
One great internal development of the 1990s was theachievement of EMU. This had many things to be said for it. A single marketwithout a single currency would always have been subject to attack. To be ableto travel Europe-wide without changing your money is a huge advantage. But themove to EMU (European Monetary Unification) was more a political than aneconomic decision and the jury is still out on the question of whether allEurozone countries will be able to live with its «one size fits all»single short-term interest rate. [2, p.156-164]
 
1.4 The Treaty of Maastricht
7 February 1992 the Treaty on European Union (TEU) is signedin Maastricht, entered into force on 1 November 1993.
TheMaastricht Treaty based on three ‘pillars’:
1 pillar I – the EC;
2 pillar II – new intergovernmentalarrangements for a CFSP;
3 Pillar III – increased co-operation onjustice and home affairs.
Themain provisions of the Treaty were:
· The principle of subsiduarity wasembodied.
TheTreaty also enshrined the principle of subsidiarity, under which action inareas where the EC and Member States share competence should be taken atEuropean level only if objectives cannot be achieved by Member States actingalone, and can be better achieved by the EC.
· Concept of European citizenshipintroduced, allowing citizens in the EU to vote in European Parliament andlocal elections in whichever member state they live.
Itintroduced the concept of EU citizenship as a supplement to nationalcitizenship.
· Institutional reform introduced – newpowers to the European Parliament and extension of qualified voting majority inthe Council of Ministers.
· A common foreign and security policyallowed for through intergovernmental cooperation
· Agreement on increased intergovernmentalcooperation on issues such as immigration and asylum seekers.
· Move towards economic and monetaryunion.
TheMaastricht Treaty was not welcomed among many Conservatives, even though bitwas John Major who signed up to the Treaty. It had a long and difficult passagethrough Parliament. One major complaint was it increased the path towardsfederalism. Eurosceptics attacked this claiming it was the slide towards aEuropean superstate with a huge centralized bureaucracy. However, supporters ofMaastricht and federalism interpret as a means of decentralizing power, not centralizingit. Another controversial issue was monetary union. Maastricht laid down thedisappearance of national currencies and the introduction of a single Europeancurrency, and the establishment of central European bank. This would havepowers to set interest rates for the whole EU.The other contentious area ofMaastricht was the Social Chapter. The aim was to harmonize laws across the EUon social issues such as workers rights e.g. a minimum wage; this was designedto prevent unfair competition through exploitation of workers. In order tostave off defeat at home, and keep the Conservative Party on board, John Majornegotiated an opt-out of the Social Chapter claiming it would increase thecosts to business.[5]
 
1.5 Government of T. Blair
 
1.5.1 Social Chapter
In 1997 Labour party, headed by T. Blair, was elected. TheBlair government immediately demonstrated its pro-EU credentials byincorporating the Social Charter into UK law. It stood back, however, fromparticipating in the launch of the single European currency in 1999. Thegovernment’s official position on this issue was that it supported the singlecurrency in principal, but would not join until economic conditions wereappropriate. The government also promised that the UK would not to join untilthe electorate had voted to do so in a referendum. [3, p.24]
A new government found itself plunged immediately into a newround of treaty amendment negotiations. The proposals aired in the AmsterdamTreaty were relatively modest in effect. The Amsterdam Treaty was signed in1997 and the UK agreed with following issues:
· On human rights, discrimination on thegrounds of gender, race, religion, sexuality and age was outlawed.
· Free movement of people was guaranteed(although UK and Eire allowed keeping their border controls).
· Law on divorce, immigration, visas andasylum were to be common throughout the EU.
· Europol – an intelligence-gatheringagency – to begin operations.
· Budgetary deficits to be regulated oncethe single currency introduced.
· Coordination of employment strategybetween member states.
· Social Chapter to be incorporated intothe Treaty following UKs signing up to the Social Chapter in 1997.
· High ranking civil servants tocoordinate common foreign and security policy.
· More powers for the European Parliament.
TheUK could not agree on the following:
· No progress on reforming the EUinstitutions.
 
