chapter 7: the EU

what is the EU?

• political and economic grouping

• 27 members

• given up sovereignty in exchange for political, business, economic and monetary memberships

• worlds biggest free trade area

the single market

• founded in 1993

• market is made up of 500m people

• 20% of global GDP

main features of a single market

• no barriers to trade

• no internal tariffs/quotas

• free transfers of resources

• consistent standards

• common external tariffs on imports

benefits to workers

• can move in the market for work

• safety standards and employment law are maintained

• higher real income

benefits to consumers

• standards are the same on all products

• reduced prices as tariffs are reduced

• more choice

• access to providers

why is the EU not a 'complete single market?

• barriers to trade

• protection of industries

• problems with harmonisation of srandards

• cost implications

benefits of EU membership

• comparitive advantage

• higher economic well being

• increased FDI

floating exchange rate

is determined by supply and demand

fixed exchange rates

fixed at a certain level by the countries central bank and maintained by the central banks intervention in the foreign exchange market

benefits of joining the euro

• currency fluctuations don’t effect imports and exports in the EU

• inflation is constant

drawbacks of joining the euro

• no control over the printing of money

• no control of monatary policy

benefits to UK businesses of leaving the EU

• expand into new markets

• imports from outside the EU are cheaper

• loss of red tape

drawbacks to UK businesses of leaving the EU

• loose out on exchange rates

• loss of customers

• more risk with exchange rates

• supply chain issues

• new legislation

• loss of grants and subsides

restructuring and insolvency

EU laws on insolvency are designed to co ordinate cases across EU countries, to stop those involved from ‘shopping’ around

financial services

• because of the size and influence, UK has previously led the financial sector, alligned with EU rules, its likely to remain but in a different form

• those operating outside the EEA will usually have a branch in that area