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A2 External Influences The European Union.

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Presentation on theme: "A2 External Influences The European Union."— Presentation transcript:

1 A2 External Influences The European Union

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

3 History 1945 - Conclusion of 2nd world war, aim to avoid future wars
Creation of European Coal and Steel Community (ECSC) - Treaty of Paris (Belgium, Holland, Luxembourg, Italy, France and later West Germany) Treaty of Rome - formation of a free trade area with a common external tariff, original 6 enjoyed strong economic growth UK, Ireland, and Denmark decide to join. Single Market the European Community - development of a common market with free movement of all factors of production Maastricht Treaty- creation of European Union to develop greater unity Membership up to 15, Austria, Finland, Greece, Portugal, Spain and Sweden joining at various points Euro adopted by 11 countries Greece adopt Euro New members = Cyprus, Czech republic, Estonia, Hungary, Latvia, Lithunia, Malta, Poland, Slovakia, and Slovenia. 2007 – Bulgaria and Romania join

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

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

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

7 The European Union members

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

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

10 Implications of the EU for business
Value of membership depends on level of trade with EU Removal of barriers to the four freedoms of movement people, goods, services, and capital within the EU 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: Join a trade union and take industrial action Be consulted and informed about company plans Equal treatment for males and females Minimum wage and maximum working hours 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
Bigger market million Economies of scale opportunities = lower costs and more specialisation More competition = more efficiency + innovation More opportunities for mergers and joint ventures Encourages inward investment - looking to avoid external tariff of EU Greater mobility of labour = bigger supply Free movement of factors of production and investment = set up in cheaper locations

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

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

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

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

17 Pan-European strategy and EU expansion
A2 External Influences Pan-European strategy and EU expansion

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

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

20 Emerging markets and Eastern Europe
Emerging market - an international area that has the potential to grow and develop in terms of productive capacity, market opportunities and competitive advantage. 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
At least six countries are waiting in the wings to join the European Union. Bulgaria and Romania have signed accession treaties and have now joined in 2007 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
The other four Balkan countries have been told they can join the EU one day, if they meet the criteria. These include democracy, the rule of law, a market economy and adherence to the EU's goals of political and economic union. BBC Video - bin/search/ &scope=all&edition=d

24 Student Activity 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 Tesco’s success be even greater if the UK adopted the Euro (15 minutes)

25 Positive implications with Eastern Europe (an emerging market)
New market with large population Big opportunities for new products and well established brands Cheaper labour Less stringent government control 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
Lower incomes Immature political systems = unstable and unpredictable trading conditions High inflation = low confidence in currency Difficult to raise finance in these countries Poor infrastructure

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