1.5.2The Treaty of Nice
TheTreaty of Nice was signed in 2001 and entered into force in 2003. It introducedchanges to the EU institutional machinery in preparation for enlargement. From1 January 2005, the number of votes allocated to each Member State in theEuropean Council changes to take account of prospective new members. The totalrises from the 87 votes held by the 15 Member States until June 2004 to up to345 votes held by a potential 27 Member States. France, Germany, Italy and theUnited Kingdom will each have 29 votes. Assuming 27 Member States, the totalrequired for a qualified majority will increase from 62 to 255, and for ablocking minority from 26 to 91. From 2005, the European Commission willcomprise one member from each country, although when the EU reaches 27 members,the number of commissioners will be capped at a figure less than the totalnumber of Member States. However, provisions in the Constitutional Treaty, ifadopted, will supersede some of the Treaty of Nice provisions.
 
1.5.3Treaty of Accession
TheTreaty of Accession, signed by 25 heads of state in Athens in April 2003,provided for the accession to the EU of ten members on 1 May 2004. Under theTreaty, nationals of the ten new Member States have the right to move freelywithin the EU from that date for all purposes except for work. The Treatyallows for the imposition of transitional work restrictions on nationals of thenew Member States, except Cyprus and Malta, until 30 April 2011. United Kingdomhas waived its right to impose these transitional work restrictions, subject tocertain safeguards.
InJune 2003, the Convention’s findings were presented in the form of a draftConstitutional Treaty at the Thessaloniki European Council. 29 October 2004 the25 EU countries sign a Treaty establishing a European Constitution.
 
1.5.4under the Constitutional Treaty:
MemberStates will confer competences on the EU;
· national parliaments will have a role inmonitoring and enforcing subsidiarity;
· a full-time president of the EuropeanCouncil will work alongside the existing presidents of the European Commissionand the European Parliament;
· an EU foreign minister will bringtogether the roles of external relations commissioner and council highrepresentative;
· a legally binding charter of rights willbe introduced;
· the EU will become a single legal‘personality’ (until the Treaty is ratified by all Members the EC and the EUhave separate legal personalities);
· there will be greater co-operation onsocial security, justice and home affairs;
· A simpler voting system will beintroduced where decisions would pass if supported by at least 55 per cent ofMember States, representing at least 65 per cent of the EU.
When citizens in both France and the Netherlands voted 'No'to the Constitution in referendums in 2005, EU leaders declared a «periodof reflection».
13 December 2007 the 27 EU countries sign the Treaty ofLisbon, which amends the previous Treaties. It is designed to make the EU moredemocratic, efficient and transparent, and thereby able to tackle globalchallenges such as climate change, security and sustainable development. Beforethe Treaty can come into force, it has to be ratified by each of the 27 MemberStates. [5]

Chapter 2. European economic integration
 
2.1EuropeanCommunity Budget
 
2.1.1The budget as a source of problems among the EU partners
Thegeneral budget of the European Community is an account of revenues fromspecific resources and expenditures for specific purposes, required by law tobe in expostbalance. It remains insignificant in size (about 1 per cent of theEU GDP, while members' budgets average up to 40 per cent of their GDP). Thenarrowness of its structure affects both the contributions to it and thepayments from it, 'the budgetary incidence', which is different for each memberstate. Therefore, unintentionally the budget functions as an instrument ofinter-country redistribution, which in the 1970s propelled the Community intoan acrimonious crisis that threatened to undermine the very process of Europeanintegration. The cause of this crisis was the members' net contribution to theEU budget, the difference between what they paid in and what they received fromthe budget. Germany and, after its accession to the EU, the UK were the onlytwo member states that paid more into the budget than they got out of it.However, while at this time Germany's relative prosperity (measured by real GDPper head) was well above the EU average, the UK's was below the EU average.This problem was caused by two aspects of the budgetary process originating inthe revenue and the expenditure sides of the EU budget. [11, p.52]
 
