Development of Second-World Countries in the European Union - Assignment Example

?Introduction The changes in the European Union in the past five to ten years have altered effects within the economy and from those that are involved in the region. One of the changes is based on the boundaries that are associated with the European regions. The different countries that are a part of the European Union have a different status in terms of economy, politics and the social well – being within the nations. The differences between second world countries have created a gap in the past decade, specifically in terms of economics. The development of the second world countries has directly affected the progress of the European Union in terms of economy and living standards. At the same time, regulations and changes within the internal market have been applied specifically because of the decision to unite Europe while understanding the complexities of the barriers created. This paper will examine the development of the second world countries in the past five to ten years, as well as how this has affected the economy of Europe in their progression. Development of Second World Countries in 5-10 Years Bulgaria and Romania are two of the main second world countries that have moved into rapid development and change since 2001. This is specific to the movement into the EU and the new dependencies that have pushed the political, social and economic agenda to a different level. The EU has been able to leverage Bulgaria and Romania through the criteria of uniting Europe and expanding the economic options that are a part of the world. However, it is also noted that domestic factors have created complexities in the ability for Bulgaria and Romania to progress. The lack of resources and opportunity has stopped the expansion that the EU has desired. The result is continuous progression and a push to move into a different status because of the external pressure. Semi – reforms and finding ways to meet the demands of the EU have become the main components in terms of politics and economy, specifically with the need to find ways to meet the needs of the other countries that are a part of the European Union (Noutcheva, Bechev, 2008). The need to develop, gain more resources and to match the competitiveness of others in the EU economically has led to initiatives being taken politically in areas such as Bulgaria and Romania. For instance, the establishment of the European Development of Bulgaria, or GERB, and the Coalition for Bulgaria, are trying to find new ways to help those in the community to move outside of the developing initiatives and into a developed country. The initiatives have led to reinforcements by policies for the community and to change the economy. New systems are being developed and business ventures are continuing to be supported within the region. This is followed by watch lists and initiatives used to change the social stance of those in the community, specifically with the idea of progression in mind. Taking out problems with trafficking, illicit drugs and other problems within the country are some of the areas which are continuing to be promoted and developed within the region (CIA, 2009). The same component of development is not only reaching Bulgaria and Romania, but is also moving into the second world country of Greece. The initiatives in the past decade are based specifically on changing the sociology of individuals and moving into economic development within the region. The beginning of this has been new policies that have been revisited since 2001, beginning with the changes made to the Constitution in terms of policies for humanitarian acts. Fair employment, meeting the needs of citizens in the country and stimulating the economy by assisting businesses with generalized policies are the main initiatives taken. For example, unemployment protection legislation has been created to change the economic activities and to alter the amount of money coming into the region. The initiatives are leading to stronger work forces, more development in the region, and growth at an average of 1.4% each year (Lazaridis,2009). It is noted that the economic development in Greece has moved at a more rapid rate than any other second world country. This has been attributed to the change in the constitution, the focus on moving into the humanitarian rights of the citizens and the accountability for the economics that are within the region. More important, the political achievements moved into creating a sense of collective bargaining and social pacts among society. This moved into creating pacts with institutions from the politicians, specifically which was based on finding ways to be more accountable for the economic growth and stimulation within the region. This has resulted in businesses being accountable to policies and the employees changing the social values, specifically which has led to stimulating the economy. The result is more demand within the economy as well as a growth in demand because of the policies which have led to changes in the social understandings in society (Zambarloukou, 2006). The second world countries which have created new policies and initiatives for economic stimulation have further affected regions which were already in the process of growing, such as Spain and Italy. These regions were still considered a developing country when the EU began to formulate ways for each of the countries to work together. At the same time, they worked as mixed market economies, meaning that there wasn’t a sense of coordination between the different types of economic structures in various institutions. To meet with the