Economic and monetary union

Short description: Trade bloc with a common tariff and currency

Part of a series on

World trade

Policy

* Import
* Export
* Balance of trade
* Trade law
* Trade pact
* Trade bloc
* Trade creation
* Trade diversion
* Export orientation
* Import substitution
* Trade finance
* Trade facilitation
* Trade route
* Domestic trade
* Tax

Restrictions

* Trade barriers
* Tariffs
* Non-tariff barriers
* Import quotas
* Tariff-rate quotas
* Import licenses
* Customs duties
* Export subsidies
* Technical barriers
* Bribery
* Exchange rate controls
* Embargo
* Safeguards
* Countervailing duties
* Anti-dumping duties
* Voluntary export restraints

History

* Mercantilism
* Protectionism
* Laissez-faire
* Free trade
* Economic nationalism
* Economic integration

Organizations

* International Monetary Fund
* International Trade Centre
* World Trade Organization
* World Customs Organization
* International Chamber of Commerce

Economic integration

* Preferential trading area
* Free-trade area
* Currency union
* Customs union
* Single market
* Economic union
* Fiscal union
* Customs and monetary union
* Economic and monetary union

Issues

* Intellectual property rights
* Smuggling
* Competition policy
* Government procurement
* Outsourcing
* Globalization
* Fair trade
* Trade justice
* Emissions trading
* Trade sanctions
* War
* Currency war
* Trade costs
* Trade war
* Trade and development

Lists

* Imports
* Exports
* Tariffs
* Largest consumer markets
* Leading trade partners

By country

* Trade mission
* Trading nation
* United States
* Argentina
* Pakistan
* Romania
* Vietnam
* India

Theory

* Comparative advantage
* Competitive advantage
* Heckscher–Ohlin model
* New trade theory
* Economic geography
* Intra-industry trade
* Gravity model of trade
* Ricardian trade theories
* Balassa–Samuelson effect
* Linder hypothesis
* Leontief paradox
* Lerner symmetry theorem
* Terms of trade

* v
* t
* e

An economic and monetary union (EMU) is a type of trade bloc that features a combination of a common market, customs union, and monetary union. Established via a trade pact, an EMU constitutes the sixth of seven stages in the process of economic integration. An EMU agreement usually combines a customs union with a common market. A typical EMU establishes free trade and a common external tariff throughout its jurisdiction. It is also designed to protect freedom in the movement of goods, services, and people. This arrangement is distinct from a monetary union (e.g., the Latin Monetary Union), which does not usually involve a common market. As with the economic and monetary union established among the 27 member states of the European Union (EU), an EMU may affect different parts of its jurisdiction in different ways. Some areas are subject to separate customs regulations from other areas subject to the EMU. These various arrangements may be established in a formal agreement, or they may exist on a de facto basis. For example, not all EU member states use the Euro established by its currency union, and not all EU member states are part of the Schengen Area. Some EU members participate in both unions, and some in neither.

Territories of the United States, Australian External Territories and New Zealand territories each share a currency and, for the most part, the market of their respective mainland states. However, they are generally not part of the same customs territories.

## Contents

* 1 History
* 2 Processes in the European EMU
* 2.1 Roles of national governments
* 3 List of economic and monetary unions
* 3.1 Proposed
* 3.2 Previous EMUs
* 4 See also
* 5 References
* 6 Further reading
* 7 External links

## History

Several countries initially attempted to form an EMU at the Hague Summit in 1969. Afterward, a "draft plan" was announced. During this time, the main member presiding over this decision was Pierre Werner, Prime Minister of Luxembourg.[1] The decision to form the Economic and Monetary Union of the European Union (EMU) was accepted in December 1991, which later became part of the Maastricht Treaty (the Treaty on European Union).[2]

## Processes in the European EMU

The EMU involves four main activities.[3]

The first responsibility is to be in charge of implementing effective monetary policy for the euro area with price stability. There is a group of economists whose only role is studying how to improve the monetary policy while maintaining price stability. They conduct research, and their results are presented to the leaders of the EMU. Thereafter, the role of the leaders is to find a suitable way to implement the economists' work into their country's policies. Maintaining price stability is a long-term goal for all states in the EU, due to the effects it might have on the Euro as a currency.

