Eu Membership Advantages And Disadvantages To Uk Economy Economics Essay
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Published: Mon, 5 Dec 2016
Creating a level playing field for trade across Europe requires harmonised legislation in many areas of work and life, from social policies to health and safety legislation to the regulation of advertising. What looks fair to some can seem heavy-handed to others. Getting the right balance demands constant constructive engagement. Successive British governments have had little doubt that the benefits to the UK economy outweigh any problems, and make it important to continue to push forward our role in the EU.
The EU has cemented peace between European nations after centuries of war. It has used that peace to build the largest single market in the developed world, bringing greater prosperity to all member states (including the UK). When the whole of Europe speaks together we have more clout on the world stage.
Looking out in the world today we can see strong growing economies such as China and America, both have millions of inhabitants and strong currencies. With the EU membership in place and more joining the UK will stand a greater chance against these two large forces. We are stronger in trade negotiations if we negotiate as one economic bloc, and diplomatic initiatives, designed to improve our security, can be more effective with the support of European partners.
As well as economic benefits joining countries together in union with each other will hold many political benefits. It’s founding is a step towards European integration, to prevent war in the union. It’s a well known fact that countries that trade effectively together don’t wage war on each other, this means peace throughout Europe and beyond (we hope). Nato and the alliance with the United States remains the guarantee of defence for most European countries.
Access to EU Funds
Extra funds and grants are available to businesses in order to improve economic welfare in high unemployment and deprived areas. The European Social Fund provides funds for vocational training, helping to create jobs. The programmes work through direct spending on transport and other infrastructure, and on training people and helping them learn new skills. Several parts of the UK have benefited from these funds, including Northern Ireland, the Highlands and Islands of Scotland, Cornwall and the Scilly Isles, Merseyside, South Yorkshire, and West Wales and the Valleys.
Freedom to trade and work
The single European market is the world’s largest free trade area. Europe’s businesses enjoy a ‘home’ market of 490 million people, selling goods and services without tariffs or other trade restrictions, and to common safety standards. The market has created more competitive services, greater choice and lower prices, supporting wealth and job creation. It has lowered business costs, and opened new opportunities. 67% of UK trade is within the EU (compared to 16% for the USA), and the UK benefits from inward investment from companies within the EU.
For many it has also increased the burden of red tape. Such regulation is one of the areas where Britain is looking for improved performance. The Commission’s ‘better regulation’ agenda is starting to see results, assessing the impact of new regulations, simplifying and even cancelling existing ones. Some may argue that the main benefit of the EU is free trade. Some argue back that the UK could retain the benefits, even if it left. For example, Switzerland is not in EU but benefits from EU trade.
Co-ordinated economic policies
The EU provides a forum where member countries can share best practice and learn from others’ experiences helping to ensure that European businesses can compete effectively in global markets developing the right infrastructure for a successful modern economy.
Although some may favour the new infrastructures others find them less appealing or find them-selves less suited to the change. Like the UK government favours adopting the Euro in principle, but will only join when the economic conditions are right. Others still disagree the Euro should be adopted at all.
Freedom, security and justice
EU member countries are working together to create an area of freedom, security and justice across Europe. All of the member countries, except the UK and Ireland, have agreed to scrap their border controls with each other. They allow citizens to travel freely without checks at the internal borders. The UK and Ireland have a right to choose whether to sign up to EU laws on border controls, immigration and asylum. The UK and Ireland play a proactive role with other member states in working to tackle illegal immigration and abuse of the asylum system.
Increased Immigration as a single market requires free movement of labor. This has led to an inflow of immigrants from Eastern Europe; this has placed a strain on housing and other amenities in the UK.
Common Agricultural Policy (CAP)
The CAP has been reformed, but arguably it still is an inefficient method of subsidizing the declining agricultural sector. For a long time the EU has maintained target prices for agricultural goods above the market price; this has various disadvantages:
Higher prices for consumers
Higher Tariffs on Imports required, this has been a stumbling block to trade
High prices encouraged oversupply. EU had to buy surplus that was created.
