This paper begins by locating the EU in the classical definition of the stages of economic integration. This uncovers the central problem that confronts analysis of the EU: how is deep economic integration achieved and governed in the absence of centralised political authority? In Section 3, we then compare the EU with two other types of an economic arrangement: multi-lateral trade liberalisation and the management of a domestic economy, particularly a continental federation. The EU lies between the international and the domestic, sharing certain characteristics of each. It is emphasised that the preservation of an “international” dimension frequently requires stronger, rather than weaker, EU rules and more, not less, EU competence. Section 4 examines some difficult issues concerning the evolution and significance of the internal market. Should the internal market be understood as the eventual implementation of a blueprint agreed in the Treaty of Rome, or as the novel outcome of the Community’s particular evolution? Why is the European internal market so prominent, given the constraints on the EU’s powers and the emergence of globalisation? Section 5 characterises Europe’s emerging economic policy, offers an explanation for its unusual nature and discusses alternative views of its effectiveness and potential. In section 6, we summarise the wider argument of which this paper forms a part.