Britain and the EU Essay Example

Britain and the EU Essay Example Britain and the EU Essay Britain and the EU Essay Assignment 1: 1. In 1957 the EU was fashioned to elevate the living standards of its members by encouraging peace, democracy and equality for the countries that had joined the partnership. Its aims were to end war and repair the division of the European continent. It has become a unique economic and political partnership consisting of 27 European countries with around 500 million inhabitants (see figure 1 in appendix). This map shows the 27 (coloured) EU countries (Grey countries are candidates) It was not until 1973, the EU’s first enlargement, that the UK became involved on account of the then Prime Minister, Edward Heath. The UK did not join the EU from the start as it chose to stay with a rival group called the European Free Trade Area. It wasn’t until the 1950’s that it became apparent the living standards of France and Germany surpassed those of the British and their Government (under Macmillan). Additionally, French president Charles De Gaulle vetoed their first application (1963) considering the UK as inappropriate candidates – not a good asset and a liability to the union. Despite the assistance it provided other countries during the war and its eventual success, Britain suffered post-World War II with stunted economic growth, high inflation and poor industrial relations; her position in the hierarchy of the world had dropped and it was a difficult matter to cope with. The empire was falling and so was its trade. Also, the US encouraged the UK to join, due to fears of France trying to take control of Europe, in attempt to balance out the power struggle. It was Edward Heath’s opinion that due to its economic and political ills Britain would benefit from joining the EU; economically to increase trade and politically to form unity and stability for the failing empire. British membership was sealed by a referendum in its favour held in 1975. The general advantages of its membership include Free movement of goods and capital with other EU countries, without boundaries or border controls. A circuit of diverse and new goods (through international trade) and equipment, skills, services and workforce/people – more workers results in a boost in tax revenue. If more jobs are available people will be contributing in taxes rather than extracting with benefits. Ease in the exportation of goods leading to a more competitive market and reduced prices for consumers. An increase in population helps domestic demands – more products bought, more services needed. Disadvantages of joining EU UK cannot afford increase in populati on – heavy demand on schools, NHS and benefits. Influx of immigrants leads to high competition for jobs, fewer jobs for British, more people requiring benefits, impact on UK residents – squeezing funds. Tax increases to fund extra services needed. Exchange rates can influence the balance of payments negatively. Free movement of labour could weaken the economy. Loss of independence. Draining of resources. Since joining the EU the UK’s trading market has suffered a deficit. Overall trade post-1984 has been substandard. Benefits of international trade not shared equally. Outsourcing. Workers and services bought overseas for lower cost meaning UK suffers/loses trade. The balance of payments is the record and measurement of payments and transactions between one country and the rest of the world. It includes imports and exports of goods (visibles) and services (invisibles), tracks the flow and balance of finances ranging from dividends and interest to investment, loans, transfers and trade credit, and the transactions and transfer of capital. These are categorised into three accounts: current, capital and financial. The UK’s gross domestic product rose by 0. 5% in 2011, a rise following two consecutive quarters of negative GDP said to be the oot of the recession. Surplus is when the production of goods or services exceeds the consumption or when goods are in excess of their requirement. A deficit is a deficiency in amount, for example when a company, government or individual’s spending exceeds its income. Long-term deficits stack up huge debts that will have to be paid off eventually causing problems for future generations. Debts must be paid off ideally money would be earned from exportation however sometimes this is not possible and the country will have to borrow or invest to reach repayments. A good example of the result of a long-term deficit is Greece – currently have no advantage in trade of visible goods, their advantage in tourism is not enough to cover their arrears so at first money can be borrowed to make up the difference but then as the loans escalate Greece has to default on its loans knowing they can never repay the money. A rescue plan is now being debated. The largest surpluses in UK trade 2004 were with USA at ? 