Dn the 1970s, France taxed Spanish imported products; Spanish workers had to go through the National Immigration Office to find work in France; economic interactions between the two countries fluctuated with variations in the exchange rate between the franc and the peseta. A few decades later, in 2002, Spanish products sold in French supermarkets were not subject to any customs taxes, workers could freely move from one country to another, and we all used the same currency. Much has changed in Europe since the signing of the Treaty of Rome in 1957.
Today, however, there is some dissatisfaction with the European Union (EU). The Euroscepticism of the 2010s resulted in the UK leaving the EU. Governments and populations sometimes have the feeling that European regulations create more barriers than they remove. So sometimes the average European citizen is tempted to cast an envious glance across the Atlantic, wondering what an integrated Europe would look like. But is the European Union really less integrated than the United States?
One of the important questions to be answered at this stage is how to assess the degree of integration of each of the two unions. To measure border frictions, the usual method of international trade economists is to compare economic interactions subject to friction – cross-border interactions – with those not subject to friction – interactions internal to a country (“interactions within a country”). National Borders Matter: Canada-US Regional Trade Patterns », John McCallum, The American Economic Review, No. 85/3, 1995).
Negative effect of the border
The logic of this approach is easy to grasp. We measure the volume of trade between Toulouse and Bordeaux, and compare it with the volume of transactions between Toulouse and Barcelona. Modern econometric techniques allow us to make such comparisons taking into account differences in distance, language and other bilateral factors. What emerges from this comparison is the (negative) effect of the Franco-Spanish border on trade.
This approach makes it possible to compare the level of integration of the European Union with that of the United States (“ The United States of Europe: A Gravity Model Evaluation of the Four Freedoms »Keith Head and Thierry Mayer, The Journal of Economic Perspectives, No. 35/2, 2021). For each union, the authors collect data on goods flows, mergers and acquisitions and worker migrations. Each flow is measured twice: within borders and from one country to another. For the United States, they take into account state borders; for the European Union, the borders of the Member States. This study reached, “with some surprise”to the conclusion that, according to numerous indicators, the European Union has reached or exceeded the level of openness observed within the United States.
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