Secondly, the EMU must coordinate economic and fiscal policies in EU countries. They must find an equilibrium between the implementation of monetary and fiscal policies. They will advise countries to have greater coordination, even if that means having countries tightly coupled with looser monetary and tighter fiscal policy. Not coordinating the monetary market could result in risking an unpredictable situation. The EMU also deliberates on a mixed policy option, which has been shown to be beneficial in some empirical studies.[4]

Thirdly, the EMU ensures that the single market runs smoothly. The member countries respect the decisions made by the EMU and ensure that their actions will be in favor of a stable market.[5]

Finally, regulations of the EMU aid in supervising and monitoring financial institutions. There is an imperative need for all members of the EMU to act in unison. Therefore, the EMU has to have institutions supervising all the member states to protect the main aim of the EMU.

### Roles of national governments

The economic roles of nations within the EMU are to:

* control fiscal policy that concerns government budgets
* control tax policies that determine how income is raised
* control structural policies that determine pension systems, labor, and capital-market regulations

## List of economic and monetary unions

* Economic and Monetary Union of the European Union (EMU) (1999/2002) with the Euro for the Eurozone members
* de facto the sovereign states in the OECS Eastern Caribbean Currency Union with the East Caribbean dollar in the CSME (2006)[6]
* de facto Switzerland–Liechtenstein[7]

### Proposed

Community  | Currency  | Region  | Target date  | Notes

|
|
|
|

Economic and Monetary Community of Central Africa (CEMAC)  | Central African CFA franc | Africa  |  | Not yet functioning common market
West African Economic and Monetary Union (UEMOA)  | West African CFA franc | Africa  |  | Not yet functioning common market
Gulf Cooperation Council (GCC)  | Khaleeji | Middle East  |  | Possibly gold backed, but postponed due to the 2008 financial crisis.
East African Community (EAC)  | East African shilling | Africa  | 2015  | To be used by the future East African Federation
Caribbean Single Market and Economy (as part of the CARICOM)  |  | Latin America
/Caribbean  | 2015  | To supplement the OECS Eastern Caribbean Currency Union
Southern African Customs Union (SACU)  | South African Rand  | Africa  | 2015  | de facto for the CMA member when the SADC economic union is established
Southern African Development Community (SADC)  | South African Rand
(interim proposal)  | Africa  | 2016  | To supplement or succeed the CMA and Southern Africa Customs Union
South Asian Association for Regional Cooperation |  | South Asia  |
Union of South American Nations (UNASUR)  | Latino[8] | Latin America
/Caribbean  | 2019  |
Economic Community of Central African States (ECCAS)  |  | Africa  |  | To supplement the Economic and Monetary Community of Central Africa (CEMAC)
Economic Community of West African States (ECOWAS)  |  | Africa  | 2020  | To succeed UEMOA and WAMZ
African Economic Community |  | Africa  | 2028  | See African Monetary Union
Union State of Russia and Belarus  | Russian ruble | Europe  |  |
Arab League | Arab Dinar  | Arab states  |  | Arab Dinar has been proposed ever since the creation of the Arab Monetary Fund, expected for serious plans of doing so, after the creation of the proposed Arab Union.
Eurasian Economic Union | Altyn  | Eurasia  | 2025  | Kazakhstani President Nursultan Nazarbayev had first proposed, in 2009, the creation of a common noncash currency called "yevraz" for the Eurasian Economic Community. It would have reportedly helped insulate the countries from the global economic crisis.[9] In 2012, the idea of the new joint currency found support from Vladimir Putin and Dmitry Medvedev and by 2014 proposals were drafted in Eurasian Commission documents for the establishment of a Eurasian Central Bank and a common currency to be called the altyn which is to be introduced by 2025.[10]

### Previous EMUs

Stages of economic integration around the World (each country colored according to the most integrated form that it participates with):

Economic and monetary union (CSME/EC$, EU/€, Switzerland–Liechtenstein/CHF)

Economic union (CSME, EU

–UK, EAEU, MERCOSUR, GCC, SICA)

Customs and monetary union (CEMAC/XAF, UEMOA/XOF)

Common market (EEA–Switzerland, ASEAN[dubious - discuss])

Customs union (CAN, EAC, EUCU, SACU)

Multilateral Free Trade Area (CEFTA, CISFTA, COMESA, CPTPP, DCFTA, EFTA, GAFTA, USMCA, SAFTA, AANZFTA, PAFTA, SADCFTA)

v * d * e

* Monetary union of the Belgium–Luxembourg Economic Union (1922–2002), superseded by the European EMU.