2.1.2Budgetary revenues and expenditures
Atthe beginning of the 1980s, when the crisis reached its peak, the EU budget wasfinanced by its 'own resources' which were made up of:
· customs duties, agricultural levies, andsugar levies on imports from non-EU countries;
· The members' contribution based on valueadded tax (VAT). At that time, a significant proportion of UK imports werecoming from outside the EU, while as an indirect tax the VAT is regressive anddoes not reflect ability to pay. As a result, the UK was a major contributor to'own resources' because of its dependence on non-EU imports and its VATpayment, both of which overcharged it relative to its prosperity.
Budgetaryexpenditure on Community policies was dominated by a few items which causeddifferent distributional effects among the partners:
· Expenditure on the CAP which until themid-1980s accounted for more than two-thirds of the total and went mostly tomember states with relatively large surplus-producing agricultural sectors,such as Denmark. Germany and the UK, with relatively small agriculturalsectors, were net importers of agricultural products and therefore lowrecipients of CAP spending.
· The 'structural funds' for regionaldevelopment and social policy which accounted for less than 20 per cent of thetotal. The UK benefited from the regional fund but, set alongside the CAPspending, the sums received were insignificant. [8, p.12]
 
2.1.3Reforms
Thecommitment to complete the Single Market programme by 1992 and to move towardsEMU finally compelled the Community to implement the long overdue radicaloverhaul of Community finances. In addition to the 'traditional own resources'of agricultural levies (now replaced by tariffs), sugar levies, and customsduties and the 'third' resource based on VAT, a new topping-up 'fourth'resource was added based on members' GNP and thus reflecting each country'srelative prosperity. The Community decided also to restructure the expenditureside of the budget by:
· increasing real expenditure by about 22per cent to help promote economic and social cohesion between the EU memberstates and regions for accelerated progress towards EMU;
· Increasing the structural funds'allocation in real terms by 40 per cent and to agriculture by 9 per cent.
Thesedevelopments changed the structure and the size of the general budget.
Althoughthese innovations were generally on target, the remodeled budget continued tocreate unfair inequalities in 'net positions' between countries. Therefore, theCommission had to admit that 'the budgetary imbalance of the UK is no longerunique' but extended to Germany, the Netherlands, Sweden, and Austria, whichwent through budget deficits with the EU larger than the UK (as a percentage ofGNP), and naturally wanted similar rebates.
In1999 the European Council decided instead to:
•  reducethe shares of these four countries in the financing of the UK correction to 25per cent of its normal value;
•  neutralizeany windfall gains to the UK, caused by enlargement or other future events;
•  cutthe maximum call-in rate for the VAT resource so that the more equitable
Fourth resource, a proportion of GNP, makes thelargest contribution to the budget. [11, p.53-55]
 
2.2Common Agricultural Policy
TheCommon Agricultural Policy (CAP) is a system of European Union agriculturalsubsidies and programmes. It was proposed in 1960 by the European Commission.It followed the signing of the Treaty of Rome in 1957, which established theCommon Market. [7, p.5]
 
2.2.1CAP objectives
Theinitial objectives were set out in Article 39 of the Treaty of Rome:
· to increase productivity, by promotingtechnical progress and ensuring the optimum use of the factors of production,in particular labour;
· to ensure a fair standard of living forthe agricultural Community;
· to stabilize markets;
· to secure availability of supplies;
· to provide consumers with food atreasonable prices.
Fromthe beginning of European integration, farmer’s income was the issue thatdominated the debate on agricultural policy. Nevertheless, all CAP objectiveshave largely been achieved, but at a high cost. [11, p.46]
Thelatter function was assigned to a specially established fund financed from theEU budget, the European Agricultural Guidance and Guarantee Fund (EAGGF).
 
2.2.2CAP policies
TheCAP has used an assortment of instruments to achieve its objectives, the mostimportant of which was price-fixing (in a common currency, such as the ecu andnowadays the euro, €) at levels well above the world market prices. Producer’increased incomes fall short of the coat of the policy incurred by theconsumers of the commodity, who paid high prices, and the taxpayers, whofinance the EU budget. A direct income subsidy to producers would have achievedthe same increase in their incomes at a lower cost.
 
