European Business
Introduction
This assignment has been split into two parts, Part A and Part B.
Part A of the assignment I have been asked to produce a report for Eurotown on the general trading conditions that exist between the UK and France, Germany and Italy.
Part B of the assignment I have been asked to write a report on one of the new countries joining the European Union about its economic profile, the impact of enlargement on UK businesses and the implications for the EU Single Market.
Part A
As a local industrial journalist I feel I have invaluable information in which I can offer to Eurotown involving the general trading conditions that exist between the UK, France, Germany and Italy.
When a company from the UK or any other country, is thinking off trading with another company from another country, there are many factors that are too be considered. These factors are the balance of payment of their own country and off the country they are trading with, the exchange rate of their own country compared to the country they are trading with, the interest rates between the companies and countries and the current account of each country.
As we are aware, the countries we are dealing with are the UK and France, Germany and Italy. As all four countries are in the European Union, there is a free trade area for importing and exporting that exists between each of the four countries. A free trade area exists when there is no restriction on the movement of goods and services between the four countries. This also applies to the remaining eleven countries in the European Union. However, if one of the four countries decided to operate with another country that was outside the European Union, say the USA, and then there would be International Trade Barriers.
We need to take into consideration the balance of payment of each of the four countries. The balance of payment is a measure of whether the country is selling (exporting) more abroad than it is buying (importing) from abroad (a surplus) or the other way round (a deficit). If the UK has a surplus, this will tend to make the pound worth more to the Euro, so that imports become cheaper, for example a UK dealer in German cars. A deficit will have the reverse effect. Basically if a company wishes to operate with another company in a different country they will have to look at the balance of payment very carefully.
The European Union has been helped economically ever since World War II. Right after World War II’s end, Europe was struggling to hold on. The countries of the modern-day European Union thought it would be a good idea to come together and help each others struggling economy. To this day, this decision has had a very positive outcome on the EU’s economy. As shown in Diagram 1, the European Union combined together has the world’s highest GDP at 18.3 Trillion USD as compared to the United States’ 17.4 Trillion USD GDP and China’s 10.4 Trillion USD GDP. The idea
The European economy was effected in both negative and positive ways. In document 2, a
Economic integration is the joining of economic policies between different states/regions. This eliminates tariff and non-tariff barriers to the flow of goods, services and factors of production between the regions. Economic integration has varying levels referred to as trading blocs; these are a form economic integration. A trading bloc is a group of nations that have been made a bilateral or multilateral agreement. There are four types of trading blocs. The least advanced level is the Free Trade Area. The features of this level is that reduced tariff barriers between signatories, which at times are abandoned altogether and there is free movement of labour and capital and the non-member countries have an independent set of tariffs against member countries. The second level of economic integration is the Customs Union. This is a Free Trade Agreement plus a common external tariff. Member countries agree to reduce tariff barriers among themselves and they have in common, this is referred to as tax harmonisation. The Common Market is the third level of trade blocs. This has features of the Customs Union plus free movement of capital and labour and some policy harmonisation such as similar trade policies to prevent certain member countries having an unfair advantage. The European Union is an example of a Common Market and is an economic and political partnership that involves 28 European countries. It allows goods and people to be moved around and has its own currency, the euro, which is used by nineteen of the member countries (The UK excluded). It also has its own parliament and sets rules in a wide range of areas such as transport,...
Trade, of course, is only part of a larger network of relationships between our two countries. This network evolves in response to many complex influences, and exporters need to consider how our two countries' ever-expanding, ever-changing relationships will affect their activities. To take just a few examples:
European Commission. Economic and monetary union and the euro. Publications. Luxembourg: Publication Office of the European Union, 2012. Document.
· ‘Saturday May 1 will mark one of the most important days in recent European history’ (http://europa.eu.int). The continent will see the biggest expansion of EU to date when ten states become new members. For Ryanair new markets will open which suits its growth plans (www.ryanair.com).
Traversed by the rivers Rhine, Maas and Scheldt as they meander towards the North Sea, the Netherlands is a hub of transport and distribution: a natural gateway to Europe and centre for multinational enterprise. Its advantages include an advanced infrastructure both for transport and telecommunications. Many Asian and North American imports to Europe are transhipped at Rotterdam or Amsterdam, the country’s two transport centres.
These are very exciting times for our country, we are now part of the largest economic community the world has ever seen, opening the doors of opportunity for us, the Irish citizens, everywhere we look. Ireland's membership of the EU is seen by most to be of great benefit to the country as it will solidify the foundations of our economy as well as increase the awareness of Ireland as an investment opportunity for multi national companies; however, some will argue that the change would be detrimental to our nation in the long run.
Economic risk is another type of exchange risks companies have to consider when dealing globally. Changes in exchange rates are bound to affect the relative prices on imports and exports, and that will again affect the competitiveness of a company. An UK exporter dealing with companies in the US would not want the US$ to depreciate, because it would make the exports more expensive for the US market, thus the company will loose business.
All nations can get the benefits of free trade by being specialized in producing goods they have a comparative advantage and then trade them with goods produced by other nations in the world. This is evidenced by comparative advantage theory. Trade depends on many factors, country's history, institution, size and. geographical position and many more. Also, the countries put trade barriers for the exchange of their goods and services with other nations in order to protect their own company from foreign competition, or to protect consumers from undesirable products, or sometimes it may be inadvertent.
Mulle, E.D., Wedekind, G., Depoorter, I., Sattich, T., & Maltby, T. 2013. ‘EU Enlargement: Lessons from, and prospects for’. IES Working Paper 3. Pp 8-39.
With the introduction of the Euro Zone allowed the Anglo and INBS to compete in the Irish market. Unfortunately, this resulted in the willing...
Free trade can be defined as the free access to the market by individuals without any restriction or any trade barriers that can obstruct the trade process such as taxes, tariffs and import quotas. Free trade in its own way unites and brings people together. Most individuals love the concept of free trade because it gives them the ability to move freely and interact with the market. The whole idea of free trade is that it lowers the price of goods and services by promoting competition. Domestic producers will no longer be able to rely on government law and other forms of assistance, including quotas, which essentially force citizens to buy from them.
Free trade is a form of economic policy which allows countries to import and export goods among each other with no government interference. In recent years there has been a general consensus in economist’s stance on free trade. They view free trade as an asset. Free trade allows for an abundance of goods with increased varieties and increased availability. The products become cheaper for consumers and no one company monopolizes an industry. The system of free trade has been highly controversial. While free trade benefits consumers it has the potential to hurt manufacturers and businesses thus creating a debate between supporters of free trade and those with antagonistic positions.
There is one thing that differentiates the international business with the domestic business where it uses more than one currency in the commercial transaction. For example, if a company from British purchases some goods from a company from US, the international transaction will require for exchanging pounds and U.S. dollars which involve the foreign exchange market. In the foreign exchange market, any country that wish to do business with foreign country, the country need to convert their domestic currency into the foreign currency that they are wish to cooperate with through foreign exchange.