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A2 External Influences The European Union. The EU n A free trade area with no internal barriers to trade and a common external tariff. n Free movement.

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Presentation on theme: "A2 External Influences The European Union. The EU n A free trade area with no internal barriers to trade and a common external tariff. n Free movement."— Presentation transcript:

1 A2 External Influences The European Union

2 The EU n A free trade area with no internal barriers to trade and a common external tariff. n Free movement of good/services, labour and capital. n The aim is to develop economic and political stability and prosperity

3 History n Conclusion of 2nd world war, aim to avoid future wars n Creation of European Coal and Steel Community (ECSC) - Treaty of Paris (Belgium, Holland, Luxembourg, Italy, France and later West Germany) n Treaty of Rome - formation of a free trade area with a common external tariff, original 6 enjoyed strong economic growth n UK, Ireland, and Denmark decide to join. n Single Market the European Community - development of a common market with free movement of all factors of production n Maastricht Treaty- creation of European Union to develop greater unity n Membership up to 15, Austria, Finland, Greece, Portugal, Spain and Sweden joining at various points n Euro adopted by 11 countries n Greece adopt Euro n New members = Cyprus, Czech republic, Estonia, Hungary, Latvia, Lithunia, Malta, Poland, Slovakia, and Slovenia. n 2007 – Bulgaria and Romania join

4 The Single Market n Building one internal market was intended to launch Europe as an economic superpower n As member states got rid of obstacles to trade, companies would start to enjoy new economies of scale n More cross-border competition would wipe out inefficient firms

5 Institutions of the EU n The European Commission - proposes EU policy and legislation. n The Council of Ministers - Agrees to adopt legislation. n Both institutions can impose their will upon the union through: n Regulations - which must be obeyed and primacy over national laws n Directives - require members to introduce legislation in their parliaments n They may also make recommendations and give their opinion n The European Parliament - Enforces the legislation

6 Student Task: Who are the current members? n Write a list of what you feel are the 27 EU members.

7 The European Union members

8 The European Union Trade Flow: n exports $813bn n imports $801bn

9 Candidate countries n Croatia n Former Republic of Macedonia n Turkey n Albania, Bosnia, Kosovo, Montenegro and Serbia are expected to join in future

10 Implications of the EU for business n Value of membership depends on level of trade with EU n Removal of barriers to the four freedoms of movement people, goods, services, and capital within the EU n Barriers were: regulatory, technical, legal, bureaucratic, cultural and protectionist (e.g. tariffs)

11 Social Chapter Element of Maastrict Treaty Aims to harmonise working conditions Ensures workers can: n Join a trade union and take industrial action n Be consulted and informed about company plans n Equal treatment for males and females n Minimum wage and maximum working hours n Minimum 4 weeks paid holiday Student Task: Produce a spider diagram with the advantages and disadvantages of this social chapter (10 minutes)

12 The EU - Positive implications n Bigger market million n Economies of scale opportunities = lower costs and more specialisation n More competition = more efficiency + innovation n More opportunities for mergers and joint ventures n Encourages inward investment - looking to avoid external tariff of EU n Greater mobility of labour = bigger supply n Free movement of factors of production and investment = set up in cheaper locations

13 The EU - Negative implications n Increase in legislation n Increased competition in Europe and domestic market n Skilled labour and investment may be attracted to other countries n Low wage rates in countries such as Poland = fierce competition as costs lower

14 The Euro n Introduced on 1 January 1999 n 12 countries have adopted it and currencies were fixed together n These 12 countries are called the Eurozone

15 The Euro n Positive implications - n No exchange rate transaction costs n No uncertainty with fluctuations in exchange rates n Price transparency = easy comparison n Easier planning n Further union with rest of EU to become part of large economic super power

16 The Euro n Negative implications - n 40% of UK trade with non-EU countries n Loss of ability to decide interest rates and control business cycle n UK business cycle not in sync with EU n Firms have opportunity to put prices up n Costs of changeover, pricing and wage systems n UK is a net importer for EU n Need more focus on improving own countries services

17 A2 External Influences Pan-European strategy and EU expansion

18 Objectives n By the end of the lesson all students should have: n Revised their knowledge of the EU and the Euro n Understood what a pan-European strategy is n Discovered the importance of emerging markets such as Eastern Europe along with the positive and negative implications

19 Pan-European Strategy n An approach which regards all markets within Europe as similar to one another( a European market) n Discussion point: Will this be a successful approach? (discuss in pairs) n The aim is to achieve economies of scale n Evidence suggest markets across Europe are differentiated and fragmented n Cultural and language barriers

20 Emerging markets and Eastern Europe n Emerging market - an international area that has the potential to grow and develop in terms of productive capacity, market opportunities and competitive advantage. n E.g. Eastern Europe with the introduction of capitalism after the fall of communism in late 1980s

21 EU Expansion to the East - Potential candidates Joined in 2007

22 Expansion into the East of Europe n At least six countries are waiting in the wings to join the European Union. n Bulgaria and Romania have signed accession treaties and have now joined in 2007 n Croatia and Turkey started accession talks on 3 October Turkey could complete them in 10 years, Croatia in five.

23 Expansion into the East of Europe n The other four Balkan countries have been told they can join the EU one day, if they meet the criteria. n These include democracy, the rule of law, a market economy and adherence to the EU's goals of political and economic union. n BBC Video - bin/search/ &scope=all&edition=d bin/search/ &scope=all&edition=d

24 Student Activity n Read the case study on Tesco expanding in Europe (page 387) and complete the following tasks: (25 minutes) 1. Produce a spider diagram detailing the benefits and disadvantages of establishing supermarkets in Central and Eastern European countries of the EU. (see page 386 for guidance) 2. Essay style question: To what extent might Tescos success be even greater if the UK adopted the Euro. (15 minutes)

25 Positive implications with Eastern Europe (an emerging market) n New market with large population n Big opportunities for new products and well established brands n Cheaper labour n Less stringent government control n More labour - UK currently experiencing skill shortage e.g. BUPA hiring carers from Poland and Czech Republic

26 Negative implications with Eastern Europe (an emerging market n Lower incomes n Immature political systems = unstable and unpredictable trading conditions n High inflation = low confidence in currency n Difficult to raise finance in these countries n Poor infrastructure

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