2.2.3UK policies
Inevitably,the CAP set up a system of winners and losers among produsers, consumers, andtaxpayer and, depending on the relative national production and consumption ofagricultural products, between the EU states. The UK, which is a net importer agriculturalcommodities, had before joining the EU set up policies on imports, mostly fromCommonwealth countries, at prices determined competitively by internationaltrade, and supported its farmers by production subsidies, called deficiencypayments, financed largely by taxpayers. Since UK producer support pricesbefore joining the EU were about 50 per cent lower than CAP prices, the priceincreases affected both UK consumers and producers, but differently. Theaccession stage of UK membership lasted five years and the actual pattern ofadjustment was different for each comrnodity.
Asa result, during the period 1972-86 the total volume of UK agricultural outputgrew by more than 20 per cent, while the share of food and agricultural importsin the real value of UK imports jumped from 40 to 60 per cent, with adversewelfare and balance of payments effects arising from 'trade diversion', theswitch from low- to high-cost suppliers. Not surprisingly, the CAP is regardedby UK consumers and taxpayers as a device by which the EU generously subsidizesinefficient (French and Italian) farmers from the EU budget—to which theycomplained that they made excessive contributions.
 
2.2.4CAP inconsistencies
However,the good times for the farmers did not last long. The entry of the UK into theEU coincided with the rise in the price of oil, which caused a long period ofinflation and unemployment. From the mid-1970s, despite increases in the volumeof output, farm incomes fell as CAP support prices failed to keep pace withinflation in input prices, such as increases in the real cost of labour,interest payments, and rents. Inevitably, these effects changed the structureof UK agriculture; for example, in the first ten years reducing the dairy farmsby 50 per cent, the cereal farms by 30 per cent, and the employment of farmlabour by 25 per cent. At the same time, increasing EU budgetary expenditure,mounting surpluses of agricultural output, and international pressures byagricultural exporting countries induced several attempts at reforms. Thoseinspired by mainly budgetary constraints, such as 'milk quotas' and'co-responsibility levies', were supply controls based on previous volumes ofproduction and attempted to alleviate the budget crises by penalizing excessproduction without correcting price distortions which continued to inflict highwelfare losses. [11, p.47-50]
 

 
2.2.5The 1992 and 1999 reforms
In1992, the MacSharry reforms (named after the European Commissioner forAgriculture, Ray MacSharry) was the first significant reform of the CAP.Support prices were reduced and compensatory “direct payments” were introduced.These compensatory payments are still being made today – around €18 billion ayear of direct payments date back to this first reforms.3 similar reformsoccurred in 1999, but the next major step was taken in 2003 when the link betweendirect payments and production was broken. This reduced the negative economicimpact of the payments, and made receipt dependent on meeting minimum standardsof good agricultural and environmental condition. [1, p.19]
Althoughwith these reforms the EU took a big step towards market liberalization, theprocess of change was slow, and this triggered the need for further reforms.The new agreement for CAP reform was signed in 1999.
Thenew reforms extended the direct farm payments and the cuts in support prices byas much as 50 per cent. They also attempted, but without success, to ease the'budgetary imbalance' of the big contributors to the EU budget—Germany, theNetherlands, Austria, Sweden, and the UK—by a partial 'renationalization' offarm spending which would have cut CAP's income support from 100 to 75 percent, the members paying the balance to their own producers. [11, p.51-52]
 
2.2.6The 2003 reforms
The next major step was taken in 2003 when thereforms aimed to ‘decouple’ direct payments from the production activity. Thisreduced the ‘production for subsidy’ link of the payments, and made receiptdependent on meeting minimum standards of good agricultural and environmentalcondition—the so-called ‘cross-compliance’ conditions. The centerpiece of the2003 reforms was the ‘Single Payments Scheme’ (SPS), aimed at simplifying allthe disparate product-specific area and headage payments into one singlepayment per farm. [13, p.7]
Thebasic elements of the new CAP:
•  TheCAP consists of a 'single farm payment', independent of production.
•  Thefull granting of the single farm payment and other direct payments are linkedto a number of statutory environmental, food safety, animal and plant health,and animal welfare standards ('cross-compliance') which will also contribute tothe maintenance of rural landscapes.
•  Thereare revisions to the CAP policy by price cuts for most of the products of keysectors traditionally supported (such as cereals and dairy products).
•  Directpayment for bigger farms is cut ('digression') to generate additional financefor the new rural development policy.
•  Amechanism for financial discipline will be introduced to ensure that the farmbudget remains fixed until 2013.
•  Countries,such as the UK, that wish to apply further radical reforms are allowed to doso.
The reforms entered into force in 2004-2005. [11,p.52]
 