17. 1 billion. The largest deficit recorded was Germany at ? 12. 3 billion and France (explored later) at ? 3. 2 billion. A country’s wealth is affected by international trade, which is important because of an introduction of new resources, greater efficiency due to competition, greater choice for consumers, greater output through comparative or absolute advantage, specialisation and division of labour. An absolute advantage is when a country is superior at producing a good or service and can make equal or more goods at a lower cost or with fewer resources. Alternatively, a country may have the absolute disadvantage and be totally inefficient at producing anything in comparison to its trading partners. A comparative advantage is when a country specialises in a good or service that it is least inefficient at when compared with producing other goods or services. UK’s absolute advantage is in financial services with a 70% growth it is the UK’s biggest area of exports. International trade is necessary as a business will eventually ‘hit the ceiling’ and simply cannot expand any further in one country. The gains, and sometimes losses, distributed to trading countries are indicated by the terms of trade. It can be defined as a ratio of the country’s average price of exports to the country’s average price of imports. Ideally the price of exports would be greater than the price of its imports, this is known as movement in a ‘favourable direction’. The terms of trade depend upon the global demand and supply of goods. A fall in the price of a product exported by a country can cause a balance of payment deficit, especially when the foreign exchange earned in its exports is used to pay for its imports. Generally over the past 20 years the UK’s terms of trade have been improving, meaning export prices have risen relative to import prices. This is partly due to the fact globalisation has had less impact on export prices of UK invisibles compared to the price of its visible imports. The exchange rate, or rate one currency can be converted into another is constantly changing due to many factors including interest and inflation and the political and economic state of the country in question. A business will want payment in the currency of its country so if the value of the pound falls (meaning less euro for every pound) the UK importer will end up paying more a negative impact on the UK’s finances. The British pound to euro exchange rate on 31/12/09 was 1 GBP = 1. 2 EURO. As of 3/11/11 it stands at 1 GBP = 1. 16 Euro the increase signifies a current benefit to the UK (exchangerates. org. uk). China currently keeps its exchange rate low to have a positive effect on its balance of payments. Generally since 1990 the UK has suffered with a deficit in its balance of visible trade. The figures from The Pink Book show th at in 2004 the UK’s deficit increased to a record ? 58. 6 billion due to a rise of 1 ? % in the value of exports compared to a rise of 5 ? % in the value of imports compounded by a higher ratio of imports to exports. The whole world suffered, with a 2? % increase in exports and a 9? increase in imports in non- EU countries so although the UK had a deficit it was sheltered from extreme rises experienced outside the EU, â€Å"The deficit with non-EU countries widened from ? 22. 0 billion in 2003 to a record ? 29. 5 billion in 2004, the deficit with EU countries widened from ? 25. 8 billion in 2003 to a record ? 29. 2 billion in 2004. † The deficit on goods is far bigger than the surplus on services resulting in an overall decrease on the current trade. The fall of the value of exports in the EU was partly caused by the crackdown on MTIC fraud (businesses wrongfully buying goods VAT free) by UK Revenue and customs. Overall between 1981–2001 export volumes increased. However a decline in economic activity abroad caused the growth in exports to slow during 1991- 1993. By 2004, import volumes had risen significantly more than export volume. A 50% increase in the price of crude oil in 1999, which elevated to 70% in 2000 (The Pink Book 2005 p39) had a huge impact on the UK with both imports and exports due to its ongoing effect on the price of manufacture and distribution of goods. Until 1996 there had been a surplus in the export of crude oil. By 1998, following problems in the North Sea reducing production levels; the surplus had been reduced by ? 