Business Environments in the Single European Market - Essay Example

? Business Environments in the Single European Market Introduction The formation of a single European market or economic block on the basis of a common market was the major objective of the Rome Treaty. The Treaty’s Article 2 stipulates that the cooperation shall have its task by forming a common market and increasingly estimating the member states’ economic policies, in an attempt to promote a harmonious growth of economic activities all through the Community, a balanced and continuous enlargement, increased stability, an increased raising of the living standards of the people in the member states and closer ties between the nations that belong to it (Alexandra, 2007, p.74). It is beyond reasonable doubt that the economic block was not an end to itself, however a way of achieving political and economic goals. Before going deeply into discussing the topic, it is important to describe the ‘common,’ ‘internal,’ and ‘single’ markets that are used nearly synonymously even though they have considerable nuances of meaning. The common market refers to a phase in the process of international integration, which according to a ruling of the Court of Justice, aims at doing away with all the barriers to trade between communities with a view of bring together national markets into one large market, forming conditions that are as close as possible to a legitimate internal market. It is important to tone that the Lisbon Treaty does not take into consideration the ‘single market’ concepts and those of the ‘common market.’ The words ‘common market’ were replaced the outcome of this stage of the process of integration, by the treaty, which on the operations of the European Union, according to the Treaty’s Article 26 is composed of an area that do not have internal frontiers whereby the free movement of individuals, capital, services and goods is ensured according to the Treaties’ stipulations (Barnard, 2012, p.99). There are several challenges that the community had to deal with during the stage of common market so as to attain the objective of single market. First, the formation of the common market needed the eradication of all export and import duties that existed between the member states of the community before the European Economic Community was formed. The member states successfully eliminated the custom obstacles even before the deadline set by the Treaty had expired and how they begun to put up some other barriers between them, immediately after they dismantled the tariffs, especially the technical barriers that were even more hard to deal with in some instances (Blanpain, 2012, p.65). The formation of a common market that looked like an internal market does not only mean that there was the trade liberalization among the member states that were taking part but also called for free movement of individuals, factors of production such as services, capital and labor. Furthermore, it involves a free formation of corporations and individuals in all the boundary of the member states so as to be in a position of exercising their business or professional activities (Rogovsky and Salais, 2012, p.73). Therefore, in order to talk about a common market, there has to be the availability of four major freedoms between the participating member states, including freedom of movement of services and goods, due to the eradication of the barriers of trade; freedom of movement of workers who are salaried and those that are not, as a result of the eradication of all the barriers to their entrance together with residence in the other member states; the freedom of formation of corporations and persons within the boundaries of the member states as well as of the offering of services by them within the countries that host them; and the freedom of movement of capital for the purposes of business and individual. Freedom seems like the key or main word of the common market (Lejour & Mooij & Nahuis, 2001, p.65). This paper will also raise awareness about the enlargement of the single market, to offer information as well as serving as a motivation for action. Furthermore, it will describe the process of enlargement in part, specifically the issues related to the single market and the economic benefits of the process. It will be important for the members of the region as it is expected to increase their knowledge about the opportunities of business across the new member states (Forslid, Haaland, Knarvik & Maestad, 1999, p.67). Enlargement of the EU single market Enlargement of the European single market is an historic opportunity for development both for EU and the new members. This will actually respond to the challenge that was set about ten years ago due to the tumbling of Iron Curtain, to enhance the progressiveness and stability that is presently being enjoyed by the member states of the EU further across the European continent to the advantage of everyone. Successful enlargement of the economic block will bring the applicant states into the economic and political structures of the Western Europe, thus promoting peace stability, development and democracy (Richard, Joseph & Richard, 2007). In addition, it will raise the weight of the region in the affairs of the world, and will offer a spur for development all through an enlarged European Union, via technological transfers, economies of scale, the spreading and sharing of organizational skills and enhancing the access of the member states to the expanding markets. The customers will gain through a wider choice as well as the lower costs which accrue from increased competition. The British businesses or companies will actually have a wide access to more that one hundred million new clients in an extended single market (Poissonneau, 2012, p.78). By having a close working relationship with the new member states and encouraging a constructive discussion within the region, there will be a great development among all the countries in a simultaneous manner. There will be stiff competition from some other member states for business and other commercial benefits. For one to be