the impact of government and the eu
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eu_flags_starter.pptx | |
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5.4_the_impact_of_government_and_the_eu_on_business_activity.docx | |
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Can you name all the countries and all of the flags of the 28 member states of the European Union?
The European Union
Started after World War 2 to develop links between European countries.
1. 28 Member states
2. 490 million
3. 7% world population
4. 30% of global GDP
5. 23 languages spoken
Started after World War 2 to develop links between European countries.
- A single or common market
- No ‘Tariffs’ or ‘Quotas’
- Free movement of people
1. 28 Member states
2. 490 million
3. 7% world population
4. 30% of global GDP
5. 23 languages spoken
Being part of the EU means that some of the decisions that used to be made at national level are now made at EU level. E.g. tariffs and quotas that limit imports into a country are decided at EU level. There are EU product safety regulations that apply to all products sold in the EU. There are also many EU regulations that affect businesses and workers.
The European Union has helped create a single or common market. Goods can be traded freely between member countries. There are no tariffs or quotas on trade between member countries.
Key term: PROTECTIONIST POLICIES - measures designed to reduce foreign goods coming in to a country
Key term: TARIFFS OR CUSTOM DUTIES - taxes put on goods imported into a country which make them more expensive for buyers.
By reducing barriers it should be as easy for a UK business to sell products to a London based business as it is to a Rome or Paris based one. It should also be as easy to hire a worker in London to work in Britain as to hire the same worker to work in another EU member state office. The European Union is still changing. For example, most member countries now use the same currency, the Euro. (The UK and a few others still have their own national currencies)
taxation
Tax rates are still set by individual governments in the EU. Taxes affect both businesses and consumers.
- Taxes reduce the amount that businesses and consumers have to spend. (Taxes on company profits mean less money to pay out in dividends. They also then have less to keep back to invest in the company.) Income tax reduces the take home pay of workers. VAT increases the price of goods and mean that businesses sell fewer goods that they would if there were no taxes.
- Taxes affect the way in which businesses and consumers behave. Taxes on employing workers (NICs) discourage businesses from employing workers. High taxes on cigarettes discourage smokers from buying so many cigarettes.
- EU countries have different tax rates so some businesses may locate themselves in countries that have lower taxes on profits e.g. Ireland. Eastern European countries have lower taxes on employing workers.
regulation
All businesses have to deal with government regulations. Sometimes this is referred to as red tape (because it ties things up and is difficult to unravel). Examples include:
- Submitting audited accounts to Companies House each year
- Vehicles being insured
- Products sold to consumers must conform to the Trade Descriptions Act
- Waste must be disposed of in particular ways
- Offices and factories can only be located in buildings that have been designated by local authorities for commercial use under planning regulations
Regulations are designed to protect different stakeholder groups in a business. How do the above protect various different stakeholder?
Complying with regulations is costly for businesses.Some complain that businesses in developing countries have an unfair competitive advantage compared to European firms because their regulations are not as strict. Some regulations across the EU member states are different and some are the same. A business must know the regulations in each country they operate.
minimum wages
Key term: MINIMUM WAGE - The lowest payment per hour, day or week that can be given to a worker for their work.
Most countries in the EU set a minimum wage. It is not fixed by the EU, but by each national government. Below is the UK and Slovakia based on a 40 hour week.
Minimum wages tend to reflect wage levels in a country. The higher the average wage, the more likely it is that the government will set a relatively high minimum wage. This gives businesses an opportunity to locate their production in low NMW countries. This will lower costs of production and be a threat for their competitors.
Pressure groups representing businesses in a country tend to argue that MWs are too high and should not be increased. This is because high MWs tend to increase costs and hit profits. However, trade unions lobby governments to have higher minimum wages.
maternity and paternity rights
EU regulations give all workers minimum maternity rights. The minimum maternity leave is 14 weeks. Men are entitled to 1 or 2 weeks paternity leave. Countries outside of the EU have their own rights, and some countries within the EU have much more generous maternity rights than the UK. Pressure groups for businesses tend to argue against maternity leave extensions. Employers often have to pay most of the cost of maternity pay and work is also disrupted when a woman goes away on maternity leave. Employers also have to keep her job open to her if she chooses to come back. Employers often appoint a temporary worker to fill her gap, but this can be disruptive. This has a larger impact on smaller businesses with fewer employees. Pressure groups on the other hand who represent workers argue that women who have children should not be penalised at work.
health and safety regulations
All countries in the EU have health and safety regulations. For example:
- How long employees can work without a break
- Storage of dangerous chemicals
- Level of heating in a workplace
- Amount of ventilation in a factory
These regulations impose costs on businesses. Pressure groups will argue these regulations are excessive. They are costly and often have little impact on the health and safety of workers. Trade unions on the other hand will argue that employers ignore the health and safety needs of their workers.