The European Union

Question 1

What is the European Union

Answer 1

Union of currently 28 countries with population of approx. 500 million

Question 2

Explain what is meant by the eu being a single market

Answer 2

No trade barriers between members, so firms don’t pay tax on imports from eu countries. All firms compete with common eu competition law. There is a customs union. Single market soothes out price differences between member states. Freedom of movement of all factors of production

Question 3

Explain the transparency of the single market in the eu

Answer 3

It soothes out price differences between member states, producers can look for highest selling price in eu and consumers can look for lowest buying price. When price in part of eu is high, producers flood that area with their product, drawing prices down. Low prices attract more buyers to market, pushing prices up

Question 4

What business opportunities can the eu provide

Answer 4

• when eu expands, size of market for eu producers does, so get economies of scale
• eh collectively has more political bargaining power than its member states would have individually. For example the eu can negotiate any trade dispute with USA on equal terms
• low production costs in recently joined countries like Hungary

Question 5

Wha business threats can the eu provide

Answer 5

• increased competition may hurt inefficient producers in new member states, who were previously serving protected national markets
• industries from some new member states such as Hungary, cheap manufacturing and agriculture = bad for U.K.

Question 6

Explain what a pan-European strategy is and why it won’t work

Answer 6

A markets strategy that works for all of Europe.

Won’t work cos there are still different languages, cultural differences so must do different marketing campaigns for different countries

Question 7

What four categories are eu laws divided into

Answer 7

• regulations = binding laws applying to all eu citizens
• directives = tell member states to pass a law that means a specific objective
• decisions = binding laws that apply to a specific country/business

Question 8

Give pros of the U.K. adopting the single currency (euro)

Answer 8

• euro zone firms can sell to each other without hassle and uncertainty of constantly changing exchange rates
• easy to compare prices
• avoids cost of exchanging one currency for another

Question 9

Give cons is the U.K. adopting the single currency (euro)

Answer 9

• euro zone countries all have same interest rates
• individual countries can’t use interest rates as a tool to control own economy
• can’t control inflation well because don’t set own interest rates
• hard to improve competitiveness of firms if you can’t allow them to borrow more/less cos you don’t set interest rates

Question 10

Give pros of Brexit for U.K. firms

Answer 10

• U.K. will remain an extremely competitive economy and therefore an attractive destination for foreign investment
• exit will allow U.K. to ‘cherry pick’ best global workers

Question 11

Give cons of Brexit for U.K. firms

Answer 11

• from outside eu, firms will have to conform to rules product if they want to continue to trade, but will have no influence in setting them
• eu is a stronger position to negotiate trade deals with non-eu countries than U.K. would be on its own
• inward migration helped with skills shortages, a shrinking domestic workforce and may help keep costs and prices down in some sectors