Common agricultural policy
The creation of a common agricultural policy was proposed in 1960 by the European commission. The six member countries wanted to intervene in agriculture to control how agriculture was organised and guarantee prices for goods. They wanted to increase productivity, ensure a fair standard of living for those within the European Union, stabilise markets and provide a secure availability of supplies, while providing the consumer with reasonable prices for agricultural products. The CAP is a system that maintains the prices of products by using subsides to support production. Subsides have helped to make EU countries self sufficient in food.
Taxation
In the European Union governments retain the sole right to maintain and set levels of direct taxes. These are the taxes they set for incomes and company profits. Instead EU taxation policy focuses upon indirect taxes. Indirect taxes include value added tax and excise duties. It is argued that where VAT or excise duties are put on petrol, drinks and cigarettes, they have the capability to distort competition in what should be a free market. Some of the EU budget is funded from VAT. By having a common approach to this, it means that contributions to the EU are fairly distributed across all markets.
Marks & Spencer is an example of a company that trades both in the domestic and European markets. The company owns and operates nearly 100 additional Marks & Spencer stores in Europe, Hong Kong, and Canada as well as franchise outlets for its products. It has been able to expand thanks to European business initiatives abroad and has made many profits there. However this expansion has not been without its problems for Marks and Spencer.
For example when Marks and Spencer was forced to close its French stores to save money, it was not without its critics in Europe. It was argued that Marks and Spencer did not consult with its French work force before closing its French outlets. The consequence of this was that workers were left feeling unprepared for their redundancies.
This situation resulted in the decision by the EU to discuss new directives for information and consultation of workers when companies engage in industrial restructuring.
Marks and Spencer was also involved in a tax dispute with EU states. Marks & Spencer, the Britain's largest clothing retailer, sought a rebate of more than 30 million pounds, arguing that it should have been allowed to deduct losses made at its Belgian, French and German units.
Marks & Spencer expanded from its UK market and established subsidiaries in Belgium, France, Germany and Spain. In the late 1990s, these units incurred increasingly heavy losses according to court documents. In early 2001, the retailer decided to close the businesses.
The company sought to offset losses between 1998 and 2001 through group tax relief under UK law. The rule allows a member of a group of UK companies to transfer a loss to another member, a process known as tax consolidation.
The request was refused. British authorities said group relief can only be claimed for losses in the UK Marks & Spencer appealed, arguing the legislation harms companies that have subsidiaries outside the country, a violation of EU law. The UK High Court referred the case to the EU tribunal. .
Marks & Spencer eventually won the crucial European court judgement which could rewrite UK company tax law and cost the Treasury billions.
Judges in Luxembourg said the Inland Revenue's refusal to allow companies to offset their losses in another EU country against their UK profits violated European Union rules
The verdict has saved Marks & Spencer an estimated £30 million whilst at the same time giving the treasury future problems when dealing with companies in the same positions as Marks and Spencer found itself.
Marks and Spencer prides itself on being an ethical company and it has shown this side of itself on a number of occasions.
Recently Marks and Spencer joined forces with other high street companies to campaign against the EU from bringing back cosmetics tests on animals in a new law on chemicals. The coalition have signed up to a joint declaration as it launches a nation wide advertising campaign to urge Britons to fight for their right to keep cosmetics cruelty free.
Millions of animals could be made to suffer painful and inefficient tests if new EU legislation to regulate chemicals – known as the Regulation, Evaluation and Authorisation of Chemicals. The UK stopped licensing cosmetic animal tests in 1998 due to broad public opposition but this new legislation could mean that companies will be forced to test cosmetics on animals regardless of what they or their customers want.
Marks and Spencer has also been warned by Europe’s Trade Commissioner Peter Mandelson about the illegal dumping of goods on European markets.
He was referring to the free flow of unfairly cheap Chinese and Asian products that were not in the long term interests of consumers even if it meant lower prices in the shops in the short term.
In the past Mr Mandelson had been forced to order quota limits on imports of millions of euro worth of Chinese made clothes, including bras in order to prevent the dumping of substandard goods.
The world trade organisation
The World Trade Organisation (WTO) is an international body whose purpose is to promote free trade by persuading countries to abolish import tariffs and other barriers. As such, it has become closely associated with globalisation.