Expensive for EU Taxpayer. – CAP budget accounts for nearly 50% of total EU budget. It costs UK £14 billion per year.
The CAP alone is 50% of the EU budget, and costs the UK £14 billion per year, with most of this money going to French farmers. The EU subsidises farmers, but penalises them for growing too much which leads to higher food prices. The UK has a relatively small but efficient agricultural sector; therefore it benefits the least from CAP.
Higher Utility Prices and EU Law
EU law allows foreign companies to buy UK utility companies, who then said to overcharge us. The EU’s high renewable energy targets will cost British families £750 in higher energy prices. Water bills are also rising by 20%, because of new EU regulations. Laws being imposed on UK businesses and citizens from decisions made in Brussels, which may benefit some member states but have a negative impact on the UK.
Action on the environment
On the environment, it is vital to work together to tackle serious common problems that cross national borders, such as pollution. The EU is strongly committed to sustainable development and the Kyoto agreement on tackling climate change. Action to tackle environmental problems can create jobs and benefit the economy, for example by encouraging companies to make renewable-energy technologies like solar panels, hydrogen cells and wind turbines. This will help make the EU a leader in a growing global market.
Explore one area of economic activity in the UK which EU membership has and does affect.
The Carphone warehouse (CPW) was founded in 1989 to bring mobile services to consumers. They have grown from a handful of stores operating exclusively in the UK, to a European-wide platform of over 1500 stores in 10 countries. The EU gives the UK access to the world’s largest single market consisting of 27 countries with over 490 million potential customers.
CPW like all UK businesses currently have access to trade freely in all of the 27 member states. Thanks to the EUs free trade area and a customs union the Single market works for businesses by ensuring that everyone is competing on a level playing field and able to move resources freely amongst member states. The EU promotes free trade among member states while acting as a protectionist bloc against the rest of the world.
The customs union of the EU:
Establishes a free trade area between states.
Erects common external tariffs to charge on imports from non-member countries.
Free trade areas have been achieved by the elimination of trade restrictions. Many businesses like CPW have found this to open doors into new markets. Government figures in fact show trade within the EU has risen by 30% since 1992. Without out these areas many businesses including CPW would not be able to trade goods and services with the rest of Europe (or do so as easily). As well as free trade the common market also means complete mobility of funds and labour. A British citizen has the freedom to work in any of the European countries and vicar versa. For CPW this provides the skills of labour required to compete efficiently and the opportunity to gain EU funds if necessary.
The absence of border bureaucracy has cut delivery times and reduced costs. Before the frontiers came down, the tax system alone required 60 million customs clearance documents annually: these are no longer needed. For CPW and traders alike it means there is no need to submit any tax declarations or customs declarations at all.
Increase in trade and increase in competition, these factors drive innovation and better efficiency between firms. This in turn not only benefits the consumer but improves infrastructures and communication. With IT and telecommunications improved and more accessible CPW is able to speed up distribution times for example. The development of common standards for equipment; means being able to invest and operate in distant EU countries is becoming easier and less risky.
Firms that learn to compete more effectively can benefit from economies of scale.
Open trade policy makes EU firms match the world best
Stable exchange rates cement the internal market.
Internal market rules embody a high level of environmental protection.
Basic workplace rights, will bring economic prosperity accompanied by better living and working conditions.(this however is argued y some people to be bad for business).
The road haulage market is being liberalised by eliminating bureaucratic red-tape. Shipping services between member countries are also to be provided on equal terms and as competition on air routes increases the result should be lower fares. For CPW the transportation of goods from one country to another has become easier and cheaper.
Lower fares could benefit businesses in lots of ways, through reduced costs in flights for business meetings or travelling to and from premises in the EU, reduced costs in transporting goods from one country to another and service businesses could benefit from more people travelling (tourists) due to cheaper flights. Banks and securities houses are able to provide banking and investment services anywhere in the EU allowing for numerous opportunities for growth and expansion.