sure that their business capitalizes on the enlargement of the singe EU market, they should be aware of the opportunities that are offered and the best way of exploiting them. The opportunity of enlargement There is a golden chance to the establishment of a really all-inclusive European Union single market. Such would help in consigning the region’s cold war division to history. The enlargement will also help in dealing with some of the problems that have appeared difficult that face the region presently. For example, it will enhance the region’s dealing with the issue of international crime as it will enhance the co-operating between both the present and future member countries in fighting the trafficking of drugs and organized crimes (Bretherton, and John, 2006, p.72). Environmental standards will also be improved in the region to a great extent. The enlargement will also bring about considerable business opportunities for the companies that presently exist in the region. For instance, it is estimated that the eight largest applicants of Central Europe’ accession could raise the annual GDP of the UK by not less that two billion Euros. Some of the consequences of the enlargement include: Bringing down of the trade and business barriers. The companies within the economic block will gain from the extended access to probable the largest single market in the whole world fro investment and trade, consisting of more than five hundred million customers. Increasing the power of purchasing of the new member nations and hence the increased demand for the goods and services of the EU. Increasing the cross-border competitiveness of the companies of the region. That is, they will gain from the low cost inputs, a labor market that is diverse and larger, and more opportunities for the transfer of technology and extended economies of scale. The regions’ consumers will also benefit in a manner such that they will have a great access to a wider variety of products at affordable prices. In the long-term, it will serve as a bridge, consequently increasing economic partaking with the countries on the eastern and southern boundaries of Europe. It is true that some of the advantages of the enlargement of the single market are already being enjoyed. This is due to the fact that in the preparation or the membership of the EU, the applicants have to open up their markets, besides restructuring and reforming their economies. Consequently, this has resulted in a strong economic development in most of these nations. More so, it is widely known that the accession of most of these states is just a matter of time before it happens. This has made several businesses and companies in the region to consider putting heavy investments in the region for a long time and there has been a considerable rise in the trade volume between the candidates and the European Union (Brown, Deardorff, Djankov, & Stern, 2005, p.25). The enlargement process The process of negotiation with the candidate countries will ultimately culminate in the accession of treaties or agreements that will stipulate the details of the accession of each nation. Just like the earlier enlargements, many of the discussions will be about the progress of the applicants in the adoption of the acquis and limited periods of transition, giving the applicants more time for catching up, which might ne required in some regions before the full application of the acquis. The business relationships between the European Union and most of the applicants are presently supervised by the Europe Agreements. The agreements allow for tariff-free business in majority of the industrial products besides providing means of dealing with conflicts (Harrison, Rutherford, Tarr, David, 2007, p.55). The membership of European Union will integrate the applicants in a close manner with the wider economy of the EU, eliminating the remaining obstacles and making economic interaction much stronger. Enlargement will also enhance the process of adoption by the applicant nations of the economic forum agenda of EU, giving them encouragement to embrace measures that will lead to the making of their markets stronger. The community is slowly moving away from a kind of economy that has its basis on the regulation towards the creation of the best environment of business innovation, employment and competition. The current economic reform agenda of the community started with the Cardiff Process of the Presidency of the United Kingdom, which ensured accord on the modernization of the capital and product markets of the European Union (Keukeleire and Jennifer, 2008, p67). The process will call for some institutional changes within the European Union itself. This will include reforms to some of the regions’ institutions and on the processes of decision making, so as to ensure that there is proper operation of a wider union. The enlargement’s opportunities and challenges In order to fully capitalize on the benefits from the process of expansion, every applicant will have to be prepared well. They must have a complete process of industrial restructuring and economic reform, which is backed by European Union legislation’s transportation and the creation of structures required for the implementation and enforcement of the process (Davies 2012, p.77). The changes together with investment required for the aligning of the applicants with the requirements of the European Union in some cases might include periods of transition. The community has really made it clear that it will not be easy for periods as such to be given. Requests for such periods will be critically and carefully reviewed and will be subject to time lines that are very strict and limited, since the aim of such periods will be making expansion of the single market as fast and operational as possible. The macro-economic effect The expansion is expected to increase the gross domestic product in both the applicant nations and in the European Union. However, in the applicant states, continued growth of the GDP will slowly pull them toward the community’s average and form new business opportunities. Increased business