Essay on European Union (EU) Trading Bloc

What are the implications of the EU trading bloc for international business?

The European Union (EU) is one of the world’s biggest trade blocs and one of the world’s largest economies after the United States (Bollen, De Ville & Orbie, 2016). The EU has enabled regional economic integration for most European nations. More importantly, it allowed these European countries to spend much of their resources on relevant issues within the domain of development and trade. The EU triggers numerous impacts on international businesses. First, it creates opportunities for work and investment (Sbragia, 2010). The EU has created more opportunities for European nations and other countries to trade against each other. In addition to creating a regional trading bloc, it has created a foreign market for states, including China (Damro, 2012). The EU is one of China’s largest trading partner. In the period between 2009 and 2010, businesses in China exported more than 38 percent of their products to the EU (Damro, 2012). This was a significant improvement as international companies were often forced to ship their products to individual European countries.

The EU makes it much cheaper for businesses to export their products to Europe (Damro, 2012). More significantly, custom regulations and tariffs that may be imposed at each European country’s border does not exist due to the EU; all nations in this region are joined under standard tariffs and regulations. As regulations are smoothened and tariffs are reduced, the cost of supplies drops. In most cases, small companies in different parts of the world find it easier to source raw materials and finished goods from Europe. The businesses that take advantage of reduced tariffs and regulation in the EU thrive (Baldwin & Seghezza, 2010). The EU also allows space for increased efficiency and productivity for larger international businesses. Companies that conduct their operations with the EU benefit broadly; they scale up their productivity and save money. Multinational companies that trade with the EU have access to larger market size. Most countries in Europe have a population of fewer than 20 million people. At the same time, seven states in the European Union have populations greater than 20 million. When combined, the populations of these countries closely equates to that of the United States. This instance also creates a huge market for countries trading with the EU.

Is the EU helpful or harmful? Why?

When the EU was set up, its members only concentrated on establishing a single market. But it became evident that stronger economic and monetary cooperation was required for the further growth and stability of the internal market. Nonetheless, the EU triggered other advantages as well; in fact, since this trading bloc was established, it has delivered more than half a century of peace, stability, and prosperity (Della Sala, 2018). The union has helped raise people’s standards of living and assisted in creating a single European currency (the euro). Notably, the EU led to the creation of central European power and allowed the establishment of institutions such as the European Parliament and the European Court of Justice, which oversee members’ interests (Della Sala, 2018). Apart from developing a central European power, the EU has allowed its members to experience a sense of security; therefore, it would be correct to say that the EU is helpful.

The EU abolished border controls between European nations. Today European citizens can travel freely throughout most of the continent, an instance that has made it easier for citizens to work and live in European countries they see fit. European citizens are allowed the freedom to choose with European countries they want to work in, study, or retire. In other words, the union created an umbrella that protects European citizens. Before the EU, countries in Europe had individual employment and taxation laws. But today, countries joined by the treaty on the European Union are directed to treat each European citizen in the same manner as they would treat their citizens in matters such as social security, tax, and employment (Della Sala, 2018). The euro, as a currency of the European Union, has also led to significant benefits. The single currency system in the region triggered new opportunities in the global economy; in fact, the euro made Europe an attractive region for developing countries to conduct business; the euro brought and promoted trade and investment in the area.

The EU has also increased human rights protection in Europe (Della Sala, 2018). It is essential to understand that two main streams of human rights policy and action in the EU exist. Protecting people’s fundamental rights is the first mainstream and promoting human rights on an international level is the second mainstream. The European Union charter of fundamental rights ensures that European citizens are protected. The charter also lays out the fundamental rights that are binding upon European Union institutions and bodies. Likewise, EU policies protect minorities and refugees. All in all, the EU has been helpful both economically and socially. It has led to prosperity and peace, and more importantly, it protects and promotes human rights.

How might the EU affect a firm’s investment decisions?

In most cases, investment decisions made by businesses are concerned with the issue of whether the addition of capital assets today will lead to an increase in revenue tomorrow. Therefore, firms’ investment decisions are capital commitments made in anticipation of economic returns at a future date. Many factors in and by the EU might affect a firm’s investment decision. The EU might affect investment decisions made by firms through EU reforms on investment or legislation (Fontanelli & Bianco, 2014). There are two distinct types of EU laws: primary and secondary. Primary legislation forms the basis of all EU actions. At the same time, secondary legislation includes directives, decisions, and regulations derived from the principles and objectives laid down in the Treaty on European Union. The legislation made in this case affects investment in numerous ways. In 2015, for example, the EU settled on a reformed approach to the settlement of investment disputes to remain up-to-date with high levels of legitimacy and transparency. Notably, this agreement introduced a more transparent and more precise rules on investment protection and created a permanent dispute settlement mechanism known as the Investment Court System. For a business understanding, this instance may help protect future investments.