5. 0 billion. The figures yo-yoed for the following several years and although there was still a surplus it was significantly reduced with drops in the export of crude oil and an increase on imports. Looking at trade in goods other than oil during 1992 and 1999 there was a steady surplus but there has been a considerable deficit thereafter. In the past decade trade in motor-cars, and other consumer and intermediate goods has been in deficit even though from 1994 – 2004 import in motor- cars has risen; this is visible trade. Figure 2. 6 in the pink book illustrates that the balance of imports (visible trade) were considerably higher than exports (invisible trade), both of which are rising, imports more rapidly than exports, creating an overall growing deficit. As indicated by preceding figures it seems the EU has protected the UK. The deficit in this country has not been as bad as that outside the EU even though trade has worsened since 1984 and our deficit is due to joining the EU. The UK’s absolute disadvantage lies in travel and tourism as people go out of the UK for a holiday. The idea of having one common currency, the Euro, was to evade exchange, interest and trading tariff rates, to have shared monetary policies (including costs of goods and wage rates) and to ease trading in general. With several different currencies things were too intricate and complicated; one currency would eliminate these problems. The UK opted out of joining the euro from the beginning and although the subject is still under debate it looks unlikely that the UK will adopt the Euro. The UK would have to answer to the European Central Bank and lose any monetary control. It is the opinion of some that this would create further economic crises. Greece with its current financial issues blames the Euro and wishes to return to the drachma. 2. The EU has increased from 15 countries to 27. 17 of which have adopted the euro. Currently there are talks about further enlargement of the EU. There is no evidence that the enlargement has helped Britain however we have benefited from cheap labour and great opportunities to UK business and consumers. However this has also been a drawback to UK residents during the recession as jobs were lost as it was much cheaper to take the labour abroad. One of the benefits is foreign direct investment; an example of this is Toyota. Once the company had broken through and cracked the EU market it became the world’s most profitable and second largest manufacturer of automobiles. Examples of businesses that have successfully expanded to France include; BP, ICI, Zeneca, Glaxo-Wellcome, Barclays, RMC, Abbey National and The Woolwich. Some say the EU is ill equipped to deal with its rapid growth being unable to offer sufficient jobs subsequently giving too much away regarding healthcare and benefits. The diversity of the EU in regards to economies, cultures, languages and demographics will get too complicated and global powers will clash. The EU has been accused of being greedy, focusing on size rather than economy, allowing weak states with low GDP growth to become members. The UK has lost most of its manufacturing industry, a recent example is Bombardier who cut more than 1,400 jobs as the last train manufacturing plant in Derby failed to secure a deal which was won by Germany. The UK is not competitive in the industrial market, which is not good for the British economy. The contributions to the EU from the UK are high and some feel it is unbalanced. Conservative leader Margaret Thatcher fought to reduce inflation and increase the amount the UK received by the EU in comparison to its contributions. An enlargement could mean that more countries are going to have to be subsidised by the UK. Advantages of an enlargement lie strongly in unification of states. Being more than a redistribution of wealth, it is a politically, economically and culturally diverse union. Intended to be equal and balanced with an understanding of common good it is a strong way to fight terrorism, in addition to the increased availability of goods to trade freely. Word count: 2,243 3. The Steeple analysis (see appendix figure 2) identifies the current business environment in France. 