integration with the economic block will result in s considerable boost the economic performance of the applicant countries. It will also result in development in the export markets for the manufacturers or producers in the present member states, whereas customers will gain from the rise in competition and variety. The applicant states have already started gaining from ventures, as the obstacles to free trade with the members of the single market are eliminated and business and legal frameworks created to the standards of the EU (Dinan, 2008, p.33). The applicant countries are encouraged to take part in the economic forum agenda of the European Union, which the Lisbon European Council carried forward recently; with the objective of creating the most dynamic economy in the world with high employment and based on knowledge. The applicant states will not immediately be enjoined in the EMU when they are accepted into the community, however, they will be regarded as member countries with derogation till when they will have attained all the requirements (Jacobs, et al. 2005, p.62). Tariffs’ removal The European Union accession and complete taking part in the single EU market will necessitate the elimination of any quotas and tariffs that will be remaining between the member states and the candidate countries. The new member states will also have to embrace the common external tariff of the EU. The current arrangements of trade between the EU and the applicant countries is already an assurance of trade that is tariff-free in many industrial goods, even though there are considerable exemptions in some like the products of agriculture, coal and steel. The reduction or complete elimination of the tariffs can bring about economic advantages via increase in trade, the decrease in economical distortions, and reduced filling of forms and bureaucracy. The applicant countries in the region of central Europe have shown their dedication and commitment to ensuring that there is cooperation by forming CEFTA (Central European Free Trade Association), which already encourages free trade among the applicant states (Hemerijck, et al, 2009, p.38). Foreign Direct Investment The expansion of the European Union single market will enhance competition in region for investment initiatives that are globally mobile. Although the applicant countries might have lower costs of labor, this is an advantage that will like disappear slowly. Any venture in the applicant nations which increases the GDP will result in gains across the European Union, not least in offering new opportunities of export (Hill, and Michael, 2005, p.78). The elimination of the trade barriers will bring about essential economic impacts to the region. New companies will find it easier to gain entry into the markets that were originally under the dominance of the local producers, opening up opportunities for companies from some other nations to make their investments and do business in a more effective and efficient way. Key to the approach of the community to negotiations with the applicant countries is the determination that the expansion has to promote the single market, and not detraction from it or even undermining it. This is an underlying concept that is reflected in the insistence by the community that any periods of transitions are very minimal and limited, and that it is critical to have effective implementation (Kenner, 2011, p.25). Free movement of services and goods There are many critical elements to making sure that there is free movement of goods and services within a common or single market. Nevertheless, the mutual agreement involves the acceptance of goods and service legally on sale in the other member countries. This includes the nationally accepted standards, testing and certification’s mutual recognition. It even becomes easies to take goods and services to the applicant countries as they try to harmonize their regulations with that of the European Union. Moreover, the applicant nations have begun the adoption of harmonized standards of the European Union and the recognized systems of accreditation for the bodies of testing and accreditation (Ross, Dooly and Hartsmar, 2012). This will help in the eradication of the problems that are at times experienced by those that attempt to sell their goods and services in these countries. The legislations of the union on the public procurement implies that the applicant countries will have to do away with the preferential treatment for the local producers in the supply and works contracts. Service’s liberalization like telecoms and energy will offer some new opportunities in the market sectors that were initially not accessible. Free movement of people The people’s free movement is composed of four major areas including; the free movement of labor, mutual qualifications’ recognition, the rights of citizens and the coordination between the member countries on matters social systems of security. The implementation of the business aspects of the people’s free movement is essential for the smooth operation of the single EU market and will consequently bring about economic benefits from the flexibility of the developed labor market and increased opportunities for the member states’ companies and employees internationally. The new member countries will be enjoined into the Schengen system that promotes cooperation to enable the running of minimal controls of internal borders for individuals, even though they might not do so right after being accepted into the community (Harrison, Rutherford, Tarr, & Dec, 2004, p.88). Research indicates that the expansion of the free movement of people will lead to a rise in the number of employees moving from one country to another within the community. The European Union’s policies encourage this freedom. Such measures include directives on the professional qualifications’ mutual recognition, which enhance entry to restricted professions in any of the member countries. Considerable permanent movement into the present European Member states is not likely, considering the potential for the economic development in the applicant