European Union Flashcards
(17 cards)
Objectives of the EU
*Promote peace, values and well-being of its citizens
*Ensure freedom, security and justice
*Foster economic, social and territorial cohesion
*Establish an internal market with free movement
*Combat discrimination and promote equality
*Uphold sustainable development and environmental protection
Characteristics of EU
*Supranational governance structure
*Shared currency (Euro) in 20/27 countries
*Common policies on trade, agriculture, competition and environment
*Own institutions: European Parliament, European Commission, Council of EU
*Free movement of people, goods, services and capital (Four Freedoms)
Purpose of the EU
*Unite Europe economically and politically
*Prevent conflict through integration
*Enhance global influence and economic strength
*Promote democracy and human rights
*Facilitate cooperation in areas like climate, defence and technology
Advantages of EU
*Economic stability and growth through a single market
*Easier travel and work across member countries
*Access to EU funding for infrastructure, research etc.
*Stronger political and global voice
*Peace and stability in the region
Disadvantages of EU
- Loss of national sovereignty in some areas
*Uneven economic benefits across members
*Bureaucratic complexity and slow decision-making - Migration and border control challenges
Explain the European Union
~The single market operates on the basis of ‘…one territory without any internal borders or other regulatory obstacles to the free movement of goods and services’
~ The main aims of the single market are to encourage competition and trade, improve efficiency, raise quality and help to cut prices
~ Members of the EU have access to a single market and approximately 500m potential customers. The single market generates over 20% of global GDP
The european union
The European Union was formed in 1993 to create a Single European Market where there would be:
* Free trade in terms of goods and services and factors of production - land, labour and capital.
* Common technical standards (such as metric units and safety), harmonisation of taxes (such as VAT), a reduction in the number of customs posts and the ending of duty-free sales.
* A common external tariff on imports of goods and services from outside (that is, countries wishing to sell goods to any of the EU countries would have to pay an import tax, which would be the same amount for any EU country).
* Common policies on industrial social affairs, defence and health.
* A single European currency (the euro).
Main features of EU
- No barriers to trade between member states. This means no quotas (limits on number, value
or quantities) on imports and exports. - No tariffs (taxes on imports and exports) on goods and services traded within the single market.
- Free transfer of resources from one country to another, including capital and labour.
- Consistent standards from one country to another (a good, service or professional qualification that is valid for sale or for use in one member state, is free to be sold or used in all member states).
- Common external tariff on imports into the EU.
Why is the single market not yet complete
- Protection of industries for political or economic reasons. Protectionism is still being practised throughout Europe. Subsidies are paid by governments to uneconomic and noncompetitive industries.
- Problems with harmonisation of standards. Harmonisation means the bringing together of different standards that exist within Europe.
This is a difficult and complex task, made more so by countries fighting to protect their national interests. - Cost implications. For many industries, there are high costs to be met in trying to achieve the
harmonised standards set by Europe.
Advantages of the single market for consumers and workers
- Increased wealth as trade and competition increases. Lower prices means higher ‘real income’, and increased economic activity leads to more employment.
- Increased consumer choice. There is access to all manufacturers and service providers. Why not take out a mortgage or loan with a German
bank if the interest rates offered are lower? - Greater employment opportunities. For those with ‘marketable skills’ – employment
anywhere in Europe is available to anyone living in one of the 28 member states. - EU competition law has increased choice and
forced down prices.
Drawbacks to UK business of the expansion of the EU
- Greater competition is likely to appear in some industries, such as tourism, as holidays in some of the new member states are cheaper than holidays in the UK.
- The UK’s agricultural industry may be threatened by a surge of cheap imports from the new member states – the productive
potential of Poland, for example, is extremely large. - Jobs may be lost in the UK economy where labour is relatively expensive as the competition from the east increases.
- There are even more languages that need to be taken into account.
- There are more currencies to deal with as the newly joined countries do not adopt the euro
immediately. - There are greater distances to transport goods as the countries likely to join the EU are in Eastern Europe.
- UK businesses are under pressure to develop strategies to sell their products in 27 diverse
countries.