4. My action plan (see appendix figure 3) examines ways in which a business, using the example of Marks and Spencer, needs to adapt to be successful in France. Appendix Figure 1. Member States of the EU (year of entry) [pic]Austria (1995) |[pic]Latvia (2004) | |[pic]Belgium (1952) |[pic]Lithuania (2004) | |[pic]Bulgaria (2007) |[pic]Luxembourg (1952) | |[pic]Cyprus (2004) |[pic]Malta (2004) | |[pic]Czech Republic (2004) |[pic]Netherlands (1952) | |[pic]Denmark (1973) |[pic]Poland (2004) | |[pic]Estonia (2004) |[pic]Portugal (1986) | |[pic]Finland (1995) |[pic]Romania (2007) | |[pic]France (1952) |[pic]Slovakia (2004) | |[pic]Germany (1952) |[pic]Slovenia (2004) | |[pic]Greece (1981) |[pic]S pain (1986) | |[pic]Hungary (2004) |[pic]Sweden (1995) | |[pic]Ireland (1973) |[pic]United Kingdom (1973) | |[pic]Italy (1952) | | Figure 2. Steeple analysis effecting business in France Social / Demographic |Current population at 2011 stands at 62, 448, 977 | | |20th most populous country in the world in 2003 the natural birth rate of France was responsible for almost all the population| | |growth in the EU. Exploredia. France Population (2011) [online] http://exploredia. com/france-population-2011/ [accessed 3 | | |November 2011] | | | Continuous population growth – 12. 29 births/1,000 population compared to 8. 76 deaths/1,000 population | | |64. 7% of population according to the CIA world fact book (2011) is ranged between 15-64 slightly more males than females 18. 5%| | |are aged 0 – 14 years old again more males than females. 16. % of population is 65 years old + and is the only age range that | | |has more females than males | | |Unemployment stands at 9. 814% Economy Watch Content (2010) France Economy. [online] | | | economywatch. com/world_economy/france/ [accessed 3 November 2011] | | |Employment percentages rank highest in services (71. 8%), industry (24. 3%) then agriculture (3. 8%) | | |Low migration levels 1. 6 migrants/1,000 population | | |Welcomes at least 75 million foreign tourists with Paris as the world’s number one tourist destination. | | |Etiquette and approach to business is more formal than that in the UK however it is important to be polite and welcoming, UK | | |retail staff are more standoffish than those in France. | | |French companies are committed to keeping French culture, or la Patrimoine, taking pride in the products and services they | | |produce and turning over a profit for their shareholders. | |Attitudes to work are more laid back than in the UK, they are more for living life, working only what is necessary, According | | |to the French book, Bonjour Paresse (Hello Laziness), | | |a company can fire you at anytime, you dont owe them any more than the bare minimum in terms of work and devotion. They are | | |nonchalant about time keeping and punctuality. How to understand French culture. EHow contributor. [online] | | | ehow. com/how_2085611_understand-french-attitudes-towards-work. tml#ixzz1cfGP4jjJ [accessed 3 November 2011] | | |Abides by EU standards in terms of minimum wage, qualifications, product testing | | |Language barriers- the French are very proud of their culture and language signs information etc tends to be in French. Often | | |English films and cinema is dubbed. | |Technological |France is a leading exporter in nuclear technology Encylopedia of the nations. (2008) France – Science and Technology [online]| | | nationsencyclopedia. com/Europe/France-SCIENCE-AND-TECHNOLOGY. html [accessed 3 November 2011] | | | Pioneers in the development of high speed transportation systems such as the Concorde and the TGV high speed train | | |Industry includes electronic and automobile products. | |Agriculture made up 2. 1 percent of GDP, while industries contributed 19 percent, 78. 9 percent came from the service sector. | | |(economy watch) | | |High tax subsidy rate to businesses for research and development | | |Large share of research and development expenditure on defence France – center for local development (2011) France. [online] | | | cgdev. rg/section/initiatives/_active/cdi/_country/france [accessed 3 November 2011] | | |Second most developed market for logistics outsourcing in Europe | | |Channel tunnel links UK to France which is high speed and convenient for logistical purposes. | |Economical |France economy is found to be one among the top ten economies over the world in terms of its value of Gross Domestic Product | | |at $2. 555 trillion in 2010. | | |Hosts more than 22,000 forei gn companies. | | |Paris home to a large number of multinational HQs | | |Free market economy with a tendency for state intervention (capitalism). | |Elected officials key to business in country providing funding, state aid and infrastructure to attract businesses | | |The Global Competitive Index 2009-2010 reports favourably on France’s infrastructure as third best globally | | |The Global Competitive Index 2009-2010 reports adversely on labour market flexibility | | |GDP grew by 0. 