International Economics

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International Economics

Assessment 2


Samantha Cochrane

In joining the European Union, the United Kingdom has been affected in many different ways. We have had the advantages and the disadvantages, the benefits and the costs.

Advantages to the EU cover many fields; there is greater specialisation and economies of scale, for example the more efficient a firm is in producing their product then the bigger the scale of production leading to higher capital for them and also leading to lower costs.

There would be more competition involved as the removal of trade barriers leads to more countries being involved leading to greater ideas and more innovation.

Trade between member states becomes quicker and cheaper as the EU is a customs union – a single market.

No tax tariffs will be imposed due to this and so this is another benefit of being part of the EU. This leads to cheaper prices for the consumers of all the imported products.

Consumers will also benefit from food heath and safety standards as all goods that are produced in the European Union must now carry, “Best Before” dates, price indicators and a list of ingredients, colourings and additives that they contain. British consumers need not worry about eating imported foreign foods from the EU as they all have pretty much the same standards.

Problems arise with the unemployment levels, as there are more businesses in every trade the less efficient firms tend to close down leaving the people who were employed in them unemployed.

The admin costs are likely to be high as running a trade bloc incurs high costs and it can be quite slow as it takes time to respond to changing economic and political events.

Combining common economic policies may be beneficial for the EU as a whole but could be damaging for UK firms in certain situations. A decline in customer’s demands would normally mean that the UK government would cut interest rates to encourage customers to keep spending. However the EU economic policy may dictate that interest rates are kept relatively high to combat rising inflation.

One question that has also been raised is that does the UK need to be a part of the EU, or does the EU need the UK?

Mr. Blair believes that the jobs currently resulting from trade with the EU would be lost if we left. However, a number of studies have found that if the UK were to leave the EU then it would have little impact on jobs, including a report by the National Institute for Economic and Social Research.

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Pain, N and Young, G., Continent Cut Off? The Macroeconomic Impact of British Withdrawal from the EU, NIESR, February 2000. Republished as, “The macroeconomic impact of UK Withdrawal from the EU”, Economic Modelling, 21 (2004), pp. 387-408. They concluded that there was, “no reason to suppose that unemployment would rise significantly if the UK were to withdraw from the EU”. However, they argued that foreign investment would fall, leading to a reduction in GDP of 2.25 per cent.

One of the main issues surrounding us at the moment is the decision whether or not to join the euro, ...

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