European Business Environment
European Business Environment
There is no doubt that the single market was expected to have been completed by the end of 1992, and this meant positive economic consequences for the European Community. From 1989, the European Commission initiated several attempts aimed at the harmonization of rules to govern the European Union and as well to provide significant steps to guide the integration of capital markets in Europe. The idea of the single European market entailed the creation of free trade area among member states characterized by lack of internal tariffs, standardized regulations, and uniform monetary policy and currency (Smith, 2010). Objectives that have been realized so far include the adoption of a unitary monetary policy and s single currency, joint responsibilities in multilateral trade, and coordination in the implementation of economic policies. While the project was supposedly complete as planned, much of its implementation has remained ‘project in continuous creation. Despite the few achievements, completion of the single market is far from over due to several gaps in pertinent sections ranging from administrative issues, legal issues, and lack of enforcement (Smith, 2010).
First, economic competition among member states based on the desire to achieve national interests as compared to the pursuance of interests that seeks to benefit the EU is a substantial impediment (Smith, 2010). Some of the states, such as the UK, have defied EU directives or rather have had a different interpretation of EU directives. This move puts consumers and companies at a limitation when compared to regions with minimal restrictions. Second, certain states have requested for derogations on certain elements within the single state thereby impeding reforms. For instance, France’s control of the energy sector has led to the energy being excluded from aspects of a single European market (Smith, 2010). Third, the move by the United Kingdom to be excluded from the Eurozone (single currency) is another impediment in the completion of the single market currency, one of the major objectives of the EU.
Fourth, the administrative structures and legal implications coupled with political and economic issues have also disrupted the realization of a single European market. This can be attributed to the lack of intergovernmental and established decision-making structures to govern the free movement of capital, goods, labor, and other services (Smith, 2010). Finally yet crucial, aspect of language barriers due to different languages in the majority of the member states is another major impediment to the completion of the free market.
Social dumping is the act of exporting goods from a country, which are weak, and the exporters prices are lower compared to the ones charged by its competitors or at the home market, therefore bringing about an unjust advantage in the global trade (Daniel, 2009). It is discouraged by the World Trade Organization (however not prohibited) if it results in injury to a home country industry in the importing country.
The single market in the Euro zone exposes firms, operating in a domestic market to competition with others in the European Union. This mounts a pressure on firms with high wage costs to produce at a level, which enables them to compete with other firms in the Union, which have lower wage costs.
National labor laws impose some indirect labor costs on firms, for example, costs associated with conformity with labor standards and protection schemes. Lower social and labor standards in some member countries might involve lesser indirect costs of labor giving them a competitive edge over firms from member countries with higher social and labor standards (Daniel, 2009). However, these advantages might be compensated by other factors favoring firms in countries with high labor and social standards for example good infrastructure and a more skilled workforce. All the same, a competitive advantage will still exist.
A joint and genuine fiscal policy will help curb the social dumping problem in the European Union. This will help bring about harmonization of indirect labor costs for all the firms in the member states. Consequently, this eliminates the risk of uneven standards altering competition in support of the member countries with relatively low standards.
Labor market policy is one of the important instruments to reduce social dumping in the European Union. This strategy will help in reducing competition resulting from across the border shopping (Daniel, 2009). For example, setting up minimum wages and labor standards. The social dumping war in this case attempts to get rid of unfair competition brought by insufficient social provision thus protecting workers and develops a social security to the backward ones. Additionally, redistribution of tax burden on some enterprises will also help reduce the existing competition thus reducing the incidences of social dumping.
These policies call for a tax union, Social union, unified wage system and a joint bargaining system. The fiscal policies will help in stabilizing the economic trends by controlling both the expenditure and income.
Daniel, A., 2009. Union Socio-Political Trends in the Member States of the European.
Smith, M., P, 2010, “Single market, global competition: regulating the European market
in a global economy.” Journal of European Public Policy. 17(7)