economic needs of the EU, both Spain and Italy had to change the strategy of being a mixed market economy, specifically with a shift to market liberalization and by creating strategy and structure within each of the institutions responsible for stimulating the economy. This shift has been a combination of working with institutions as well as developing policies through political systems to match the needs of the EU. This has moved into labor reform, protection systems for welfare and methodologies used to ensure that the economic flow is monitored for international competition. The result has been the development of a hybrid system, which allows those with specific skills and wages to develop on a variety of paths, all which assist in the stimulation of the economy (Hancke, Rhodes, Thatcher, 2007). Affects on the Economy The initiatives that are taken from those in the second world countries have affected various aspects of the economy. The first way which this has changed is through the GDP. Currently, the European Union ranks third in terms of exports and imports to the country and is continuing to grow in terms of what is offered, as seen in Table 1. Table 1: Trade of Goods Global Ranking Rank Partner % 1 USA 17.8% 2 China 17.0% 3 EU 13.1% 4 Korea 6.4% 5 Taiwan 5.5% 6 Thailand 3.4% 7 Hong Kong 3.4% 8 Australia 3.3% 9 Saudi Arabia 3.0% 10 U.A.E. 2.7% (European Commission, 2011). These facts and figures show that the European Union, with the initiatives taken, has slowly began to rise to the top global prospects in terms of exports and imports of goods throughout the nation. Since the year 2000, this has led to a continuous GDP growth of an average of 3%. Table 2 shows the GDP growth of each country through 2009. Table 2: GDP of EU Member States GDP 2009 Pop. (millions) GDP per capita GDP Nominal GDP Percentage Eurozone  European Union 11,808,717 500 23,600 23,600 100%  Germany 2,409,100 82.3 27,400 29,300 116% Yes  France 1,907,145 63.8 25,400 29,600 108% Yes  United Kingdom 1,566,741 60.9 26,500 25,300 112% No  Italy 1,520,870 60.1 24,400 25,200 104% Yes  Spain 1,051,151 46.9 24,300 22,900 103% Yes  Netherlands 570,208 16.4 30,800 34,600 131% Yes  Poland 310,075 38.2 14,300 8,100 61% No  Belgium 337,284 10.6 27,400 31,400 116% Yes  Sweden 292,680 9.1 28,000 31,100 118% No  Austria 277,074 8.3 29,300 32,800 124% Yes  Greece 237,494 11.2 22,100 20,700 93% Yes  Denmark 222,893 5.5 28,400 40,300 121% No  Ireland 163,543 4.4 29,800 35,700 127% Yes  Finland 170,971 5.3 26,600 32,100 113% Yes  Portugal 167,633 10.6 18,800 15,800 80% Yes  Czech Republic 137,246 10.3 19,200 13,100 82% No  Romania 115,869 21.5 10,900 5,400 46% No  Hungary 93,086 10.0 15,300 9,300 65% No  Slovakia 63,332 5.4 17,200 11,600 73% Yes  Luxembourg 37,755 0.5 63,900 76,500 271% Yes  Slovenia 34,894 2.0 20,700 17,300 88% Yes  Bulgaria 33,877 7.6 10,900 4,700 44% No  Lithuania 26,650 3.4 12,900 7,900 55% No  Latvia 18,539 2.3 12,200 8,200 52% No  Cyprus 16,947 0.8 23,200 21,200 98% Yes  Estonia 13,730 1.3 15,000 10,300 64% Yes  Malta 5,720 0.4 19,000 14,100 81% Yes (Eurostat, 2011). As can be seen, each of the countries, as well as the EU, are continuously growing and the GDP is providing more opportunity for those belonging to the EU. When looking at the developing countries, such as Bulgaria and Romania, there is not as large of an increase, with 44-46% being the GDP. However, this may also be linked to factors such as population and the growth of different types of exports and imports within the region. Generally, the amount of GDP in each region is consistently growing, while keeping the same pace as the developed countries in the nation (WTO, 2009). GDP of specific countries Bulgaria, Romania, Greece, Italy, Spain The changes in the GDP have also affected the living standards that are associated with each of the regions. The focus of the EU to unite the continent has also led to a demand that living standards and humanitarian practices should be added into the specific needs, as this provides a representation of the continent. This began in 2004 with the admittance of the countries of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Poland and other second world countries. Bulgaria and Romania joined in 2007 and have led the EU to meet specific applications for living standards. Legislation for this has included changes with agriculture, culture, customs and basic humanitarian acts needed for the communities. The changes in standards are now based on altering the standards among the extreme poor while adding in aid for education, training and assistance to stop poverty and to assist with employment and human rights. This has led to an increase in the living standards and has provided new opportunities for those that are a part of the EU (Europa, 2011). Even though the basics of the EU has allowed the developing countries to move forward, there are also considerations in terms of trading with other countries, as well as barriers which were enforced when adding in the second world countries to the EU. When the free trade areas were created, the more developed countries were easily able to move into the region and begin heightening the imports and exports that were available. The free trade areas allowed an imbalance between nations, with some having the ability to create more opportunity, while developing countries didn’t have the necessary resources to continue with the same options. The result was the creation of the Euro – Mediterranean scheme, which regulated the amount of trade that was between each of the nations while providing extra assistance to those who were still developing, while monitoring the amount of opportunity