The WTO is the only international agency overseeing the rules of international trade. It polices free trade agreements, settles trade disputes between governments and organises trade negotiations.
WTO decisions are absolute and every member must abide by its rulings. So, when the US and the European Union are in dispute over bananas or beef, it is the WTO which acts as judge and jury. WTO members are empowered by the organisation to enforce its decisions by imposing trade sanctions against countries that have breached the rules.
The general agreement on tariffs and trade was the predecessor of the world trade organisation.
The general agreement of trade and tariffs was formally set up in 1947 to operate on three levels
- to create set of trading rules.
- as an international agency for helping to resolve trade disputes
- as a means for countries to get together to create freer trade and to cut down existing barriers.
The WTO was formed in 1994 to replace the GATT treaty under the Uruguay round of talks.
The countries who signed into GATT agreed to go through a series of agreements called a round creating agreements to reduce certain tariffs. There have been nine trade negotiation rounds under GATT, one of which is still going on.
The world trade organisation has agreements in the following areas
Goods – this is where all of the trade agreements started. GATT was the forum where lower customs duties rates were negotiated as well as other barriers to trade across a whole range of areas from agriculture to textiles.
Services. - Banks, hotel chains, insurance firms and all other businesses who provide services are able to enjoy the same principles of free trade as those who trade in goods.
Intellectual property.- These are rules and agreements related to trade in ideas and creativity. Rules refer to copyrights, patents, trademarks, names, designs, trade secrets and more.
Dispute settlement – The WTO has a procedure for resolving trade disputes and this is important as it provides a means for enforcing its rules in order to ensure that trade flows smoothly.
Policy review – This is designed to provide a better understanding of the policies that countries adopt and to assess their impact.
Cost implications of not meeting international agreements.
If an organisation such as the WTO creates international agreements, it then has to set up a system of dealing with those who do not adhere to such agreements, so that where disputes between countries arise they can then be settled.
Settling disputes of trading countries and partners is at the heart of the role of the WTO. Disputes within WTO countries are all about countries who have broken promises and not stuck to international trading agreements.
Put quite simply, a dispute arises when one country decides to adopt a form of trading that another WTO country feels is breaking a WTO agreement.
Settling disputes is all part of the responsibility of the dispute settlement body, and this consists of WTO members. This body establishes panels of experts to consider a particular case. It then has the power to authorise retaliation which may have severe cost implications for a country that does not comply with a ruling.
There are two main stages
Stage 1 consultation for up to 60 days
Before anything happens the countries that are involved in the dispute have to talk to each other to see if they can sort out all of the differences themselves.
Stage 2 up to 45 days for the panel to be appointed and 6 months for the panel to conclude.
If the first stage fails, then the complaining country can ask for a panel to be appointed. The role of the panel is to help the dispute settlement body make rulings or recommendations.
At the end of the panel a final report is submitted to both sides in the dispute and then it is circulated to all WTO members. If the panel decided that the dispute does infringe an international trade agreement. It will then recommend what the country has to do in order to conform to the rules. If it continues to break its agreements this may lead to trade sanctions, offers of compensation or fines. These things have a big impact on the country to trade.
Opportunities created by increasing international trade for the global community
An argument for increasing international trade is a very important issue in life, creating jobs. If you create exports to other countries as well as increasing imports from other countries helps to increase the supply of goods and services which creates jobs not only at home but also in other countries.
Another good opportunity created through trade is to satisfy demand through imports. Importing allows other countries to supply consumers with goods that are cheaper to buy than if they were produced domestically. Importing allows us to eat things and wear different items from all over the world which help provide consumers with a greater choice a better way of life.
There is also an advantage created by increasing international trade for the global community as they also benefit from trade as the process of trade and international specialization reduces prices. Imports also help to reduce inflationary pressures which allow the industries to become more productive.
Another advantage is free trade. Free trade exists when there are no barriers to trade. Individuals, organisations and countries will specialise in the things they do best and will then sell the products of their labour. Some of the products imported into the UK could be produced in the UK but they should concentrate on producing those things that they are good at producing. In free trade the argument is that there is room for everyone to specialise in something. As tariffs and other barriers are removed it provides real good trading opportunities in particular for the less economically developed countries.
