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We argue that European integration is provoked and sustained by the development of causal connections between three factors: transnational exchange, supranational organization, and European Community (EC) rule-making. We explain the transition, in any given policy sector, from national to intergovernmental to supranational governance, in two ways. First cross-border transactions and communications generate a social demand for EC rules and regulation, which supranational organizations work to supply. We thus expect that Community competences will be unevenly constructed, both across policy sectors and over time, as a function of the intensity of these demands. Second, once EC rules are in place, a process of institutionalization ensues, and this process provokes further integration. Although we recognize the importance of intergovernmental bargaining in EC politics, our theory is not compatible with existing intergovernmental theorizing.

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