2.2.7 The 2007-08 CAP Heath check
In May 2008 the European Commission produced a substantialset of proposals for change to the CAP. These proposals, which required threeseparate legislative measures in order to implement and was at least partlyopposed by some Member States, reflect the outcome of consultation and thefast-changing global food market in which prices have been rising sharply.
Rising economic prosperity in India and China and a growingworld population have contributed to a global shortage of food, notably cerealsand rice. Between September 2006 and February 2008, for example, the prices ofwheat rose 96 per cent and dairy products by 30 per cent. The first part of theEU’s May 2008 package dealt with immediate measures to tackle the shortage ofsupply (and the concomitant rise in food prices). These included lifting alltariffs on imported cereals, abandoning set aside for arable crops and thescrapping of milk quotas by 2015.
Rising food prices are an opportunity to move away fromproducer support to a more market orientated system as higher prices makesubsidies unnecessary in many sectors. A strengthening of competition throughthe scrapping of things like milk quotas, the simplification of administrationto reduce the bureaucratic burden on farmers and allowing Member States moreflexibility in implementation would all help to reduce the regulatory impact ofthe CAP.
If adopted, further changes will mean a reduction in thenumber of very small farmers who receive subsidies; at present there are alarge number who have less than a hectare of land and who receive a few hundredEuros each year in payments that cost more to administer than they are worth.
2.3Economic and Monetary Union
 
2.3.1European Monetary Union: reasons and history
Forestablishing an integrated competitive market which by common prices would leadto the optimal allocation of resources, increase welfare, and promote economicgrowth, the EU has adopted four fundamental principles:
· Free trade in goods
· Free trade in services
· Free mobility of capital
· Free mobility of labor
However,the existence of separate national currencies, which are subject to erraticexchange rate swings, causes unpredictable fluctuation in inter-country prices,which disturb the volume and direction of trade and therefore the process ofmarket integration. It is also possible that recurrent currency misalignmentcould promote protectionist sentiments and undermine the single market. Therefore,from early European Monetary Union (EMU) was set as an objective component ofEuropean integration, necessary for establishing and maintaining monetarystability. Its realization became more urgent after completion of the SingleMarket, which made monetary integration necessary for setting up an environmentof stabilizing competitiveness leading to attainment of its potential benefits.[12]
TheMaastricht Treaty provided for the establishment of a European economic andmonetary union in stages, culminating in the establishment on 1 January 1999 ofa single currency, the euro, by the participating EU Member States. Thus on 1March 2002, for twelve of fifteen countries the objective of monetary integrationwas realized by establishing a new currency, the euro (€), run by a new EUmonetary authority, the ‘Euro system’, made up of the European Central Bank(ECB) and the European System of Central Banks (ESCB)of the member states. Themain task of the Euro system is to ensure price stability as the means forminimizing distortions in the allocation of resources and fostering economicgrowth.
2.3.2Benefits and costs
Theeconomic reasons for monetary integration concern the benefits and costs of asingle currency in an integrated market. The benefits are positively associatedwith the openness of a country and its volume of international trade andinclude:
· price transparency across borders,increasing the volume of trade, and enhancing competition and marketintegration;
· the efficiency of a single money as aunit of account and store of value;
· standardization and lowering of interestrates, including within a stable market;
· Increased policy credibility fromelimination of devaluations.
Buta single currency involves risk, which are negatively associated with theopenness of a country to international trade. The members of a monetary uniongive up:
· the right to use their own monetarypolicy and the option to adjust their exchange rate (by devaluation/revaluation) to counteract asymmetric shock by changes in relative prices;
· to use of seigniorage as a source ofbudgetary revenue;
· the independence of other nationalpolicies (e.g. budgetary policy), which are constrained by the common monetarypolicy.
Butthree EU Member States are outside the euro area. These are Denmark, Sweden andthe United Kingdom. [11, p.55-56]
 
