Structure of EU Single Market The Single Market

Structure of EU Single Market

The Single Market Signed 1986 non-discrimination between domestic and imported goods mutual recognition accept products produced in other countries but of different standards Burden of Proof health a safety issues must be proven by scientific evidence 4 big areas of policy are: (a), removal of frontier controls, technical barriers, public procurement and fiscal frontiers

The Single Market Free movement of people, product and capital removed many barriers to free trade technical standards costly documentation other ‘even cricket pitch’ factors So now we must meet product standards harmonised tax and tariff rates adapt to ease of trading conditions eg inspections at customs posts

European Monetary System (EMS) - 1 Needed to reduce uncertainty and volatility of currencies needed to bring national monetary and fiscal policies more together needed to reduce use of exchange rate as macro tool Needed to control money expansion within member states needed to control expansion on money stock v competitive de -valuations Started with ERM

Customs Union Free access to markets access to factors of production large markets 350 m+ protection from external competition increased competition Drive for efficiency and standards with a common currency they have no transaction costs transparency of prices comparisons of quality/non-price competition

Disadvantages? Lack of choice? Increased costs? Reduced market share as competition increases? Lack of efficiency as barriers protect? Marketing may have to be changed to appeal to diverse markets? Change in marketing mix? Problems with expansion - 25 member states

EU Policies CAP - almost half of budget Treaty of Rome 1957 to increase agricultural productivity ensure fair standard of living for farmers Stabilise markets guarantee supplies ensure fair prices guarantee minimum prices keep farmers from entering world markets

CAP - problems High prices = over production? High EU prices when compared with rest of world? Cost of buying surpluses? Enlargement? Non-EU countries prevented from entering markets? Removes market forces from agriculture? most productive use of resources?

Regional Policy Funds provided by richer members to those suffering from unemployment bring in those on edge Grants given to companies to help them locate in particular parts of EU Regional Policy and Cohesion Fund (from Charles White)

The Social Chapter Maastricht Treaty minimum wage minimum working hours minimum paid holiday freedom to join a trades union Access to appropriate training the right to be consulted and informed about company plans protection of young workers

Impact on UK Business? Better motivated workers? Improved industrial relations improved productivity? Increase labour costs? Reduce competitiveness lose trade force difficult economic choices?

The Single Currency Fixed exchange rates from 1999 Started 2000 why? Transaction costs reduce uncertainty transparency of prices encourage mergers BUT what of initial costs? Role of ECB loss of control of economic/political decisions problems with expansion

Euros? Those outside? Quote prices in euros reduced uncertainty as only one trading currency reduction in transaction costs competitive disadvantage Changes in currency affects price of goods in export sector could impact on imports compete against the stronger merged units that will evolve within EU

Euro - 2 UK most affected businesses? Those who trade mainly within EU? Suppliers of big MNC’s who are using euro? Banks? Retailers in tourist areas? Subsidiaries of large corporations whose main division quotes in euros?

Expansion of EU Could be 25+ many are poorer CAP? Big customer base former Communist countries? Greater political and economic cohesion? Adapt single currency? Managing euro? Huge trading block trade-offs, balances, winners/losers?

More information see www. johnbirchalleconomist. com and go to “Europe” section www. eun. org and go to “Virtual School” and the community where you will find details on the older members of the EU and the new members.