With mention of international trade and investment theory, briefly outline the primary purpose of the European Union and the significance of the Single European Market for an EU-based business.
International trade is the exchange of goods and services between countries. International trade is distinguished from domestic trade since it takes place totally within a single country. International trade may also be called as 'world trade' or 'foreign trade' (International Trade).
While studying about the investment theory we need to analyze why nation's trade and gain a competitive advantage, why and how organizations internationalize and how do they sustain competitive advantage in the international arena. When we talk about a country Comparative advantage, they will be the Superior top features of a country which provide it with original benefits in global competition derived weather from national endowments or deliberate national policies. It is concept that helps answers the question all nations can gain and sustain national monetary superiority. Competitive Advantage of a country's firm is distinctive assets or competencies of any company produced from its size, assets, innovation strengths that are difficult for its opponents to duplicate or imitate. In other words the concepts tells us what sort of firm can gain and sustain distinctive competence vis a vis competitors. (Theories of International Trade and Investment, 2008) Single Market - European Union
The European Union is a group of Western European nations working to unite the monetary resources into a single economy. It really is a group of 27 member states which have been united to create a political and economical community throughout Europe. The European Union imports and exports more than any one country on earth. The community's chief trade partner is america. The community have special trade agreements with a great many other countries (European community).
The main purpose behind EU is to provide better economy to the poorer countries in Europe. In addition, it means that trade between these countries is cheaper. Aside from this europe aims to market economical and social progress and a high level of occupations, thus maintaining sustainable development and an improved standard of living and Gross Domestic Product of the economy. With the establishment of economical and monetary union, they create an area without internal frontiers, which includes a single currency and it creates trade easier. Among the reasons behind the forming of European Union was to give a common defence phenomenon. In this way all the members will be secure in conditions of defence. Throughout the introduction of the citizenship of Union, the rights and interests of the nationals are strengthened and protected (Folketinget).
Internally the European Union has abolished trade barriers, experiencing a currency and is continually striving to the convergence of improved living standards. The European Union faces a lot of difficulty in devising and enforcing common policies due to variations in the per capita income among member states. Between 2004 and 2007, 12 countries were put into europe which are generally less advanced than the rest of the 15 countries. Being a sizable Union, it includes a couple of transnational issues. The European Union itself does not have any border disputes with the neighbouring countries. But technically Estonia has no land agreements with Russia; on the other hand Slovenia disputes its land and maritime boundaries with Croatia. Similarly Spain has territorial and maritime problems with Morocco and with the united kingdom over Gibraltar (Central Intelligence Agency).
A single market is actually a trading bloc which is composed of a free of charge trading area, which has common policies and it there exists freedom of movement for the factors of production namely land, labour, capital and enterprise. The primary objective is these factors of production are mobile. All the trade barriers, whether by means of taxes that happen to be fiscal, physical such as the borders and technical barriers are removed so that trading policy becomes easier. In this way the countries can form a common monetary policy. The formulation of a single market leads to the freedom of movement of all the factors of production because of which the factors become economically efficient further increasing productivity. A single market economy can be competitive as it creates the existence of monopolies very difficult. This means that those companies who are producing inefficiently have to close down and as a result will suffer lack of market share.
To achieve the single market phenomenon has been a gradual and steady process The 1957 Treaty establishing the European Economic Community made it possible to abolish customs barriers within the Community and establish a common customs tariff to be applied to goods from non-EEC countries. This objective was achieved on 1 July 1968. However, customs duties are just taking care of of protectionist barriers to cross-border trade. In the 1970s, other trade barriers hampered the entire achievement of the normal market. Technical norms, health insurance and safety standards, national regulations on the to practice certain professions and exchange controls all restricted the free movement of people, goods and capital.
Single market within the European Union was established under the Single European Act, it was the core of the procedure of European financial integration, relating to the removal of obstacles to the free movement of goods, services, people, and capital between member states of the EU. It covers, among other benefits, the elimination of customs barriers, the liberalization of capital movements, the opening of public procurement markets, and the mutual recognition of professional qualifications. It came into influence on 1 January 1993 (Single European Markeyt).