Elimination of trade restrictions covers the following areas:
Physical barriers (e.g. customs inspections) on goods and services have been removed for most products. Companies have had to adjust to new VAT regimes as a consequence.
Technical standards (e.g. for quality and safety) should be harmonised.
Governments should not discriminate between EU companies in awarding public works contracts.
Telecommunications should be subject to greater competition
It should be possible to provide financial services in any country.
It should be free movement of capital within the community
Professional qualifications awarded in one member state should be recognised in others.
The EU is at taking a co-ordinated stand on matters related to consumer protection
All of these factors contribute towards a level playing ground making it fair and competitive for business to run. In all, a mutual recognition principle means that in most cases companies can do business across the EU by complying with the rules in their home Member State.
Discuss how EU institutions can benefit a UK organisation.
EU institutions can benefit UK businesses in many ways; their main aim is to ensure that everyone is competing on a level playing field. In order to achieve this “level playing field” the countries that make up the EU remain independent sovereign nations but share in the decision making process and work together to make sure legislation and regulation is carried out. The EU’s decision-making process in general and the co-decision procedure in particular involve three main institutions:
The European Parliament (EP), which represents the EU’s citizens and is directly elected by them.
The Council of the European Union, which represents the individual member states.
The European Commission, which seeks to uphold the interests of the Union as a whole.
This ‘institutional triangle’ produces the policies and laws that apply throughout the EU. In principle, it is the Commission that proposes new laws, but it is the Parliament and Council that adopt them.
The Commission and the member states will then implement them, and the Commission ensures that the laws are properly taken on board.
Two other institutions have a vital part to play: the Court of Justice upholds the rule of European law, and the Court of Auditors checks the financing of the Union’s activities.
The powers and responsibilities of these institutions are laid down in the Treaties, which are the foundation of everything the EU does. They also lay down the rules and procedures that the EU institutions must follow. The Treaties are agreed by the presidents and/or prime ministers of all the EU countries, and ratified by their parliaments.
It is The European Commission that acts as an executive of the EU. The commission is first and foremost the guardian of the treatise. It is an impartial body which sees to it that the treaties, and decisions based on them, are correctly applied. It can initiate infringement proceedings against any member state and may, if necessary refer matters to the European court of Justice. It can also impose fines on individuals or companies, notably when they act in breach of the commission’s completion rules.
The main tasks of the commission are to:
Ensure that community rules and principles of the ‘common market’ are observed.
Make policy proposals to the council of ministers
Enforce the implementation of legislation
Administer Community expenditure
EU Competition Policy
The purpose of the EU Competition Policy is to defend the SEM ‘Single European Market’, eliminating restrictive practices.
Stifling competition – (EU has rules to prevent this)
Collusion – by price fixing and cartels (article 81)
Miss allocation of resources
Protects inefficient firms
Reduces technical development
Barriers to entry of new firms
To prevent the abuse of a dominant position (article 82)
To regulate acquisitions and mergers (European Merger Control Regulation 1989)
Restrict state aid to Indigenous firms
Governments shouldn’t be bailing out lame duck businesses
State aid – Commission can prohibit if it adversely affects the EU
Ensures governments do not unfairly favour their own national businesses
The EU Social Policy
The aim of the EU Social Policy is to create a level playing field and covers legislation that covers:
Equal opportunities for men and women
Health and safety at work
(All of this contributes to the harmonisation of working rights and employment conditions)
The European Social Fund
Was setup to invest in high unemployment and deprived areas, to provide funding for vocational training and help create jobs. Businesses are able to funding to invest in deprived areas and may be eligible for further grants from governments.
This means that in most cases thanks to the EU institutions companies can do business across the EU by complying with the rules in their home Member State. This saves time and also creates a sense of standardisation in which all competition is not stifled by one country having an advantage and all domestic competition is seen as fair.