2.3.3.The UK case
TheUK Government has set out five ‘economic’ tests, which must be met before anydecision to join can be made. The five tests are:
· whether can be sustainable convergencebetween Britain and EMU economies;
· whether there is sufficient flexibilityto cope with economic change;
· the effect on investment;
· the impact on the UK financial servicesindustry;
· Whether it is good for employment. [14,p.343]
Theresults of these tests were announced on the 9th of June in 2003.Although four of five economic tests for adopting the euro as a nationalcurrency had not been met, there were obvious economic benefits to joining. Inother words, Britain will inevitably join the euro but later. The details ofthe assessment are presented in the following:
1 The test of convergence with the eurozone had failed outright.
Althoughthe UK business cycle converge more than several euro zone countries, andinflation, long-term interest rates, government deficit, and debt have allmoved closer to that of the euro zone, the test has failed because there wasnot enough evidence to show that this convergence is sustainable. This ismainly because of some significant differences in the structure of the twoeconomies, more especially in the UK’s housing market. The high level of UKmortgage debt and the dominance of variable rate mortgages make the UKparticularly sensitive to changes in interest rate. The link between houseprices and consumer spending is more pronounced in Britain than in the eurozone. Demand for housing is much higher than supply, partly because of therigidity of planning regulations. Therefore, a common European interest ratecould lead to instability in the UK housing market. There are also differences,described as medium-risk, in the UK’s pattern of financial market andinvestment linkages.
Anotherreason is high trade interdependence. The euro zone is Britain’s biggestmarket, and the surest and fastest way to speed the process of convergence isfor the UK to join the EMU. In 2002, the fourteen members of the EU accountedfor 52.5 per cent of British trade in goods. That is why EU enlargement andmembership of the euro could lead to an increase in Britain’s trade with the eurozone by between 5 and 50 per cent over next thirty years with no tradediversion from trading partners in other parts of the world.
2. The test on labour flexibility alsofailed.
Britain'slabour market has become more flexible since 1997 and already is the mostflexible in Europe. But the euro zone economies are experiencing a lower growthrate than the UK. EU monetary policy would be inappropriate for the UK. Thelack of a strong EU central budget mobilizing fiscal transfers, and the limitedintra-EU labour mobility, imply that more reforms are necessary to make theBritish labour market more flexible, e.g. by regional wage settlements and arestructuring of housing benefits to remove the disincentive to move. The UKgovernment would also like to see more flexibility on the EU side, e.g. in thestability and growth pact (SGP), to give member states more leeway to offsetasymmetric swings in their economies.
3. The test on inward investment hasfailed.
Thethird test is concerned with the prospective effects of a decision to join onthe amount of investments. On the one hand, higher investment is supposed to bea reward for joining the euro. Exchange rate risk wills no longer troublebusinesses. “More trade and greater price transparency should mean morecompetition and thus higher productivity growth.” On the other hand, stayingout means less investment. As a matter of fact, the share of foreign directinvestment dramatically fell in the last year. However, a closer study foundthat this test should not be marked as passed since the full convergence wasnot met.
4. The only test to have been passed so faris the impact on financial services.
TheCity has continued to attract business since the launch of the euro four yearsago. This proves that the City will remain a powerful financial centre whetherinside or outside EMU. Nevertheless, joining the single currency mightstrengthen London's position as a financial centre because it would remove anyunease about locating operations outside the euro zone. It may also improve theUK's ability to compete for business generated by EU enlargement and thecontinued development of euro financial markets. In retail financial servicesthe benefits would include lower costs on euro-area transactions, betterallocation of investment portfolios, and scale economies for investment funds.Joining the euro could encourage cross-border mergers and acquisitionsinvolving UK companies, induce euro-area banks to locate to London, andstrengthen the pre-eminence of the City.
5. Impact on jobs, stability, and growthfailed—until convergence and flexibilitycriteria were satisfied.
Joining the euro could boost trade and thus nationalincome, although the estimates are highly uncertain. But any gains could beoutweighed by the costs of greater economic instability and higher unemploymentin the EMU that can only be avoided by sustainable convergence between Britainand the euro zone and more flexibility. Interest rates are not likely to besignificantly lower inside the euro than outside, and frequently they may notmeet the needs of the British economy. [11, p.60-66]
 

 
2.3.4Summary and conclusions
Joiningthe euro is not a policy but a strategy. It is not simply business as usual butwith a different name for the currency. Many things will change as a result.It’s not a short-term fix but a medium-term programme to deliver long-termbenefits.

