Communitarization:  The shift of policy activity from the intergovernmental pillars to the Community pillar.

While the Commission was far from acting as a policy entrepreneur, the meetings of the European Council were often paralyzed by distributional conflicts, notably the British budgetary rebate. The member states were not only challenged by the internal problems of an enlarged Community but also by the international economic system unconducive to further integration. Three factors were particularly important: the collapse of the international monetary order in 1971; two oil crises of 1973 and 1979; and the concurrence of low growth and high inflation (stagflation) producing economic divergence in Western Europe.

Trade diversion occurs when traded commodity is shifted from the lowest cost
country that is out of the customs union (third country) to the relatively higher cost customs union member country.

The Maastricht Treaty, 1992 

Neofunctionalism, as a popular theory of the European integration in the 1950s and 1960s, focused particularly upon the integration project in Europe. It sought to explain what was happening in Europe, and to provide a conceptual framework within which developments in Europe could be understood.

Sectoral Integration is a conception of or strategy for regional integration that follows sector-by-sector logic.

Regulatory state:  It is the expansion in the use of rule-making, monitoring, and enforcement techniques and institutions by the state, and a parallel change in the way in which its positive functions in society are being carried out.

Functionalism emerged as an alternative to federalist designs about the organization of the international system. Functionalism belongs to the liberal-idealist tradition of international relations theory and usually takes account of Immanuel Kant, John Jacques Rousseau, and Woodrow Wilson. The main figure of functionalism is David Mitrany (1888-1975). Mitrany’s seminal work entitled “A Working Peace System of 1944” has influenced many of his successors in European studies.

Even though, EU institution-building, from the outset, followed the logic of market integration, it had a political purpose too, often associated with two alternative ideas and ideologies: the functionalist approach and the federalist approach.

The Advantages of Regional Integration
? Cooperation makes war and conflict less likely.
? The single market offers European businesses a larger pool of consumers.
? Mergers and takeovers create world-class European corporations, helping the EU better compete in the global marketplace.
? There is greater freedom of cross-border movement within the EU.
? It pools the economic and social resources of multiple member states.
? Member states working together enjoy new global power and influence.
? Less advanced member states rise to standards maintained by more progressive states.
? Funds and investments create new opportunities in the poorer parts of the EU.
? Democracy and capitalism are promoted in less advanced member states.

The EU shall have exclusive competence only in the following areas:
• customs union;
• the establishing of the competition rules necessary for the functioning of the internal market;
• monetary policy for the Member States whose currency is the euro;
• the conservation of marine biological resources under the common fisheries
policy;
• common commercial policy

(Neo) functionalism and (liberal) intergovernmentalism are the two dominant approaches analyzing the impact of the European integration on the member states. While (liberal) Intergovernmentalists put the states at the center of EU policy-making, (neo) functionalist emphasized the increased role of supranational and domestic groups.

The Disadvantages of Regional Integration
? Loss of sovereignty and national independence.
? Loss of national identity as laws, regulations, and standards are harmonized.
? Reduced power of national governments.
? The creation of a new level of distant and impersonal ‘big government’ in Brussels.
? Too little reference to public opinion regarding key decisions on integration.
? Increased competition and job losses brought by the removal of market protection.
? Progressive states are handicapped as standards are reduced to help integrate state with lower standards.
? Increased drug trafficking, crime and illegal immigration arising from the removal of border controls.
? Problems related to controversial initiatives such as the Common Agricultural Policy

The new intergovernmentalism is also characterized by member states’ preference to delegate authority to “de novo” bodies which are located at the interface of supranational and intergovernmental governance mechanisms and numerous regulatory and executive agencies. These bodies often enjoy considerable autonomy by way of executive or legislative power and have a degree of control over their own resources.

Uwe Puetter associates the new intergovernmentalism with three arguments: the integration paradox, deliberative intergovernmentalism as a new form of EU governance in highly prominent areas of EU activity such as economic governance and foreign and security policy and that prevails over the classic Community method, and a new phase in the European integration.