There are two views of the European Union which appear at initial reading to be different from each other. The first is a vision of a free‐trading group, a Europe of nations, and the second is a vision of a European nation‐state. In the calculations of gains and losses, the former is often regarded as a problem in economics and the latter is treated as a problem in politics. Argues that this dichotomy is erroneous. The degree of liberalization in trade between nations is limited by the degree of residual sovereignty left in the nation‐states. Institutional differences are accentuated if the economic and political institutions of member countries do not converge. These institutional differences are often ignored in calculations about the gains from integration in pronouncements emanating from Brussels. Illustrates the above point by raising issues which are specific to trade in financial services.
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