EU economic policies might also affect firms’ investment decisions. It is worth noting that most of the EU’s economic policies create a stable and prosperous economic zone. For instance, the introduction of the euro in 1999 was meant to improve companies’ competitiveness in the region. But this action also affected foreign direct investment for companies in Europe and foreign companies planning to invest in Europe. Studies show that the adoption of the euro currency boosted the inward flow of foreign direct investment by around 16 percent within the euro region, 11 percent for non-members, and 8 percent for non-members within the euro area Fontanelli & Bianco, 2014). In like manner, investment for countries within the European zone increased as a result of the euro while companies in foreign countries faced a significant foreign exchange risk, an instance that led to an insufficient allocation of capital.

What opportunities are available to international business in the EU trade Bloc?

The European Union trade bloc is attractive for foreign investments. Each country within the union has its investment opportunity, and the European Union ensures unity, stability, and access to the market makes these opportunities more significant. There are numerous investment opportunities offered by the EU. First, businesses can invest in the real estate sector. Europe is considered one of the best regions that provide a suitable environment for real estate investors. The most notable real estate markets include Berlin, Lisbon, and Zagreb. These three European cities are experiencing increased levels of growth (Booth et al., 2015). It is essential to understand that commercial and residential real estate markets are quite expensive in these areas. Also, because of the COVID-19 pandemic, most properties in the region are yielding low cost, an instance that makes the actual underlying values of these properties appear higher than they are. While this may be confusing, this region is still attracting foreign investors for different reasons, but the European Central Bank’s monetary policy is one of the most significant reasons. Notably, this monetary policy does not regulate, and it is not involved in the real estate sector. This aspect makes real estate investments safe compared to other areas, such as stocks that are often expensive and volatile.

The transport industry is also ripe for investors. There has been an increased interest from investors around the world in the European transport industry. This increased interest is attributed to European travel companies, which are viewed as the source of global innovation. Most European transport companies have turned out to be innovators and pioneers in the sector of transportation. Another reason why the European transport sector is a good investment opportunity for foreign investors is its macroeconomic environment and increased online penetration (Booth et al., 2015). These aspects make traveling in Europe highly attractive globally. Furthermore, transport is the largest business globally and is the second-fastest-growing industry worldwide after health care. Therefore, if a company is looking to grow and invest in the EU, transport would provide a safe investment opportunity.

In addition to real estate and transportation, a business may consider the luxury goods industry. The luxury goods market is estimated to be above 250 billion dollars, and Europe leads this sector (Dhingra et al., 2017). Luxury goods may include goods in the categories of fashion, automobile, beverages, and so on. However, as time proceeds China and other emerging economies like India may overtake Europe as the world’s leading consumer of luxury products. Real estate, luxury goods, and transportation present the best investment opportunities in the EU. Although most European countries have been affected by the coronavirus pandemic, it is generally expected that they will bounce back steadily.

References

Baldwin, R. E., & Seghezza, E. (2010). Are trade blocs building or stumbling blocs? Journal of economic integration, 276-297.

Bollen, Y., De Ville, F., & Orbie, J. (2016). EU trade policy: persistent liberalisation, contentious protectionism. Journal of European Integration, 38(3), 279-294. https://doi.org/10.1080/07036337.2016.1140758

Booth, S., Howarth, C., Ruparel, R., & Swidlicki, P. (2015). What if…? The consequences, challenges & opportunities facing Britain outside EU.

Della Sala, V. (2018). Narrating Europe: the EU’s ontological security dilemma. European security, 27(3), 266-279.

Damro, C. (2012). Market power Europe. Journal of European Public Policy, 19(5), 682-699. https://doi.org/10.1080/13501763.2011.646779

Dhingra, S., Huang, H., Ottaviano, G., Paulo Pessoa, J., Sampson, T., & Van Reenen, J. (2017). The costs and benefits of leaving the EU: trade effects. Economic Policy, 32(92), 651-705.

Fontanelli, F., & Bianco, G. (2014). Converging towards NAFTA: an analysis of FTA investment chapters in the European Union and the United States. Stan. J. Int’l L., 50, 211.

Sbragia, A. (2010). The EU, the US, and trade policy: competitive interdependence in the management of globalization. Journal of European Public Policy, 17(3), 368-382.