Chapter3. Politic integration the EU and the UK
3.1 Commonforeign and security policy
 
3.1.1  Aims
TheCommon Foreign and Security Policy (CFSP) is a common, rather than a single,foreign and security policy i.e. Member states act collectively in those areaswhere they all agree. The CFSP aims:
· tosafeguard the common values, fundamental interests, independence and integrityof the Union in conformity with the principles of the United Nations Charter;
· tostrengthen the security of the Union in all ways;
· topreserve peace and strengthen international security, in accordance with theprinciples of the United Nations Charter, as well as the principles of theHelsinki Final Act and the objectives of the Paris Charter, including those onexternal borders;
· topromote international cooperation;
· todevelop and consolidate democracy and the rule of law, and respect for humanrights and fundamental freedoms.
Itcame into being when the Treaty on the European Union (the Treaty ofMaastricht) entered into force on 1 November 1993. [10, p.20]
 
3.1.2The Main Players in CFSP
· The European Council (a meeting of EUHeads of State or Government) sets the CFSP agenda.
· The General Affairs and ExternalRelations Council (GAERC), the monthly meeting of Member States’ ForeignMinisters, is the main decision-making body. Other formations of Member States’Ministers can sign off the least contentious of decisions.
· The High Representative for CFSP(currently Javier Solana) assists the GAERC by preparing and implementingpolicy discussions.
The 1997 Amsterdam Treaty created a new post of HighRepresentative for the CFSP who would also be the Secretary General of theCouncil. Under the Treaty his sole authority is limited to«assisting» the Council and the Member State holding the Presidency,which remained (and remains) responsible for the management of the CFSP. [5]
· The Political and Security Committee(Brussels-based meeting at ambassadorial level) deals with the day-to-dayrunning of CFSP.
TheCommission has no decision-making role within CFSP, but takes part indiscussions.
· The European Parliament has nodecision-making role within CFSP, but is kept informed. [6]
 
3.1.3 Common Security & DefensePolicy (CSDP)
Partof the CFSP is the European Security and Defence Policy (ESDP). This gives theEU military and civilian tools to contribute to international security bysetting up missions in conflict and post-conflict areas. [5]
The aim of the CSDP is to give to the EU a politico-militarycapability for purely European operations where the US and/or NATO do not wantto be involved, for example, for peacekeeping and other military and securitytasks, without undermining the importance of NATO as the provider ofterritorial defense for most Member States. [12]
The Maastricht Treaty brought defense policy into the EU forthe first time. However the arrangements for giving it effect (through theWestern European Union) came rapidly to be seen as ineffectual. Recognizingthis and chastened by the weak European military showing in the Balkans, at a bilateralsummit at St Malo in 1998, the United Kingdom and France went a stage further.Their joint initiative was adopted by the European Council in Cologne in 1999as the new European Security and Defense Policy (since renamed). Details werefleshed out at the Helsinki European Council in December 1999 and have beendeveloped continuously ever since. They included ambitious force goals (a corpslevel — up to 60,000 troops — deployment capability by 2003, now postponed to2010) and new command, control and politico-military structures (MilitaryCommittee, Military Staff, political control by the Political and SecurityCommittee, see above). They also included ambitious capabilities on thecivilian (civ-mil) side to win the peace in addition to military capabilitiesto win the war. As with NATO, there is no standing army, only national unitsvoluntarily assigned on each occasion for joint operations.
The CSDP is still work in progress. The Lisbon Treaty makesno fundamental changes to EDSP except to provide an obligation on Member Statesto come to one another’s defense in the unlikely event of armed aggressionagainst one of them — but this is an obligation on Member States and not on theEU. The Treaty also renames the EDSP the Common Security & Defense Policy(CSDP) [5].
 
