The European Union Fact Sheet

For Edexcel A2 Business Unit 3

Free Trade & Common Markets

Groups of countries that trade freely together without any barriers,
are known as free trade areas. Each member of a free trade area
retains its own separate trade policies with countries outside. E.g.
There is a free trade area between the USA, Mexico and Canada.
A Common Market has free trade within the area. It has its own
single policy for trade to countries outside the group. Also, in a
common market, there is free movement of people and capital. The
European Union itself is one large common market, British residents
can move to other countries in the EU to live and work.

Single Markets and the EU

A single market is the term used to describe a trade bloc in which
most of the barriers have been removed. The EU is in fact a single
market, and has been gradually working towards this since 1980s.
It has created many opportunities by opening up new markets,
allowing products to be sold and shipped into different countries
within the EU and provided the choice of cheap labour. Being a
single market, countries within have free movement is people which
allows new opportunities for working and living.

Who is part of the European Union?

EU

Austria; Belgium; Bulgaria; Croatia; Rep. of Cyprus; Czech Republic;

Denmark; Estonia; Finland; France; Germany; Greece; Hungary;
Ireland; Italy; Latvia; Lithuania; Luxembourg; Malta; Netherlands;
Poland; Portugal; Romania; Slovakia; Slovenia; Spain; Sweden; UK.

History of the EU
The EU started in 1957 under the name EEC or European
Economic Community. At this time there were only 6 members
until the UK joined in 1973 shortly followed by more countries.
In 1993, the current name was introduced. By 2004 many
eastern European countries had joined, and now in 2015 there
are 28 countries. The initial aim was to create a level playing
field in terms of manufacture and sales of goods. Businesses
now have to stick to strict EU laws and regulations so that
quality and safety is standardised throughout each country.
Content to Lee Murphy Via Get Revising.
Images are from external sources all rights reserved.

The European Union Fact Sheet

For Edexcel A2 Business Unit 3

Trade Creation & Diversion

Trade creation refers to the quantity of total goods and services
trading within a bloc. Trade Diversion refers to the quantity of
total goods and services trading between a non-member and
member in a bloc. The EU has helped influence these by removing
barriers and restrictions within the member countries which has
allowed more imports and exports. With this being possible, it has
opened up a much wider market where businesses can reach their
target market in different countries, or potentially find a new gap.
With the increased competition within markets, businesses have
more incentive to produce more efficiently and better meet
customer needs (Allocative efficiency).

Trade Policies CET & CAP

The EU has whats known as a CET or Common External Tariff,
which is an agreed quantity of imports of a product from a nonmember country; i.e. Members of the EU agree on a limit to the
number of goods imported of a specific category. The CAP or
Common Agricultural Policy protects EU farmers from foreign
competition to retain a viable market for local farms; this is a form
of trade diversion.

Benefits vs Barriers of the European Union

The benefits of the EU mainly relate to trade and how it has
increased over time. There have also been many positive legal and
political aspects of the EU such as the anti-competitive practices.
There are still barriers that exist, particularly in the quaternary
sector where specific skills are required and are heavily influenced
by the media and government regulations or beliefs.

Will the UK one day have the Euro?

Currently only 19 out of 28 countries use the Euro. The UK would
benefit from the Euro as there would be no exchange rates
between other Euro countries, which would therefore encourage
businesses to export more goods from the UK. By having the pound,
we have better control over taxes and bank rates of inflation which
can be increased or decreased as appropriate for the UK.

Content to Lee Murphy Via Get Revising.

Images are from external sources all rights reserved.