nations as well as the high migration’s cultural costs like being separated or being away from the members of the family and barriers to language (Vonk, 2012). Free capital movement The capital market’s liberalization is a foundation of the European Union single market. Besides making sure that the applicants have solid and modern systems ready, the expansion will speed up the elimination of the remaining obstacles to the movements. Many candidate countries presently have restrictions on the acquisitions on a large scale by the real estate foreigners (regardless of whether they are agricultural, business, residential or industrial). The expansion will force the new member countries to do away with all these restrictions. As a consequence, the businesses currently in the region will venture into the states to utilize the new market opportunities presented to them (Westlake, 2009). Whether the barriers or obstacles are eliminated immediately once the applicants are accepted into the community will be a matter for discussions and negotiations. State aid policy and competition In the accession, the applicants will be required to accept the practices on EU in the area of policy of competition. This includes having to embrace the anti-trust rule of the EU and formation of proper authorities of competition. Since this is particularly an area of concern for this single market, we find that the DTI will specifically put its focus on the capabilities and resourcing of the organizations formed. The companies should take advantage and gain from the adoption of the state aid legislation of the EU in the applicant nations. This law will help in making sure that there is equal handling of all the companies that trade within the community or union (Smith, 2008). Whereas there is not exact definition of what State aid is constituted of, we find that there is a clear and very simple statement of principle that all the kinds of aid, whether the state offers them in a direct manner or even in an indirect manner via the resources of the state, is not in compatibility mode with the single market if it appears to threaten or hinder competition within the European Union. Aid can always appear in several various forms, such as grants being given to companies or organizations, training being offered to their staff, guarantees and loans, and even tax exemptions. Considering the significance of the matter to a fair and free single market economy, the implementation together with the transparency of the systems of state aid are being watched very closely by the DTI. It is also creating links with the relevant offices that are being formed in some of the applicant states to help in making stronger their supervision or administrative ability and the sharing of the best practice. Intellectual and property rights Regulations in the applicant states on intellectual and industrial property rights are in accordance with the international legislations. Its effectual implementation is a critical part of the business legal framework. The protection of patent is specifically essential in the industries that have high costs of R&D and long cycles of development. In order to reduce the possible disagreements between the community and national trademarks, there is an information mechanism in place that will help in dealing with the issues (Paul & John & Marc, 2001). In instances of disagreement with the earlier rights or even earlier national trademarks, a national court can help in settling the disputes, however, the European Court of Justice can provide preliminary decision or ruling, with the aim of ensuring that there is a consistent application of the community principles and laws. Social policy and Employment All of the new member countries will be bound by the Treaty of Amsterdam’s Chapter of Employment. The chapter stipulates the enhanced community cooperation on the matters of employment, promotion of employability and labor markets that are flexible. The member countries together agree to have yearly employment principles to the coordination of guidelines and policies to job creation. The member countries share best practice via plans’ peer review. The latest drop in the rate of employment within the community indicates that the approach might enable prosperity and development that will be beneficial to the consumers and producers all through the community (Patrick, 2001). In order to assist the leading applicant nations to move towards being accepted into the community, the United Kingdom is working with them actively on the further formation and implementation of strategies that would make them to be more close to the standards that exist for the member countries, and hence the guidelines of employment (Orbie, 2008, p.45). Conclusion The European single market has been existing for many years and has had very positive impacts on the member states and the region as a whole. The community has helped the people in those countries to find employments in some other countries without having to go through the difficult and tiresome processes that would have prevented them from doing so. In addition, the consumers have been able to find variety of products from different producers across the region thus making their standards of living more improved. The producers have also been able to cross the borders to find more markets for their goods and services easily. Therefore, for these benefits to continue being enjoyed by the member states, it would be important to encourage expansion so that new members are enjoined into the single market for their own and community benefits. Bibliographies Alexandra Ferreira Lopes 2007, "The Costs of EMU for Transition Countries," Money Macro and Finance (MMF) Research Group Conference 2006 2, Money Macro and Finance Research Group. Arjan, Mooij & Nahuis 2001, "EU enlargement: economic implications for countries and industries," CPB Document 11, CPB Netherlands Bureau for Economic Policy Analysis. Barnard C 2012, EU employment law. Oxford: Oxford University Press. Blanpain R 2012, European labour law. 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