Benefits and Costs of UK Membership in the European Union - Essay Example

s Sovereignty Number Introduction UK’s membership to the EU has influenced its economy in several ways. The most significant impacts are as a result of the single market, the economic integration programme which the four freedoms of EU are guaranteed. The economic impact of the EU is also felt in other aspects of its policy, too. The EU contains exclusive competence to carry out negotiations on trade and investment treaties with nations outside the union; it is a customs union with a common external tariff in goods that are imported (Anderson, & Reichert, 2012, P.239). Therefore membership has profound impacts on the UK’s trade relations with EU non-members. The UK’s contributions to the EU budget has got also fiscal consequences as the consumer prices get affected through the common Agricultural Policy and common external tariffs that are levied on imports.EU membership also can influence the foreigners’ decisions on whether to invest in the UK or not. Being able to understand the these economic impacts gives us a good framework to do an evaluation on the benefits and costs of EU membership, but provides no information on whether UK would be at a better position by staying outside EU.I n order to establish this we require a counterfactual scenario for cost-benefit purposes (Anderson, & Reichert, 2012, P.244). i) Broad Economic Benefits The United Kingdom becomes part of the world’s largest single market by being a member of the European Union. The single market is an economic zone that is larger than that of Japan and USA together with a GDP of around 11 trillion pounds. This single market that has over 500 million people gives a level ground for British business to trade in.This helps not only in enabling free trade with absence of customs duties or tariffs but also provides a common set of rules so that business need not to be in compliance with 27 different types of regulations. A research done by the European Commission indicates that the EU GDP was increased by 2.2%(233 million pounds) and there were 2.75 million job opportunities that created since the adoption of the single market between 1992 and 2006.The increase in GDP for UK was around 25 billion pounds. The Department of business of the government, skills & innovation gives an estimation that trade has increased between member states because of the single market (Baldwin, Francois, & Portes, 2013,P.125-147). The UK becomes part of the process for making rules and regulation in the single market for being a member of the EU.Britain through its council of ministers are given the opportunity to argue for existing rules reformation. If the UK could leave the EU and be part of the European Economic Area, she could be bound by great number of single market rules could have no say in the decision making process. The UK being traditionally an open, free trade economy has benefited greatly from the EU negotiations on behalf of the world’s greatest single market giving UK a much greater clout in such situations than it would have individually as a nation Another important economic benefit of UK’s membership to EU is the foreign direct investment(FDI) that is received by the UK,Most companies would locate UK just because she is part of the single market.UK has continued to get a big share of the world FDI,despite the financial crisis globally. For instance, the UK became the fifth greatest FDI recipient in 2009 after China, US, Hong Kong and France ($46 billion for UK) (Baldwin, Francois, & Portes, 2013, P.125-147). . ii) Business Benefits Apart from the single market benefits, there are other several ways through which UK benefits from its membership to EU.For example there has been right for free movement for EU citizens which is valuable for the employees since it enables recruitment from a wide range.Britsh companies and business employers have had the access to more potential workforce in order to deal with the skill and expertise shortage in the UK.The EU has also made life less bureaucratic for business through introduction of community trade mark, industrial designs registration and protection of intellectual property. Businesses in the EU are able to register an industrial design or a trade mark and have it recognized by all 27 member states. According to Bottasso & Sembenelli (2011) studies, the competition law of the EU has played a key role in in the reopening of the markets that were previously closed which has enabled expansion of companies on the continent. It has also helped in tackling away market monopolies in a way that has never been seen in Europe. The EU has also helped to lower telecom and energy costs which have greatly benefited businesses through the EU competition rules and also with the EU’s single market in energy put in place.  