Europe and the Single Market

1
Europe and the Single Market

• Originally the EU was envisaged as a market where
  goods, services, people and money could move
  freely. This would be done via implementing
  common economic policies. 1992 was the original
  date for this to be achieved, this has long
  passed and we still do not have a fully single
  market. Why is this?
• Technical barriers
• Labour mobility
• Legal differences
• Fiscal barriers
• One key advantage of unification of economic
  policy is the gains reaped via economies of
  scale. Other advantages include reduced admin
  costs (and therefore a fall in price of traded
  goods), increased employment (as if prices fall
  demand will rise and therefore stimulate output
  and hence create jobs) and also as production
  will rise it will lead to a general increase in
  prosperity.
• For unification, taxes would need to be
  harmonised, European politicians say this is
  vital, as tax competition is harmful. BUT some
  say its beneficial to the UK as it leads to more
  jobs, investment and productivity compared to
  higher tax regimes in other parts of Europe.

2
EMU and the introduction of the Euro

• As already known, on the 1st Jan 1999 eleven
  member countries joined a single currency, fixing
  their exchange rates to the Euro. Notes and coins
  followed on 1st Jan 2002.
• The European central bank is responsible for the
  monetary policy of these Euro zone countries,
  which includes setting their common interest
  rates.
• The single currency should sharpen competition in
  Europe in 3 important ways
• Cheaper transaction costs As firms can trade
  without changing currencies and the risks that
  this entails.
• Stable exchange rates this will make firms
  decision making simpler.
• Transparent price differences this will sharpen
  competition

3
The Social Chapter

• This is part of the Maastricht Treaty signed by
  the then 12 member states in 1992. Its aim was to
  harmonise work conditions throughout the union
  i.e. it aimed to guarantee EU workers basic
  rights
• The right to join a trade union.
• The right to take industrial action.
• The right to be consulted and informed about
  company plans.
• Equal rights for men and women.
• The right to a minimum wage and a maximum working
  week of 48 hours.
• The right to a minimum of 4 weeks holiday per
  annum.
• The chapter also had provisions for redundancies
  and it seeks to encourage employee participation
  and consultation.
• In 1993, the UK opted out fearing extra costs
  on UK business.

4
Opportunities in Central ad Eastern Europe

• The fall of communism has had a huge impact,
  especially as many former communist states
  attempt to embrace capitalism and aim to join the
  EU.
• Central and Eastern Europe has a population of
  approximately 100m, large potential resources,
  huge agricultural sector, half their imports are
  bought from the EU and it accounts for 19 of EU
  exports (this figure is rising).
• These statistics offer huge business
  opportunities for EU firms.
• How have EU firms tried to take advantage?
• Joint Ventures
• Technical Co-operation
• Selling Expertise
• Dangers of trading with the East
• Eastern European incomes are 12 of the EU
  average therefore they have very little
  disposable income.
• Political instability
• Bureaucracy and corruption