with the free trade areas. The result was the ability for the developing countries to have an additional increase of 20-27% of products that were exported and imported while providing policies that continue to monitor the available opportunities between the nations (Peridy, 2005). The trade that has been developed with the internal components and the free trade areas has allowed the EU as a whole to regulate trade while beginning to grow the amount of imports and exports provided. Graph 1 shows the changes this has created for the EU as a major world entity. Graph 1: Merchandise Trade Between Canada and EU This shows that the expots and imports have increased between the two areas, also which are known as a free trade zone until 2007. While there was a slight fall in 2008, it can be noted that this was directly linked to the global recession which occurred. The balance between the two countries has also increased, showing that the trade will continue to grow and change in terms of trade (Gauthier, Lapointe, 2010). The fast growth is now known to carry an average of 40% of the export and import trade in the EU. However, similar to the internal problems which led to the agreement with the Mediterranean, there are other policies and barriers which have been created with those admitted into the EU, specifically for international relations. The foundation to this is the Trade Barriers Regulation, also known as TBR. The component is to look at the trade barriers of other countries and to find ways to remove the obstacles that may prevent the EU from growth. There are also unfair trade practices between those belonging to the EU and the nations which are continuing to function without belonging to the nation. To monitor this, trade regulations have been identified with other nations which the EU matches. Controversies include the ability to change prices to lower options from other countries, taxes that may be added or subtracted from third world countries and a lack of safety which may be found in products sold, such as pharmaceuticals. Investigations take place with the TBR in which regulations are set in place in terms of the products and processes for sale, specifically to monitor the free trade occurring between nations (ECT, 2011). For developing countries, this may limit the capacities for trade, specifically because of the limited resources. To balance this, the EU is stepping in to make sure that the regulations are met while the resources and funding is provided for development of the countries involved in the EU. Changes in the Internal Market After EU While there are regulations provided by the EU, as well as growth and change for the developing countries, there are also changes in the internal market that have applied. There are two main areas that have changed in terms of the internal market in the developing countries. The first is social dumping. This is based on the connections between the EU and various institutions. As the connections tighten, policies are given and the environment within institutions begins to change. The social dumping then occurs, which reinforces specific policies and leads several to begin to change their direction in terms of their social status and expectations within the economy. The second aspect which is changing within the internal market is the competition that is within the region. Many are now competing against not only internal companies, but also other EU nations and the globe to continue to move into the competition and to heighten the export and import status. This amount of competition, despite the regulations of the EU, has led to a divergence of the opening of the nation and is causing both institutions and individuals to have an increased sense of competition to continue to develop within the region (Cremers, Dolvik, Bosch, 2007). A noticed change in the competition, both at the social and economic level, can be seen through the aggregate demand and supply of the nations. This has caused several of the second world countries to lack in the development and competition, despite the regulations of the EU, as seen in Graph 2. Graph 2: Aggregate Demand and Supply of EU Countries (Eurostat, 2010). It can be seen from this chart that all of the developing countries, including Gree, Spain, Italy and Romana, remain in the negative of aggregate supply and demand. The developed countries, specifically with Germany and the Netherlands are taking most of the competition. However, this may not be attributed to the development of the countries, as other developed countries, such as the UK, remains in the negative amounts for supply and demand. This shows that there is a basis in terms of resources as well as the ability to compete within the given regions (Hagen, 2011). PESTEL The differences between countries not only attribute to the main concepts of competition and the economy. When looking at different analysis, it can be seen that the differences are reliant on the outside analysis. The PESTEL Analysis of the EU is one of the attributes which shows how the macro-environment is influencing the competition and the development of each of the countries. Political: Internal influences of politics still have the same national agenda that is a part of the system. However, the EU is clearly based on a capitalist structure that is competitive in nature. The political assistance for developing countries as well as the ability for the national politics within a country to develop in a specific manner is one which is currently limited. For this to work effectively, Europe will have to work toward a continental standard in which each of the countries comply with the same policies