the EU Flashcards
(7 cards)
Explain the nature and purpose of the European Union (EU) and the single European market
the aims of the single market is to encourage competition, improve efficiency, raise quality and help cut prices
members of the US have access to the single market and approx 500 million potential customers, generates over 20% global GDP
features
- no trade barriers
- free movement of goods, capital and labour
- consistent standards
- common external tariff
Explain the impact of the EU on businesses including free movement of goods, labour and capital, legislation, regulations and standards
Positive Impacts:
Free movement of goods: No tariffs/quotas → lower costs for exporters/importers.
Free movement of labour: Access to a wider talent pool; addresses skills shortages.
Free movement of capital: Easier to invest and raise finance across borders.
Regulation harmonisation: One set of product standards → reduces compliance complexity.
Challenges:
Regulatory compliance costs: Businesses must meet EU standards (e.g. environmental, safety, employment law).
Increased competition: UK firms face strong EU competitors.
potential creation of monopolies, expoliting customers
Explain what is meant by the single European currency (the euro) and the Eurozone
extension of the EU, expanded integration, common monetary and fiscal policy
- single currency
- an independent central bank
- the stability and growth pact
Evaluate the costs and of the single European currency to businesses and their stakeholders
Member states give up the ability to set their own interest rate. They have to accept the ECB’s rate even if it is not suitable for the current economic conditions of their country.
Lose the ability to depreciate the currency during a recession. By reducing a currencies value, it makes exports more competitive and can stimulate economic growth.
The conversion costs are high with all prices and ICT systems having to be changed across from the domestic currency to the Euro.
Fluctuations in the exchange rates: Businesses would no longer benefit from favourable changes in currency; a strong pound favours the importer.
Change over costs: It has been estimated that it would cost £36bn to change over from using sterling to the euro (converting machines taking money, cash tills, changing price lists and so on). This is nearly the amount spent on education in the UK in a year.
Loss of independence of monetary policy: Interest rates would be set by the European Central Bank; problems in one country could affect the economies of all the other countries. This could have an impact on the housing market, as the UK has a high proportion of homeowners who are sensitive to interest rate movements.
Convergence issues: Countries who wish to join the Eurozone must achieve certain economic criteria, so that economies are ‘converged’ to some degree. This may be achievable in the short term but may hide underlying structural issues in an economy which could add costs in future years.
Fiscal policy constraints: The Stability and Growth Pact requires that governments strictly control their budget deficits. By implication, this creates limitations for a member state when attempting to meet each country’s own economic objectives.
Evaluate the benefits of the single European currency to businesses and their stakeholders
There are no currency conversion costs when trading with other members of the Eurozone.
Exchange rate fluctuations do not impact members of the Eurozone who trade with one another.
Greater price transparency between Eurozone members, meaning that consumers are better informed.
It encourages inward investment given cheaper transaction costs between Eurozone members.
Lower transaction costs: There would be no need to exchange money when dealing with EU countries; exporting and importing would be made easier and cheaper.
Trade creation: European businesses would be more likely to trade with UK companies, as no currency conversions would be necessary and there would be a reduction in trade barriers.
Competition: The additional trade creation also encourages greater competition within euro member states, which can help reduce prices and promote efficiency.
Trade diversion: 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.
Evaluate the impact to UK businesses of being a member of the EU and the Eurozone
Free access to the Single Market → lower costs, more customers.
Greater investment due to market access and regulatory stability.
Firms could recruit easily across EU nations.
Standardised rules → simpler compliance for pan-European operations.
Drawbacks of Membership:
Had to follow EU rules (e.g. working time directive, VAT rules).
Limited control over immigration and trade policy.
Membership fees to the EU budget.
Evaluate the impact to UK businesses of not being a member of the EU and the Eurozone
For- allows UK regain full control over laws and regulations
Ability to set own immigration policies
Can negotiate trade agreements with countries worldwide, potentially enhancing trade relationships with emerging economies and reducing reliance on the EU market
Against-
- Costs and delays for businesses, trade barriers means UK’s imports and exports are expected to be significantly lower in the long term compared to if had remained in the EU
- UK have lost benefit of collective bargaining power in international affair
- MNC might not invest in the UK
- Increased compliance costs for businesses that exoirt ti EU must meet 2 separate sets of standards and regulations
- worsen skills shortages for uk businesses
- higher exposure emerging markets
Fishing industry…
UK fishers especially those exporting to the EU, increased red tape e.g. custom declarations, border checks causing delays and seafood shipments going bad before reaching EU markets
Paperwork now takes between 2-3 days by which time the fresh fish is no longer fresh