Dangers of increasing international trade
Many people believe that free trade is good but there are also a lot of people who disagree. A lot of people feel that there are a lot of problems and issues that are associated with international trade.
For example where there are a lot of competitors from other countries. It is very hard for some infant industries to develop their market presence. They may have considerable value for an economy, but they just cant compete because of the foreign competition. In some cases foreign companies may get benefits that a UK company doest have. They may have subsides or other benefits given to them by the government and these things distorts their ability to compete fairly.
Another problem through the world that distorts international trade is child labour. There is child labour because children are living in poverty and need money to contribute to their families. Child labour is more apparent is less economically developed countries. Many parents there decide to send their children to work where they can earn money rather than send them to school as there are not many schools there and the education is not very good. A lot of the time the conditions that the children work in are not very good and they work for many hours for little pay.
Marks & Spencer has been accused by Indonesian workers' leaders of selling clothes made by child labourers working for less than 50p for a 10-hour day in factories around Jakarta.
The claim was made in London by an Indonesian trade union official and a labour rights adviser who have been collecting evidence about pay and conditions in textile factories supplying leading western retailers, including Marks & Spencer.
Many of the world's biggest clothing firms have transferred production to the developing world to take advantage of low wages and are wrestling with the problem of how to deal with demands for minimum standards for workers in local factories and head off accusations of exploitation.
Marks & Spencer responded to the latest accusations by saying that it had no evidence it was buying clothing made in the factories named by the Indonesian labour activists.
Vince McGinley, a Marks & Spencer divisional director, said the company, which is a member of the government-sponsored ethical trading initiative, would cancel any contracts with suppliers using child labour "in a heartbeat".
"We take these allegations very seriously, and if we find that the integrity of the brand has been brought into disrepute we will deal with it," Mr McGinley said.
One industry source suggested that unauthorised subcontracting between different factories or fake labelling, which was common in Southeast Asia, could lie behind the claims.
The Marks & Spencer link was made at the launch of a charity and trade union-backed campaign, Labour Behind the Label, which aims to put pressure on retailers and international brand name firms to take action to ensure clothing production workers are paid a living wage, both in Britain and abroad.
Another danger of increasing international trade is that it causes pollution. As the global economy grows the speed of industrialisation has resulted in the damage of the environment, the speeding up of global warming and air and also water pollution. There are a lot of arguments which emphasise the negative effects of globilisation on the environment. One of them is that if businesses are allowed to locate anywhere in the world why don’t they locate in less economically developed countries where the environmental standards are very low.
Marks & Spencer are very good when it comes to pollution. They are already on the for its environmentally aware practices, and announced its “A Plan” to get even better. They will spend £200M over the next five years to implement their 100-point plan which includes making the supermarket carbon neutral and sending no waste to landfills by 2012. Already at the forefront, last year the top executives saw the film “An Inconvenient Truth” and Stuart Rose, the Chief Executive said “We believe a responsible business can be a profitable business. We are calling this "Plan A" because there is no 'plan B'.” The plan covers five areas, including fair trade --offering more Fairtrade products and making 20M garments a year out of Fairtrade cotton (an extension of their existing commitment). They will reduce their use of packaging by 25% and use packaging materials from sustainable or recycled sources. Already cut back, it will now become fully degradable, using cornstarch derived plastic. Stores will also test composters which will produce biogas from out of date food and other waste. The retailer will buy as much food from the UK and Ireland as possible; doubling the amount with the next twelve months. Interestingly, they will decrease the amount of food flown in and label imported food as 'flown'.
Another danger for international trade is protectionism. There is a danger that countries will take on protectionist policies which are designed to support their own services and their own products. Protectionism distorts international markets and stops countries from enjoying some of the benefits of international trade.
When countries adopt protectionism there is a danger that foreign governments may retaliate which could cause a war over trade. There are some people who argue and say that the west uses double standards when they trade with less economically developed countries.
Protectionism is the of restraining trade between nations, through methods such as on imported goods, restrictive , a variety of restrictive government regulations designed to discourage imports, and anti- laws in an attempt to protect domestic industries in a particular nation from foreign take-over or competition. This is closely aligned with anti-globalisation, and contrasts with , where no artificial barriers to entry are instituted.