Europa. Basic Information on the European Union - Essay Example

?Single Market Table of Contents Table of Contents 2 Overview of the European Union Single Market 3 European Union s 6 Money and the European Union 6 6 Regional Policy of the European Union 7 Completing the Single Market 8 General Policy Framework 8 A Single Market for Goods 10 A Single Market for Services 11 A Single Market for Capital 12 Main Obstacles to the Completion of the Single Market 12 References 14 Overview of the European Union Single Market The European Union is an exclusive partnership on the basis of economy and politics in among 27 countries of Europe. The Union has inculcated harmony, stability and opulence in Europe. It has also helped to raise the standards of livelihood in the region. One of their most important contributions is the commencement of a single currency for the whole of Europe. It is gradually structuring a single market constituting the whole of Europe in which the movement of citizens, supplies, services and assets, amongst the Member States would be without any restriction, just as within a country. The single market can create free trade within the European Union and mould Europe into a single economy (Europa, n.d.). The European Union was formed after the Second World War to promote cooperation on economic grounds amongst the European countries. The idea was that the nations which do business with one another are reliant on each other economically and will consequently avoid clashes and disagreement amongst themselves. In the year 1951, six European nations viz. Belgium, France, Germany, Luxembourg, Italy and Netherlands signed an agreement to unite their industries in the coal and steel sector so that there would not be any difference between them in future. After six years, they made a deal of ‘Treaty of Rome’ by forming the European Economic Community (EEC) with the idea of forming a common single market, the community later came to be recognized as the European Union. The elementary objective of the Treaty of Rome was the formation of a single economic region in Europe based on a universal market. The common market is a phase in the process of international integration which targets to remove all obstructions to intra market trade and plans to merge all the national markets to form a single market which would lead to conditions prevalent in an internal market. The formation of such a market needs liberalisation of business among the Union members and also makes free mobility of certain production factors such as labour, services and necessary capital. It further requires free establishment of business organisations and people in all the regions of the member nations for the purpose of exercising their business and professional activities (Europa, n.d.). After the Treaty of Rome, the EEC detached all tariffs and duties on the goods which were traded within its territory. However, there were many differences in the requirements of packaging and safety measures followed by each Member nation, these disparities in business practices led to problems in selling the same products all over the European Region. The inability to reach the undisputed agreements required to change the scenario prevented the development of the single European market. In the early 1980s, the national economies of the European nations were disjointed, inflexible and very uncompetitive. European Union adopted ‘The Single European Act’ in 1986 under which certain important unanimous decisions could be taken to construct a boundary-less single market by the end of 1992. During this period, the EU formed one common regulation system for all its members and started following the code of joint recognition. In the early years of its formation, the European Union had crossed two major obstacles to the economic incorporation of Europe. They were the formation of custom union where the custom duties were removed, and the development of a general agricultural plan which was required for the liberal movement of agricultural products between the members of the European Union (Europa, n.d.). From the time of its formation, the European Union has evolved into a large single market and has chosen Euro as their common currency. It started off as an economic union but with the span of time it has developed into a union covering many areas such as environment, development, human rights among others. The formation of this union of 27 countries have led to the eradication of national border controls between them, making it easier and comfortable for their citizens to travel and work liberally in other countries in the European Union (Europa, n.d.). The 27 member countries of this union are “Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and United Kingdom” (Europa, n.d.). The countries that have requested for membership of the European Union are Croatia, Former Yugoslav Republic of Macedonia, Iceland, Montenegro and Turkey (Europa, n.d.). The European Union is identifiable by the European Flag which consists of twelve yellow stars surrounded by blue colour. The stars in the flag represent the principles of unison, cohesion and agreement among the European people. The maxim of ‘European Union’ is “United in diversity” (Europa, n.d.). European Union Institutions The institutions are mainly of two categories namely political and financial. The three key political institutions of the EU are the European Parliament, ‘The Council of the European Union’ and ‘The European Commission’. The parliament takes legislative decisions and makes the EU budget. The council is the chief judgment making unit. The Commission which is the civil service body of the EU recommends legislation to and implements the decision of the Council and the Parliament. The two major financial bodies are the ‘European Central Bank’ and the ‘European Investment Bank’. The Central bank manages the euro, lay down the rates of interest, conducts functions of foreign exchange and also maintains constancy of price; where as the Investment bank finances projects which support the EU objectives of integration, even-handed development and economic consistency of its member nations (Europa, n.d.). Money and the European Union The Union has many resources of income to run its administrational activities and it is not exclusively reliant on the assistance of its member nations, one being the import duties on goods from outside the union and the other being a certain percentage of value added tax imposed by each nation in the European Union. Each country in the union contributes 0.73% of its gross national income which suffices for