3% in 2008 and contracted by about 2. 2% in 2009 compared to 4. 8% for UK | | |GDP per capita $33, 100 (2010 est. | | |Grants for industry and services are distributed by the DIACT | | |EU funding programmes include European Social Funding which is aimed at improving social and economical unity and equality by | | |concentrating on improving less-developed areas. Its aims are to increase job availability, quality of jobs and inclusiveness | | |of the labour market. 10% of the EUs spending is used on this type of funding. The Common Agriculture Policy grants payment | | |for crops and land. Its aims are to give farmers a good standard of living and ensure quality of food and fair prices to | | |consumers. Currently 48% of the EUs budget is used on this type of funding. | | |Taxes and other revenues are 48. 8% of GDP (2010 est. ) | | |France inflation rate in 2010 was 1. 64% but declined in 2011 to 1. 61%. | | |The EU is supplied by France for 25% of the total of agricultural products In 2010 France was the 6th largest exporter and 5th| | |largest importer of manufactured goods Economy Watch Content (2010) France Trade Imports and Exports [online] | | | economywatch. om/world_economy/france/export-import. html [accessed 3 November 2011] | | |High levels of FDI types of business, rose by 22 per cent last year, making it the most successful European country at | | |attracting overseas companies. Integrated Financial Services (2011) (FDI) in France [online] | | | ifs. ie/news-articles-and-information-archive/38-fdi-in-france. html [accessed 3 November 2011] | | |The UK sterling to euro foreign exchange rate is currently (GBP/EUR) 1. 6 | |Environmental |An introduction of carbon tax to sup port environment agendas | | |High oil prices and inadequacy of domestic supply creates a current high trade deficit | | |Weather – cool winters and mild summers, hot summers more predominant on the Mediterranean coast | | |Natural hazards; flooding, avalanches, midwinter windstorms, drought, forest fires in south near the Mediterranean | | |Some forest damage from acid rain; air pollution from industrial and vehicle emissions; water pollution from urban wastes, | | |agricultural runoff | | |Low greenhouse gas emissions per capita | |Political |Nicolas Sarkozy elected on a reform agenda – tasked to free French government from its admin burden | | |Aims to increase medium-term growth rate from 2% 3% | | | Aims to achieve full employment by 2012 (with an unemployment rate of 5% at 2010 it was 9. % ongoing affects of the | | |recession) | | |For the sale of goods, or the provision of furnished lettings, a Micro-BIC (Benefices Industriels et Commerciaux) applies, | | |whereby if gross income is less than â‚ ¬81,500 a flat 71% of income is deducted leaving only 29% to be taxed. Angloinfo. (2011) | | |French Income Tax [online] http://riviera. angloinfo. com/countries/france/intax. asp [accessed 3 November 2011] | | |The government also renounced some of its reform efforts, which ultimately led to a reduction of the GDP by 0. 7% | | |France still has one of the highest tax systems in all of Europe. |Legal |Reforms in labour laws such as Sunday trading – emergency services and police and stores selling perishable goods are | | |authorized to open Sundays otherwise regarded as a day of rest, working hours extending the 35 hour week allowing employees to| | |work overtime, business tax and research and development tax credit. | |Ethical |Faith, ethnicity, sexual orientation and religion must not influence companies or institutions. | Figure 3. A business plan to be successful in France |Aims |Action |Results | |â€Å"Make what we sell† approach |This will be achieved by employing a French agent or distributor who will know and |High tourism figures would | | |understand the culture and attitudes towards retail and services. Advice regarding |mean that UK travellers would | |Have to appeal to the French |attitudes to staff and the appropriateness of self-service checkouts – may not be |feel comfortable shopping | |market – this includes French |favourable here as the French are more formal (steeple analysis). Fully serviced changing |abroad. Eventually MS would | |cuisine and fashion. Perhaps |rooms, which were not a priority originally. Stores should consider French signage and |become a worldwide-recognised | |introducing an equivalent to |labelling (steeple analysis). Taking all this into account franchising would be a route to|brand. | |the UK’s â€Å"Per Una† range, |take. | | |which fulfils