iii) Personal Benefits One of the obvious benefits to individulas is the freedom to live, travel, work and study any place in the EU.An EU citizen does not have to possess a visa card to travel to another EU state for up to a period of three months. You can stay longer than this period provided you register with the foreign country and be able to sufficiently sustain yourself. Almost 1.6 million British citizens reside in the EU and outside the United Kingdom. They are able to acquire the same rights as those of the original citizens. The EU citizens participate in democratic exercises such as voting wherever they live in the EU.The EU has also promoted liberalization in telecommunications as national monopolies have been abolished leading to a reduction in the price incurred by phone calls and increase of choices of providers and equipment. Consumers a have now benefited from the fairer and considerable regulation of the mobile telecoms thus reducing the notorious high prices that were before mostly when travelling abroad (Bottasso & Sembenelli, 2011, P.172). Costs of Membership i) Traditional Own Resources These refer to sugar levies and customs duties and the member states are responsible for collecting the same on behalf of the EU.The collections are viewed as the property of the EU and member state are compensated with 25% of the total collection for their collection costs. TOR accounted for 12% of the gross EU revenue in 2010.These payments are made to the No 1 account of the EU that is the Commission’s account in the United Kingdom (Baldwin, Francois, & Portes, 2013,P.138). . ii) VAT and Gross National Income (GNI) The adopted EU budget shows the total VAT and GNI based contributions for every year. These are levied on member states’s VAT bases and then harmonized according the Community rules. The VAT base is capped at 50% of each GNI of the member states. The intention of this rule is to make sure less prosperous states of the EU are not paying beyond their capacity proportional level. VAT usually account for a bigger percentage of a country’s national income especially at lower levels of prosperity.GNI contributions are directly made from consolidated Fund of HMG into the bank account of the EU commission (Baldwin, Francois, & Portes, 2013,P.137). . To examine on what extent the benefits of UK’s membership to EU overweigh the costs, this paper has elaborated on the key issues that need to be considered in arriving to a logical conclusion. The first issue is market issue in terms of econonmy.Uk’s membership to EU has been seen to give the country an economical advantage against the nonmember states. These economic factors include the investment opportunities, creation of jobs and Flexible market legislations for member states. The second issue is the social aspect; this is shown by liberalizing movement and interactions among the member states through enabling free movement of EU citizens without necessarily possessing visa cards. Thirdly, the benefits can be evaluated in terms of reduction in the cost of important resources such as energy and costs associated with telecommunications. To manage this, the EU has tried to cub the level of monopolization through allowing expansion of companies to offer cheaper and more available services. Finally the benefits can also be evaluated in terms of the reduction of customs duties and tariffs among the member states which has business costs to be relatively cheaper in terms of imports and exports. Conclusion The main objective of this paper is to come up with a novel and an answer that is more satisfactory of whether the benefits accrued to UK’s membership to EU outweighs its costs (Combining social and economic aspects) .The main findings from this research has shown a strong evidence on the positive impacts from having membership to the European Union despite the heterogeneous nature of the member states. We have found that the productivity and capital GDP increase with EU membership in the United Kingdom. The costs of being an EU member for UK have appeared to minor and that are common for any other states. This is enough evidence that the benefits associated with the EU membership have outweighed the costs accrued to the same. This study gives the direction further research on the benefits that may come as a result of the support for European integration. By using the UK as an example the general returns may be very high for other nations that may join the union. To achieve this, the main focus should be on the political-economic dimension of states to disentangle the various parts of the process of integration. Moreover, there should be mechanisms put in place to ensure transparency and political support for European integration (Smith, 2007, P.123). The other recommendation is that the EU should come up with new mechanisms to support a faster GDP and productivity growth rate for member states. This study has shown clearly how the UK has greatly benefited from the EU membership. Despite the costs incurred by the country through the Traditional Owned Resources, the Value Added Tax and the Gross National Income, the benefits still outweighs the costs.IT is true that UK can afford the costs and be able to sustain its UK membership. The globalization effect gives a good opportunity for countries to come together to address their economic, social and political challenges in more integrated manner ( Smith, 2007,P.127).. This will foster development in those effects and improving the living standards of their citizens References Anderson, C. J., & Reichert, M. S. 2012. Economic benefits and support for membership in the EU: A cross-national analysis. Journal of Public Policy, 15, 231-250. Baldwin, R. E., Francois, J. F., & Portes, R. 2013. The costs and benefits of eastern enlargement: the impact on the EU and central Europe. Economic policy, 12(24), 125-176. Bottasso, A., & Sembenelli, A. 2011. Market power, productivity and the EU Single Market Program: Evidence from a panel of Italian firms. European Economic Review, 45(1), 167-186. Smith, K. E. 2007. The evolution and application of EU membership conditionality (No. 12, pp. 105-140). Oxford University Press. Read More