two-third of its budget. They use their income in various activities ranging from upliftment of rural areas, protection of environment, defence and security of the external borders and endorsement of human rights. The Euro is the common currency used in 17 of the EU nations called the Eurozone and is a concrete proof of European amalgamation. It was launched on January 1999 as an implicit currency but the ‘notes and coins’ were commenced on January 2002. The sole currency system has many benefits such as eradication of exchange rate fluctuations and the exchange cost. It helps in maintaining the economic stability and also helps business firms to perform cross border dealings easily. The monetary issue of the union is maintained by the European Central Bank whose main aim is to manage the constancy of price (Europa, n.d.). Regional Policy of the European Union The goal of the regional policy of European Union is reallocation of funds from comparatively wealthy state to the poorer state. This operation is categorised in two funds, structural and the cohesion. The structural funds are directed towards provincial development of the member nations. It has three key objectives, to shore up progress in the less affluent regions; to revitalise regions facing structural troubles; improvement of human resources. The cohesion fund was put up to perk up the atmosphere and build up the transport infrastructure in the member countries where the GNP/ capita was less than 90% of the average of EU (Europa, n.d.). Completing the Single Market The completion of an integrated Single Market is an infinite process which requires constant trial, observation and updating as the atmosphere in which the market functions is always changing. The ‘Single Market Act’, April 2011 aims at twelve tools of expansion, competitiveness and societal advancement which range from labour movement to SME finance and customer safety via digital content, uniform taxation and advanced European networks (Pelkmans, 2011). The major obstacles that remain are predominantly in the services sector, where varied national regulations prevalent make it tough for organisations to venture outside their country. The development of a fresh framework in the financial services area needs to be completed. This framework would attempt to permit the financial sector to reach its complete potential without unnecessary negotiations and cost barriers (Europa, n.d.). Various entry barriers such as set tariffs, multifaceted shareholding necessities, heavy capital requirements, and limits on the legal form a business should take still remain to be removed (BNE Group, 2011). General Policy Framework The concept of single market involves eradication of all barriers and simplification of prevalent rules to permit individuals, customers and businesses to optimise the benefits they possess due to direct and unrestricted access to 27 nations and around 480 million population (Europa, n.d.). The four freedoms fundamentally required for the existence of a common market are freedom of mobility of commodities, freedom of mobility of labour or human resource, freedom of mobility of services and freedom of capital or asset movement. These four freedoms are protected by the European Commission Treaty and can be treated as the four pillars of the Single Market (Europa, n.d.). The single market framework in practical terms provides individuals the right to live, learn, work or retreat in another nation. It benefits the consumers by providing them more range of choices at comparatively low price due to high level of competition among the businesses. The single market also helps the business houses by making cross border contacts easy and cheap (Europa, n.d.). In order to gather the profit of the single market, its functioning is constantly monitored and controlled by the European Commission. It ensures whether the common laws set by the European Union are imposed and abided by the member countries. The Commission uses an Internal Market Scorecard to check how well and how fast the Single Market directives are put into practice by the members. In case of any discrepancy, infringement proceedings are started against the member and if required, certain cases are even referred to the European Court of Justice. In the financial services domain, the Commission regularly issues transposition charts to ensure fast transposition of directives mentioned in the Financial Services Action Plan (FSAP) and also those adopted post FSAP into nationwide laws. In addition to the legal enforcements, the Commission also monitors the market progress in a regular basis and checks the efficiency of the Single Market by constructing technical reports on the performance of all kinds of market in the European market namely supplies, services and assets (Europa, n.d.). For the appropriate functioning of the European Single Market which is the Internal Market of Europe, the principles and policies of this Internal Market must be satisfactorily reflected in international relations. The noteworthy differences between the principles of the Internal Market and the third country regulations can otherwise have a negative impact on European Union organisations operating on an international level. The adequate security of copyright of European products is necessary not only within the European Union border but also when the products leave the Internal Market. The Internal market policies have an international dimension and need necessary and unswerving contemplation during the conciliation of international agreements (Europa, n.d.). A Single Market for Goods The unrestricted mobility of goods is one of the four freedoms involved in the Single Market concept. The members of the Union may confine the movement of goods in certain cases concerning goods which might involve risk to consumer health or environment. Meeting divergent product standards adopted by different countries for health and safety reasons leads to technical barriers of trade. The amount of risk involved depends on the category of products. The higher risk products such as pharmaceuticals are subjected to harmonising technical rules by the European Union legislation. The lower risk products are not harmonised and instead rely on the principle of mutual recognition. The ‘mutual recognition principle’ means that the goods legally produced and sold by one member in the EU should be in general allowed to freely move throughout the Union. The total trade volume of goods within the region of European Union is contributed almost equally by the two product sectors, namely the harmonised as well as the