312 - The European Union Flashcards
The European Union
A political and economic union of 27 member states that are located primarily in Europe, estimated population of about 447 million
Main features of the single market
No barriers to trade between member states, no quotas on imports or exports, no tariffs on goods/services, consistent standards between countries, common external tariff on imports into the EU, free transfer of resources form one country to another, including capital and labour - this men’s that businesses can source employees form EU countries without restrictions.
The aim of the EU
To favour EU produced goods and services and make them more price competitive - more demand - more jobs/incomes - improved GDP/living standards
Free movement of goods and services
Goods can move freely between member states without restriction or tariffs/quotas and other protectionist measures = bigger market to sell for but more competition
Free movement of labour
Any citizen of an EU member states can work without restriction in any other member state = bigger pool of investment available as businesses are not restricted to finding investors from their own country
Free movement of capital
Money can move freely between member states = a bigger pool of investment available as businesses are not restricted to finding investors from their own country
Legislation, regulations, and standards
EU law takes precedence over individual country laws, this means that a law passed by the EU parliament needs to be made into national law = potential greater restriction on business activity, possible higher costs
Benefits of the EU on businesses
Increase in market size greater access to cheap factors of production, lower administration costs to trade, access to EU government contracts
Drawbacks of EU membership to businesses
Greater competition, increased costs to comply with EU regulations, loss of freedom to make free trade deals with other countries, loss of the ability to charge individual or no tariffs and quotas on goods and services
The Eurozone
Compromises member states if the EU that have adopted the euro as their currency, the official currency of 20 of the 27 member states of the EU
Benefits of a single European currency
Lower transaction costs, elimination of uncertainty due to exchange rate fluctuations, price transparency, european businesses more likely to trade, competition
Drawbacks of a single European currency
Fluctuations in the exchange rates, countries with higher costs, the interest rate would be controlled by the Central European Bank