Explore the attraction of EU membership to potential members
The further enlargement of the EU benefits existing member states. With each previous enlargement the EU has emerged stronger, more confident and more capable of acting on the world stage. Importantly, an enlarged EU will help us tackle threats which cannot be confined by geographical borders, from climate change and organised crime, to the fight against terrorism. Close cooperation with our neighbours is a major force for dealing with such challenges. Whilst this explains how the existing states have benefited it should also highlight the benefits of further unity. Potential members will benefit in the same way.
Who are the candidate members?
Former Yugoslav Republic of Macedonia
Further enlargement enhances economic efficiency, drives innovation, provides funding and a level playing field for business. For example, by increasing its internal market Turkey will improve their ability to meet the challenges and opportunities presented by globalisation.
Many of the newer members of the EU have economies with much lower costs, making them attractive sources of production for businesses in this country; potential candidates will be in same situation or will benefit from work. If they join many workers from their states will come to work in the UK where wages will more than likely be higher, as well they will have access to the rest of the EUs states. For their economies membership to the EU is a means of stability growth.
An enlarged EU also invites wider and richer cultural discussion and creativity. An exciting example of this is ‘Enlarge your Vision’ – the 2010 Young Journalist Award launched by the EC’s directorate general for Enlargement.
The attraction of EU membership to potential countries can in fact be placed into two main parts:
To conclude this, it can be seen that there are many advantages for a nation to become a member of the European Union. This is supported by the Cecchini report, which gives a rise of evidence to believe that there is a significant increase in GDP as a result of the common market produced by the integration of EU Countries. Obvious outcomes of a rise in GDP will increase the standard of living in these EU countries.
Discuss the possible enlargement of the EU and the factors impacting on such possible Enlargement.
Any European country which respects the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law may apply to become a member of the Union. The Treaty on European Union sets out these conditions.
Next in order to apply they need to fulfil the economic and political conditions known as the ‘Copenhagen criteria’, according to which a potential member must:
Be a stable democracy, respecting human rights, the rule of law and the protection of minorities
Have a functioning market economy
Adopt the common rules, standards and policies that make up the body of EU law
The EU will assist potential countries in taking on EU laws and then they will provide a range of financial assistance to improve their infrastructure and economy.
The potential benefits and problems of enlarging the EU are likely to come from many directions. Ranging from the beneficial outcomes of increasing economies of scale, to the potential danger that poorer EU nations will have to receive large budgets from existing EU nations. In addition, the EU must be able to integrate new members: it needs to ensure that its institutions and decision-making processes remain effective and accountable; it needs to be in a position, as it enlarges, to continue developing and implementing common policies in all areas; and it needs to be in a position to continue financing its policies in a sustainable manner. Another key component of integration is harmonization of key areas of policy involving coordination of policies on business and competition regulation, environmental policies, taxation, and fiscal and monetary policies.
The threats to existing members are as follows:
Existing members are afraid that their markets will be swamped by cheap imports from these countries. The markets which are most at risk are politically sensitive markets, such as agriculture and textiles, where the EU has traditionally imposed high tariff barriers to protect domestic industries.
There is a fear that the contributions of rich countries to the EU budget would rise considerably following enlargement. If much poorer countries join the community, and regional and CAP payments are maintained. It is inevitable that there will be large budget transfers to the new members, paid for by existing members.
Some countries fear that enlargement will delay plans to move towards even greater economic and political union. It would be difficult, for instance to implement a single currency in 1999 if in that year three countries joined the Union.
Movements of labour and capital can also pose problems. There is a fear that capital would move to newly joined cheap labour countries whilst workers would move in large numbers from these countries to existing member countries, attracted by much higher wages .
