"Evaluate the extent to which individuals and firms in the UK benefit from membership of the EU

Question 1

Intro

Answer 1

• The EU is a single market built on free trade of goods and services, mobility of labour, and free movement of capital. The benefits of the UK’s membership can be evaluated in various ways.
• In 2019, the EU accounted for 48.1% of the UK’s trade in goods.

Question 2

Para 1 - free trade area

Answer 2

• The free trade area allows exploitation of comparative advantage and specialization, enabling the UK to import goods at a cheaper cost, leading to a shift in the SRAS curve to the right, deflation, and employment.
• However, some primary sectors may experience structural unemployment.
• The free trade area creates additional competition, which incentivizes firms to be more efficient, but some firms may go bust.
• Expansion in export industries may be possible, but some industries may see decreased competitiveness.

Question 3

Para 2 - common external tariff & regulation

Answer 3

• The common external tariff and regulations can increase the price of some imported goods and services. This can increase the cost of production through a rise in import prices, lower consumer surplus, and rising prices.
• Domestic producers may become more self-sufficient, but the producer surplus may not be distributed to workers. The CET may make the UK too dependent on EU trade routes, and higher prices may have regressive effects on society.

Question 4

Para 3 - free movement of goods, services, capital, and labour

Answer 4

• Free movement of labour is likely to see a net inward migration of labour into the UK, potentially reducing the cost of production for domestic firms. It may put pressure on public services, leading to higher taxes on individuals.
• It may increase tax revenue and FDI, stimulating growth in certain sectors and increasing the capital stock, but migrants are likely to send earnings back to their home countries.
• LRAS may shift to the right as productive capacity increases.

Question 5

W

What is a Common External Tariff?

Answer 5

The CET is a uniform rate of duty that is applied to goods imported into any EU member state from outside the EU