United States, European Union, Economic Integration and Foreign Policy

Name: Wilma Sukarna Putri

Id: 016201400196 Diplomacy 2 2014
Subject: Business, Diplomacy, and Politics: European and American Region
Lecturer: Ahmad Syafri

United States, European Union, Economic Integration and Foreign Policy

In this globalization era, technologies has been improved greatly and give tremendous impact in
our live, including our activities to improved economy in our nations and regions. Economy is
one of the most important thing that a nation is always concerning on, it determines the life of its
people and also determines how big is the power that the nations hold. Therefore, every nation
will do everything as much as possible which will help them to improve and boost their
economy, including cooperating with another nations. By cooperating with another nations,
countries could gain a bigger chance to reduce poverty, improving middle class business,
increasing living standart, and find more possibilities that will help them gaining a great
economic growth and development. One of the effort to grow the economy is to apply the
concept of economic integration. Economic integration is an economic arrangement between
different states and regions where the countries in a region cooperating to reduce and eliminate
barrier to the international flow of product, service, or capital. This reduction and elimination of
trade barriers was expected to boost the productivity which will lead to the better economic
condition. The cooperation between states also will make them economically interdependent,
which then decreasing the chance of conflict to emerged.
Level of Economic Integration
Integrating economies of states and make a cooperation, there are a lot of specialization of
economic integration which absolutely gives benefit to the state members economies. The
reduction of trade barriers will resulted lower price of product, service, and capital which will
increase productivity. There are six level of economic integration, the first one is Prefential Trade
Agreement (PTA). PTA is a level where participating countries improve quantity of trade by

gradually reducing tarrifs between the participating countries, all the trade barriers are not fully
eliminated but there is preference towards participating countries in comparison to other
countries in the world (Olivia 2011). In the next level, there is Free-trade Area (FTA). FTA is a
level where there is a free trade among the member states where barriers are almost completely
reducted and eliminated, however, each of the member countries has their own policy about tarrif
to the third countries (the non-member countries). The example of this level of economic
integration is NAFTA which stand for The North American Free Trade Agreement that created
free trade area. A little different with FTA, Custom Union as the next level of economic
integration still let free trade area but it require the same policy of trade towards the non-state
members, it means that the member countries should applied the same policy of trade. The
example of custom union is, Andean Community which includes South American countries of
Bolivia, Ecuador, Colombia, and Peru. The next greater level of economic integration is,
Common market. Common market remove all barriers of trade, not only goods, but it also add
the free movement of important production factor such as labour and cross border investment.
Eventhough it is hard for countries to cooperate and manage common economy and labour
policy towards the non-member states, the common market will make a greater benefit from
economic integration to the participate countries. The European Economic Community, or now
also known as European Community as a legal entity under the European Union framework is
the best example of common market, the aim of this organization is to bring economic
integration including common market to all its member countries. The next level of economic
integration is Economic Union, it is also the same like common market but it is not only aims to
have a common policy of economic and labour, but also aimed to harmonize the tax, monetary,
and fiscal policies, created the same currency and considered certain amount of sovereignity to

the supranational organization. European Union is the example of this level of economic
integration. The most advanced level of the economic integration is Political Union. Political
Union is a level where countries are coordinating not only the aspect of economic, but also
aspect of political system. The participating countries required to accept stances on economic
and political policies towards the non-state members, and they have freedom to set their own
economic and political policies within their territory. United States is the example of Political
Union, each state of United States has its own government that sets policies and laws, but each
state grant control from the federal government for foreign policies, specially trade kind of
policies. Goods, service, capital, and labour, can move freely without any barriers in the region
and the government sets up external common policies for trade.
The Development of European Union
The reason behind the establishment of European Union is to foster each economy of the
member countries by boosting cooperation after the world war two. The cooperation which then
become greater will make an impact of low possibilities of conflict between states as they will be
economically interdependent. The second world war has given such a great damage to Europe
economy, it gave the idea to European leaders that they have to work together to prevent a
greater conflict and to fix what has been broken. European Coal and Steel Community was found
in 1951 by the six member states which are France, Germany, Italy, Belgium, Luexembourg, and
the Netherlands. This community finally began to unite the European countries economically and
politically in the sake of greater economic development and secure lasting peace. The successful
European Coal and Steel Community led to emergence of another cooperation such as European
Economic Community, which set a free trade zone where goods, capital, and service can freely
move around the region. And also EURATOM which stand for European Atomic Energy

Commuunity, a cooperation between states which designed for the peaceful use of nuclear
energy. And in the 1967, those three organization is unified to become European Coummunities.
In 1990, European Communities is seeking for a greater cooperation and in the 1991, Maastricht
Treaty was signed. The treaty made the member states vowed to create a political union and
adapt single currency, where euro then replaced the currency of the European Communities 12
member countries at that time, and European Communities then changed its name became
European Union. On its development European Union add its member states until it become 28
member states today, the biggest enlargement was held in 2004 where European Union add 10
new member states to the organization. Eventhough as for now European Union has faced
several economic crisis, with the new ideas which always coming from the cooperation, all the
member states believed that European Union will bring long lasting growth and welfare. As for
today, the European Union is developing into political union which will bring together all the
democratic states of its member states as it always seek for greater changing and more efficient
function.
United States Foreign Policy of Marshall Plan
The second world war was giving such a great damage to Europe. War still continuously
happened even after the second world war ended in the region until the region become
vurnerable to communism threat both in internal and external way. In order to help, United States
established a program called European Recovery Program or also known as Marshall plan which
firstly announced by Secretary of State George Marshall, which then become a milestone of
United States foreign policy. The Marshall plan aimed to help rebuilding Western Europe
economies, United States has already set up goals of modernizing the industries in the damaged
regions by removing barriers, and preventing the spread of communism, those are the United

States effort of making Europe become prosperous again. Through the Marshall plan, European
nations achieved almost $13 billion economic support from United States. The Marshall plan
require reduced interstate barriers in order fasten and strengthen the productivity, it also require
labour union membership, and the adoption of modern business procedures (Carew 1987). The
Marshall plan then can be called really successful as it become the factor behind the fastest
growth of European history in the period of 1948 to 1952 where the Marshall plan was
implemented. The living standart of European countries were become higher, poverty and hunger
became long lost gone, and the industrial production increased significantly. The Marshall plan
benefit then can be felt by the United States also as it established markets for American goods.
This plan was not only made for rebuilding the Western Europe economy, but also to prevent the
spread of communism from communist country. The Marshall plan became an integral part of
United States foreign policy, and it obviously gives impact to rebuilding Western European
Countries.
After the end of the second world war, influence of communism can be seen spreading by
communist countries like China and Soviet Union. To prevent the spread of communism, United
States foreign policy then applied the containment policy. The policy of containment was created
and executed by the United States after the second world war, the policy was made as a response
to the series movement done by Soviet Union which wanted to broader its influence in Europe
and Asian. The containment policy become the basic strategy for United States foreign policy
during the cold war, it was formulated by diplomat George F. Kennan. The policy was adopted
during the the Harry S. Truman administration in 1947, with a perspective that the communist
government will fall apart if they stop expanding their influence, therefore the policy was made

as an effort of preventing the influence of communist countries to the non-communist countries.

The policy is prodiving support in military, economic, or techinal assistance.

Bibliography
Carew, Anthony. Labour under the marshall plan: the politics of productivity and the
marketing management science. Manchester University, 1987.
Olivia. Difference Between. May 29, 2011.
http://www.differencebetween.com/difference-between-fta-and-vs-pta/
(accessed May 8, 2016).