Advantages of the single market for businesses
- Increased levels of demand results from access to a larger marketplace.
- Lower costs through increased economies of scale.
- Larger markets results in larger scale production, lowering average costs of output.
- Freeing of capital markets.
- Businesses will be able to access the best finance and capital-raising deals throughout Europe.
- Greater employer access to labour markets – workers from all member states are potential employees.
- Growing wealth in poorer parts of the single market could drive future demand.
- Single market legislation has deregulated markets, increasing opportunities for competitive businesses to enter these markets.
Benefits of UK businesses of not being a member of the EU
- As the UK would not be tied to EU trade rules this allows the UK government to set up new trade deals with other trading blocs or countries which may be more beneficial to UK businesses.
- The pound (£) is weaker due to business uncertainty therefore goods bought from the UK in pounds seem relatively cheap to foreign markets. As a result, this is likely to benefit businesses in the UK focused on exporting.
- As the UK will be in a position to impose tariffs and quotas from any trading nation, rather than operating
to EU regulations, this may benefit UK businesses by restricting or increasing the price of what may
otherwise be cheap imports. This is likely to improve the position of UK goods within the market.
Drawbacks of UK businesses of not being a member of the EU
- However, tariffs and quotas may be imposed on UK goods being exported to the EU where free trade would have previously been in place. This can reduce demand for UK goods and as a result lead to a reduction in revenue for UK businesses.
- Reduction in available labour can also be a problem for UK industries, such as hospitality, which rely on a large quantity of unskilled labour. Whereas these staff may have previously been taken up by an immigrating population from the EU, the removal of free movement of labour between the EU and UK would cause a staff shortage in such industries. This could result in either a reduction in the quality of
work being carried out or an increase in the cost of employing staff, as higher wages need to be paid in order to attract UK workers with the same skills to these positions. - No free movement of capital may be an issue for UK businesses. As EU businesses were previously allowed to invest in UK businesses without penalty, this may not necessarily be the case after Brexit. This may reduce investment in the UK and as a result reduce the ability to carry out research and development. If this leaves UK business in a weaker strategic position this could become a long-term disadvantage for UK businesses
Define the eurozone
Those countries within the European Union who have adopted the Euro as their
currency.
The implications for UK businesses of the UK NOT being in the Eurozone:
- It is more difficult trading with EU countries as currencies have to be exchanged, which costs money in commission.
- It makes planning difficult for companies exporting and importing to the EU as the exchange rates fluctuate on a daily basis.
- Non-EU companies, such as Toyota and Nissan, have warned that they will move to another country that is in the Eurozone if the UK does not join the Euro.
- European businesses are less likely to deal with UK businesses due to transaction costs and exchange rate fluctuations.
- Prices are not as transparent as they have to be converted from sterling to Euros, so prices can be higher in the UK than in Eurozone countries.
- UK interest rates are set by the Bank of England not the European Central Bank – they reflect the UK’s economy and not that of all of the EU.
- Businesses can benefit from a fluctuating exchange rate – a strong pound means imports
are cheaper. - The Euro may become the working currency of businesses in the UK despite us not being members – many large retailers and banks already quote prices in sterling and Euros. UK businesses would gain the advantages of being Eurozone members without actually joining
The implications for UK businesses if the UK were to join the Eurozone:
- There would be no need to exchange money when dealing with EU countries – exporting and importing would be made easier and cheaper.
- Businesses exporting to or importing from EU countries would find planning much easier as they would not have to take into account exchange rate fluctuations.
- European businesses are more likely to trade with UK companies as there are no currency conversions necessary.
- There would be more competition as there is price transparency throughout the Eurozone – prices would have to be cheaper.
- Interest rates would be set by the European Central Bank – problems in one country could affect the economies of all the other countries.
- It has been estimated that it would cost £36bn to change over from using sterling to the Euro (converting machines taking money, cashtills, changing price lists and so on) – this is nearly the amount spent on education in the UK in a year.
- Businesses would no longer benefit from favourable changes in currency (for example, a strong pound favours importers).