3.1.4 Conclusion
TheUK fully supports an effective EU foreign policy and is committed to playing anactive role in the formulation of CFSP. When EU Member States are able to speakwith one voice on international affairs, they can achieve more and exercisegreater influence than any single Member State could alone. [6]
 
3.2European constitution
Aprocess of constitutional and institutional reform of the European Union (EU)led to the signing of the Treaty Establishing a Constitution for Europe (herereferred to as the EU Constitution) in October 2004. The Treaty was abandonedfollowing negative referendums on ratification in France and the Netherlands in2005. There was much speculation in the media about the reasons for the French andDutch rejection of the Constitution. Among those cited were the prospect ofTurkish entry, the Polish plumber, the lack of social Europe, etc. [9, p.5-12]
A‘reflection period’ was introduced, which was brought to an end in early 2007by the German Presidency of the EU. Germany re-opened the Treaty reform debateduring the first half of 2007 and in March 2007 the “Berlin Declaration”confirmed the aim of achieving a “renewed common foundation” for the EU beforeEuropean Parliament elections in 2009. In June 2007 the German Presidency setout a ‘road map’ for reform and the European Council adopted a Mandate in whichit stated.
TheTreaty of Lisbon was concluded in Lisbon on 18 October 2007 and signed on 13December 2007. The content of the Treaty, though not its structure, is similarin a great many respects to the EU Constitution. It is the sixth major Treatyamendment to the 1957 Treaty of Rome. [4, p.7-8]
 
3.2.1The British Constitutional option: No constitution
Thisis a real option. The UK has never had a Constitution, but become one of the worldsleading parliamentary democracies.
Thequestion is not whether it is better or not to have a Constitution for Europe,the question is rather whether Europe can do without and still evolve in adesirable direction.
Argumentsto support this view:
1. Many of the positive changes broughtabout by the Constitution could be implemented without the adoption of thecurrent Constitution. A good example is that of the EU Foreign Minister. All ittakes is the political will in the Council to implement this change. Of course,without a Constitution, this is not guaranteed. However, the Council shouldplay a critical role both in the choice of the High Representative for CommonForeign and Security Policy and the EU Commissioner for External Affairs. Itcould thus nominate the same person for both jobs. Many other changes, apartfrom the voting rules in the Council and most legal changes can be implementedwithout the Constitution. [9, p.15-28]
2. The status quo is not as bad as manyhave stated. The most important difference implied by the rejection of theConstitution is that one maintains the Nice rules for qualified majority. It isgenerally agreed that these rules make it very difficult to adopt newlegislation. However, it is not necessarily clear why this should be considereda bad thing. Most of the legislation related to economic and monetaryintegration has been passed (liberalization of services being a big exception).[3, p.39-40]
 
3.2.2Option 2: a none cosmetic revision
Thisway implies a new Convention, a new Intergovernmental Conference and a newratification process.
Thereare clear disadvantages to such an option.
1 It is not clear from the referendumresults in France and the Netherlands in which direction to go.
2 A revision of the current draft mighttake a very long time. [15, p.24-27]

Conclusion
Inmy work I have examined such topic as “The UK as a member of the EU” and havecome to the conclusion that the loss of status as world power and economicdownturn, connected with it, made British politicians take choose betweensovereignty and future flourishing, connected with the EU membership. In 1964Britain applied for the Union, but its application was rebuffed, and only in1973 the UK could enter the EU.
UnitedEurope and Britain have relations in many spheres. For example in economy, itis Common Agricultural Policy and European Monetary Union, in policy – Commonforeign and security policy and European Constitution. But the greatestproblems in relations between the UK and the EC are joining the Euro and Constitution,because British government considers that these two points threat soverenityand independence of the UK.
Thatis why I think that in future we will not see any revolution changes inrelations between the UK and the EU although it is difficult for the EU to findproper strategy to be united, and it has become a reason for the Union to finda new way of development. But in spite of it I consider GB is considered tohave essential role as strategic partner for united Europe and the UK will beone of the most powerful states in the EU as well as in the world.

 
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