and agendas for political decisions. Economic: The economic fluctuations are one of the areas that the EU continues to grow; however, it is leaving several of the growing nations behind. The economics for trade consist of 40% of the demand for exports and imports. However, there are specific countries that are dominating over this, while the aggregate supply and demand of developing countries is unable to compete with those that are already established and have specific systems. Overall, the GDP is able to grow within the EU, with expectations that this will grow by 3% within 2011; however, this may not assist the developing countries in producing the right resources (EU Stocks, 2011). Social: The social environment is another area that is beginning to change, specifically with the demands and competition. While there are more options for higher standards of living and assistance from the EU, there are also limitations because of the cultural and customary differences. While some regions are able to comply and change according to policies, others are limited to the customary acts of the region. Technological: The technological area is a strength for the EU as a whole, as can be seen in Graph 3. Graph 3: Technical Analysis of EU As can be seen from this chart, there is a continuous rise in the use of technology even in the last quarter. For developing countries, the movement into technology can work in favor of development while providing more competition among those that are interested in the technology (EU Stocks, 2011). Environmental: The environmental issues are continuing to remain as an agenda of the EU. The problem is based on the concepts of climate change and the understanding of environmental responsibility, especially for the developing nations. To counteract this, the EU has created programs to reduce carbon emissions and to begin creating awareness with the environment. This is assisting in new ways of production, resources to help with the alterations for the globe and the ability to remain competitive with a sense of environmental awareness (Europa, 2011). Legal: The main attribute is the barriers that are being considered in terms of other countries. There is competition that is based on the growing countries within Europe, as well as at a national level. The TBR is the only legal implication that is able to work with this by taking disputes and trying to regulate policies according to custom circumstances. However, the legal framework is limited by the capacities that are associated with the new aspects of the EU (Europa, 2011). Porter’s Five Forces The development of the EU is leading to new areas of competition, specifically as seen with Porter’s five forces. The competition is coming from the global environment as well as from the internal changes that are associated with the countries. The competitive rivalry within the industry is based on the countries competitiveness within the nation. This is furthered by the competitiveness against other countries that are within the EU, which move into competition at a global level. These three areas of competition lead to the need to continue to develop at a rapid pace and to receive resources at a higher rate. The bargaining power of suppliers and customers is the first area which each country is affected. This is best seen by the trade barriers of the EU, specifically which gives bargaining power to competitors that are supplying the same products or services but which offer different prices or tax rates because of the amount it takes to produce something in the given country. The customers also have the right to bargain, specifically because there are more options available at a national and global level. Those in developing countries may be at an advantage because of lower rates which can be made available; however, when working with the EU, this becomes regulated and allows other European competitors to have the advantage of those in the country. The threats of new entrants and substitute products are another consideration. New entrants consist of other countries that are not a part of the EU as well as other developing institutions across the globe. This can continue to increase and rise, especially with new components in technology that continue to be introduced. Substitute products can follow this all which can offer different levels of quality, makes that slightly differ or pricing that is competitive. For the EU to continue to compete with the trade has to remain under specific regulations and both the developing and developed countries have to initiate efforts to balance the competition at a global level. Conclusion The development of the EU is one that is providing new movements forward in terms of a global economy. However, the developing nations are often left at a disadvantage in growing to create a different level of competition. The lack of resources and the unification with the other countries is causing for higher competition and an establishment of specific policies that may not help with the growth of the country. However, there are advantages in allowing the countries to develop, changing living standards and in assistance from the EU for monetary development. These two aspects show both the positive and negative implications of the developing countries that are now connected to the EU. References CIA. (2009). The CIA World Factbook, 2009. Washington DC: Skyhorse Publishing. Cremers, Jan, Jon Dolvik, Gerhard Bosch. (2007). “Posting of Workers in the Single Market: Attempts to Prevent Social Dumping and Regime Competition in the EU.” Industrial Relations Journal 38 (6). 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