The European Union commission has authority over a range of regions of economical policy which helps them to modify the single market. Its regulations are adopted into national law only when it is passed down to the national governments via directives. However, we can not describe europe as a true single market since it does not have a unified taxation or welfare system. The single currency is not practiced by all members of the European Union. It isn't even successful because some members including the Schengan Convention have opted from the monetary policies (EU facts, 2010). Despite of the fact the countries like Italy and France has signed a treaty with the EU, it still is a protectionist and it is not implementing completely new single market rules. This is an offending act. Yet Italy has to abolish a couple of technical rules, which restricts how trailers might be mounted on tractors. Similarly there are threats of possible cultural distinctions too. For example if Muslim states join may be they won't be able to endure the adjustments to the approach of women to meet up with the standards of europe. Then there may be destabilising effects if the criminal elements exploit the single market by not adhering to the economical policy.
Significance of the Single European Market for an EU-based business is the fact single market is no doubt the best achievement of europe, although single market is not yet turned into a single monetary area some sectors i. e. the public services still are put through national laws these countries are also have the obligations of taxations and social welfare. EU has set up many policies to make sure market liberalization suits all the markets and the consumers of the EU member countries. However, a wider market is available for both the consumers and the producers. Consumer protection has increased because of the standard policies implemented by europe in order to protect the consumers from being exploited. Regular checks are made about the protection of the standards. Common standards are located on goods and services, meaning goods don't have to be retested once they reach other member states. This escalates the knowledge of both the consumers and the producers and eventually leads to creating greater competition among firms. Workers are given a lot of preference and protection. They are simply mobile plus they can work with the same rights in virtually any of the member states. This eventually brings about less disparity in wages among member states, which is much more convenient for the labours to find for jobs (bizled).
The impact of emerging countries such as China, India, Russia or Brazi
BRICs to be well known as, included in these are countries such as Brazil, Russia, India, China and the South Africa. China formally invited South Africa this year 2010, which is main African countries to join the BRICs. These are all countries which are deemed to be all at an identical stage of economical development. They all belong to the third world countries. These countries have attracted the most investor attention, providing a lot of opportunities for the investors to invest in these countries (Bloomberg Business Week, 2005). These countries hold 40% of the world population and take into account 20% of the Gross domestic product.
The emerging of these markets reflects self-confidence. The most significant world markets are working to recuperate fast plus they plus they have started to think that the recession may mark as another milestone in the worldwide shift of financial power away from the West. When there was a recession generally in most parts of the world, India and China accounted for a minimum of half the worlds increase in wireless technology. In Brazil even though the GDP fell slightly in the first quarter, but still it fell is an inferior ratio in Brazil than in Latin America (The Economist).
It has been predicted that the agricultural output will grow three times as fast in the BRIC countries than in the other major developed countries. For world agricultural production, developing countries provides the main way to obtain growth. It's been expected that because of the rising incomes, you will see a shift from the staple food towards meat and processed food items that will favour livestock and dairy products. The projected growth of most exports and imports is likely to increase. It also illustrates how, despite their divergent financial bases, the financial indicators are remarkably similar in global rankings between the different economies. It also suggests that, while monetary arguments can be produced for linking Mexico in to the BRIC thesis, the truth for including South Korea looks considerably weaker. A Goldman Sachs paper published later in December 2005 explained why Mexico was not contained in the original BRICs (BRIC).
Strategies where UK and EU companies may benefit from the rise of these countries
The European Union is the world's biggest trader, accounting for 20% of global imports and exports. Open trade among its members underpinned the launch of the EU almost 50 years ago and has taken growing prosperity to all its member states. The Union therefore requires a lead in efforts to open up world trade for the advantage of rich and poor countries alike.
Increased trade will probably boost world growth to everybody's advantage. It brings consumers a wider selection of products to choose from. Competition between imports and local products lowers prices and raises quality. The EU believes that globalisation can bring economic benefits to all, like the developing countries, provided appropriate rules are adopted at the multilateral level and efforts are created to integrate developing countries in world trade.
That is why the European Union is negotiating using its partners to open up trade in both goods and services. The EU seeks to help developing countries by giving them better access to its market for a while, while allowing them more time to open their own markets to European products. At exactly the same time, the EU is reforming its agricultural policy - and this too will benefit developing countries (htt1).
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