These points indicate large potential problems of new members joining the EU. The main one possibly being the inability for nations to reach Total Economic Integration. The reason behind this may lie in the fact that different economies in the EU will require different monetary and fiscal policies. While countries like the UK may need higher interest in order for people to save money and reduce consumption in order to wane inflation, a country like Hungary would require a lower interest rate in order to increase consumer expenditure and increase aggregate demand, hence increasing GDP. These problems are likely to cause conflict among policies. It is also shown that the UK, France and Germany have a vast advantage in terms of GDP in comparison to the Czech Republic and Hungary (potential EU members). This causes concern regarding the requirement for a convergence in economies within the EU regarding monetary policy.
In June 2008, the French President Nicola Sarkozy and German Chancellor Angela Merkel said that the EU cannot enlarge beyond 27 states without reform of the institution of the current Treaty of Nice rules. Such a reform would happen if the Lisbon Treaty comes into force.
Assess how enlargement of the EU may affect UK business in general and a specific organisation in particular.
In this part of essay we will investigate how expansion of the EU will affect Carphone Warehouse in the future.
The enlargement will:
Bring down barriers to trade and business. UK companies will benefit from access to the largest single market for trade and investment in the world.
Benefit UK consumers, giving them access to a wider range of goods and services at lower prices.
Encourage GDP growth in both the candidate countries and the present EU 15.
Require institutional changes within the EU itself.
It also concludes that:
The success of enlargement depends upon candidates being properly prepared so that they enhance the single market. Effective implementation of single market rules is vital and will help the candidates compete in the EU.
Extending the single market will not just increase the number and scope of opportunities; it will also simplify doing business, as candidates introduce EU legislation and practices. This aim is reflected in the EU position that any transition periods granted to the candidates on entry should be exceptional.
EU-funded pre-accession programmes offer real commercial opportunities for UK firms.
As their economies grow and their consumers become more prosperous, the candidate countries offer great opportunities for UK trade and investment. Market liberalisation in areas such as telecoms and energy should also accelerate this process.
The potential benefits and problems of enlarging the EU are likely to come from many directions. There are three main aspects of enlargement we will be looking at:
Cheaper labours force
As CPW is a UK organisation and already well established they will be faced with a lot of commercial opportunities by expansion of the EU. With more countries added to the EU they will of course be able to reach more customers.
The immediate goal of the 1957 treaty of Rome was the establishment of a single or ‘common’ market. If Turkey becomes a member state of the EU, they need cancel obvious barriers to trade such as tariffs or duties firstly. Then, it also should removal non-tariffs barriers which should also be integrated with current of the EU’s policy. Therefore, the products of British companies will go into new and big market easier than before. They also can invest into new member states in which will have a lot of new investment opportunities. Therefore, now we can say the expansion of the EU into Eastern Europe can increase export opportunities for British companies.
Cheaper labour force
For British companies including CPW labour force will be cheaper. As the UK has a high living standard more and more cheaper job seekers, who are living poor Eastern Europe nations, will flow into British labour market. This means CPW can hire workers with low wage requirements. This will allow them then to reduce working costs so the can increase their products’ competitive advantage’.
Access to more investment. The United Kingdom is still one of the most important financial centres in the world,
The integration of the Central and Eastern European countries into the European Union is a win situation: The integration will increase wealth and prosperity in the new Member States and will stimulate economic growth in the current member states. An extra 100 million consumers will be part of the Internal Market. The remaining tariff barriers between the countries will be removed. Legal and technical trade barriers will vanish. The possibilities for trade and investment will be further enhanced and the expected high economic growth rates will radically enhance the purchasing powers of consumers in the candidate countries. Increasing trade will be a valuable contribution to the functioning of the enlarged the EU and the economic development of the entire continent.
The enlargement has special significance for the United Kingdom. For the new members, accession to the EU implies great potential for increased trade and cooperation. This is a golden opportunity for British companies. During the last 10 years many British exporters and investors have secured strongholds in these markets, increasing exports dramatically. The present research shows, however, that the current level of trade only scratches the surface and that British trade with the new member countries can be multiplied many times over.
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