non-harmonised (Europa, n.d.). A Single Market for Services Services contribute over 70% of the European Union’s economic activities. The European companies have the freedom to set up their business in other Member Nations, the freedom to deliver services on another Member Nation’s territory in addition to the one they are set up. Over the years, the freedom of service has created a lot of job opportunities which led to financial prosperity of the nations. Major developments and evolution in the services field have been initiated in various fields such as ‘financial services’, ‘telecommunication’, ‘transport’ among others. Nevertheless, in spite of development in some specific areas, the overall market is not performing as well as it should have. This is mainly due to a large gap between the idea of an integrated economy of Europe and the actuality faced by the European service providers and individuals. The intricate organisational and legal requirements to venture into a cross border set up, generally makes the small and medium enterprises to turn down such opportunities. Since the service industry is dominated by SMEs, this has caused significant obstruction in the Internal Market’s progress. Hence, directives have to be set up to smooth the progress of service industry set up across the border and in addition to it make sure to provide access to a varied service range (Europa, n.d.). A Single Market for Capital The consolidation of the Single Market has led to the free movement of capital across Europe enabling appropriate allocation of funds within the Union, making cross border trade easy, and facilitating the process of raising money by organisations. Restrictions in capital movement would curtail mainly the financial services companies willing to set up an establishment across border. Strategies for strong financial integration are to be implemented for the benefit of consumers and the businesses (Europa, n.d.). Main Obstacles to the Completion of the Single Market European Union Single Market is hindered by a lot of barriers ‘physical’, ‘technical’ and ‘fiscal’. The trade fiscal barriers especially the dissimilar Value Added Tax (VAT) rates and it evasion is one of the obstacles to the single market. The countries having trade surpluses and hence elevated VAT rates would be considerably better off. For this reason, a mechanism is essential to correct this type of revenue disparity among the EU nations. The redeployment of assets takes place on the basis of percentage of theoretical VAT revenues of the European Union nations. The members of the Union are liberated to structure their tax schemes as per their preferences which lead to non-harmonisation of tax schemes. This disparity results in hindrance of movements of factors and thus effects the implementation of the Single Market. A few other obstacles are sluggish transposition of directives into nationwide laws and incorrect use of the Internal Market Directives, absence of adequate standards and sufficient mutual recognition. The implementation of agreed upon standards and the use of mutual recognition are two core instruments for lowering down trade technical barriers amongst the Member Nations. The economic profits of standards for manufacturers are that products are congruent and exchangeable, dropping trade costs and permitting an improved utilisation of ‘economies of scale’. For customers, standards reduce uncertainty of purchase judgment by making possible comparisons. They can, also, take into explanation broader policy objectives regarding consumer welfare and environmental protection. However, there are few significant exceptional issues: (i) industry is insufficiently aware of the strategic advantages of standardisation, which is often still seen as a cost factor; (ii) there is still room for improving the efficiency of the standards expansion process; and (iii) the speed of transposition of European standards into national standards is rather slow (Ilzkovitz & Et. Al., 2007). Trade and cross-border activity in services remains relatively restricted. While the share of services is close to 70%, services account for only one-fifth of intra-EU trade. Due to their specific nature and intangibility services are affected by more complex regulatory barriers than trade. Unlike goods, they frequently require business processes and the presence of the provider in both the country of source of the service provider and in the country where the service is being delivered. This double attendance can result in the replication of regulatory requirements and burdens. In addition, foreign firms often face additional costs due to their compliance not being recognised of with their home country regulations. Due to complicated regulations and failure to execute them properly leads to legal as well as economic insecurity for the service providers in this sector (Ilzkovitz & Et. Al., 2007). References BNE Group, 2011. How can the UK lead the completion of the EU’s Single Market?. Lord Brittan Speech. [Online] Available at: http://www.bnegroup.org/events/view/how-can-the-uk-lead-the-completion-of-the-eus-single-market1/ [Accessed July 23, 2011]. Europa, No Date. Europa. About the European Union. [Online] Available at: http://europa.eu/about-eu/index_en.htm [Accessed July 22, 2011]. Europa, No Date. Europa. Basic Information on the European Union. [Online] Available at: http://europa.eu/about-eu/basic-information/index_en.htm [Accessed July 22, 2011]. Europa, No Date. Europa. EU Symbols. 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[Online] Available at: http://ec.europa.eu/internal_market/ext-dimension/index_en.htm [Accessed July 23, 2011]. Europa, No Date. Europa. A Single Market for Goods. [Online] Available at: http://ec.europa.eu/internal_market/top_layer/index_18_en.htm [Accessed July 23, 2011]. Europa, No Date. Europa. A Single Market for Services. [Online] Available at: http://ec.europa.eu/internal_market/top_layer/index_19_en.htm [Accessed July 23, 2011]. Europa, No Date. Europa. A Single Market for Capital. [Online] Available at: http://ec.europa.eu/internal_market/top_layer/index_42_en.htm [Accessed July 23, 2011]. Europa, No Date. Europa. Future Single Market Policy. [Online] Available at: http://ec.europa.eu/internal_market/strategy/index_en.htm#monti [Accessed July 23, 2011]. Ilzkovitz, F. & Et. Al., 2007. European Economy. European Commission. [Online] Available at: http://ec.europa.eu/economy_finance/publications/publication784_en.pdf [Accessed July 23, 2011]. Pelkmans, J., 2011. The Case for ‘more Single Market’. Centre For European Policy Studies, No. 234. Read More