## See also

* North American Union and North American Currency Union (Amero)[11]
* Pacific Union (one proposal for Australian dollar)

## References

1. ↑ "The Hague Summit (1–2 December 1969): completion, enlargement, deepening - Pierre Werner and the European integration process: from the Schuman Plan to the Fontainebleau Summit - CVCE Website". https://www.cvce.eu/en/education/unit-content/-/unit/d1cfaf4d-8b5c-4334-ac1d-0438f4a0d617/01b8a864-db8b-422c-915e-a47d5e86593e.
2. ↑ "What is the Economic and Monetary Union? (EMU)". https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/economic-and-monetary-union/what-economic-and-monetary-union-emu_en.
3. ↑ "How the Economic and Monetary Union works". https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/economic-and-monetary-union/how-economic-and-monetary-union-works_en.
4. ↑ Blinder, Alan (September 1982). "Issues in the Coordination of Monetary and Fiscal Policy". National Bureau of Economic Research (Cambridge, MA). doi:10.3386/w0982.
5. ↑ pub/com/factsheets/emu/en/ "The EU and economic and monetary union". http://publications.europa.eu/web pub/com/factsheets/emu/en/.
6. ↑ The states participating in both initiatives are Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines.
7. ↑ Single market through participation in the internal market of the European Union, customs union since 1924, informal currency union since 1920.
8. ↑ Proposed by Ecuador's President Rafael Correa on December 15, 2007
9. ↑ "Kazakhstan Suggests a New Currency - News". The Moscow Times. 12 March 2009. http://www.themoscowtimes.com/news/article/kazakhstan-suggests-a-new-currency/375212.html.
10. ↑ "Russia, Kazakhstan and Belarus to have new joint currency". 10 April 2014. http://english.pravda.ru/russia/economics/10-04-2014/127325-russia_kazakhstan_belarus_new_currency-0/.
11. ↑ Not currently on any political agenda, based mostly off conspiracy theories.

## Further reading

* Acocella, N. and Di Bartolomeo, G. and Tirelli, P. [2007], ‘Fiscal leadership and coordination in the EMU’, in: ‘Open Economies Review’, 18(3): 281–9.
* Bergin, Paul (2008). "Monetary Union". in David R. Henderson. Concise Encyclopedia of Economics (2nd ed.). Indianapolis: Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267. http://www.econlib.org/library/Enc/MonetaryUnion.html.

## External links

* African monetary union inches closer
* United States of Southern Africa?
* East Africa's first steps towards union
* West Africa opts for currency union
* Gulf States push for single currency
* 'Limited gains' from Gulf single currency
* Do the Mercosur Countries Form an Optimum Currency Area?
* Argentina plans monetary union
* Economist – Antipodean currencies (Australia and New Zealand)
* Three Perspectives on an Australasian Monetary Union
* Reasons for the collapse of the Rouble Zone
* In Search of the "Ruble Zone"
* OECD Development Centre – the Rand Zone
* A single African currency in our time?
* South Africa proposes adoption of the rand as provisional SADC common currency

* v
* t
* e

Forms of economic integration

Trade bloc|

* Preferential trading area
* Free-trade area
* Economic partnership
* Passport-free zone
* Single market

Economic union|

* Customs union
* Monetary union
* Customs and monetary union
* Economic and monetary union
* Complete economic integration

Shared policies|

* Fiscal union
* Social union
* Political union

Theory|

* Economic integration effects
* Friction of distance
* Harmonisation of law
* Theory of the second best

Regions|

* Europe
* Latin America
* Middle East
* North America

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