The following post discusses the European Union and its advantages as well as its disadvantages since its formation in 1992. In addition, two companies will be used as an example as far as how they altered the way they conduct business due to the Union. Furthermore, disadvantages concerning the European Union from a business perspective. Concluding this post will be a brief summarization of the topics discussed throughout this submission.
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The European Union was designed to improve political, economic, and social co-operations to the union members, who are currently 27 independent European states. Previously, the European Union was known as the European Community and/or the European Economic Community. The birth of this policy began around the time of the European Coal and Steel Community and was aimed to finally bring peace between Germany and France who have been in battle with each other in both World Wars as well as many others in the past (Pinder, 2007, pp. 1-2).
Upon the establishment of the Maastricht Treaty (1991) the members or citzens whose states were members in the European Union acquired many rights concerning their mobility within the participating states as well as gaining the rights to run for local office or even vote in a state that is in the union, yet it does not have to be one of their birthplace. This treaty gave way to also enhance areas such as public health, consumer protection, education, training and culture, energy policy, as well as foreign policy. Furthermore, the Maastricht Treaty also adopted new economic rule-making as well as set the stage for a single currency, so economic and currency practices can be accepted freely over borders as well as unify the economic mindset of Europe (those states participating in the EU) (Kahn, 2008, pp. 36-37)
Some advantages of the European Union are:
1. The costs of financial transactions are eliminated for example no conversion charges and so forth.
2. Price transparency, meaning by using a single currency consumers would not have to calculate exchange rate differences.
3. Eliminate uncertainty caused by Exchange rate fluctuations, because all affiliated states are following the same economic code.
4. Peace & unification, due to the participating members of the EU all use a single currency and worry about their economy as a whole, the EU enhances not only political aspects but also political ones.
Some disadvantages are:
1. Fear of the system becoming instable due to new policy and other various conditions that can be affected by the new economic system.
2. Views of people’s financial power being loss, due to the almost monopolizing traits the new central bank would adopt, whereas a non-elected central body would rule an independent central bank. This would be undesirable because national governments would lose their ability to enforce policy.
3. Due to transitional financial adjustments deflationary tendencies can occur. For example, where one country may reduce their inflation rates to another, other issues can occur such as higher unemployment rates and so forth (Advantages & Disadvantages, 2009).
Two examples of companies affected by the European Union are as follows:
1. Master Card an international card company was and is negatively impacted by Europe’s cross-border interchange fees. Whereas Master Card appealed that they should charge retailers and consumers by location tax as well as other interest accumulating strategies, it violated the EU’s Anti-Trust laws. This would cause Master Card to cut transaction fees, where the company believes this will affect how the laws make the very competitive European market almost unsustainable (Kanter, 2009).
2. American Airlines is also in an ongoing battle with the E.U. as far as its emission policies. As this is an ongoing case, the two sides are that the E.U. wants to charge an emissions tax to international flights coming into Europe. However, the United States believes that the Emissions Trading System violates international law, as the E.U. would be placing taxes in international areas such as above the ocean, which is way off the European border, and so forth. These taxes will and can raise already expensive flight prices for customers as like any new cost adjustment that cannot be completely absorbed by a company (Rahim, 2011).
From a business perspective, the E.U. introduces many obstacles for trade as well as online businesses. The complexity as well as the invasion of different strategic ways to tax foreign businesses operating in Europe, will not only negatively current business practices in those areas but also deter future business dealing from potential foreign businesses. More importantly, the overall opinionated perspective is that the E.U. is utilizing taxes that affect foreign parties to adjust for discrepancies caused by the new policies of the E.U.
Inclusion, although the E.U. was designed to unify and bring peace to Europe as well as strengthen their economy, which was hurt by the several wars that previously took place. The policy does not meet all the requirements of today foreign needs and can cause quite the opposite affect than originally intended.
Advantages & Disadvantages. (2009). Retrieved July 6, 2011, from Think Quest Web site: http://library.thinkquest.org/19110/english/advantag/advantag.html
Kahn, P. (2008). The history of the EU 1993-today. In The European Union (pp. 36-37). New York, NY: Chelsea House.
Kanter, J. (2009, April 1). E.U. Drops Antitrust Case Against MasterCard. Retrieved July 6, 2011, from The New York Times Web site: http://www.nytimes.com/2009/04/02/business/global/02mastercard.html
Pinder, J. (2007). What the EU is for. In S. Usherwood & Simon McDougall Usherwood (Eds.), The European Union: A very short introduction (New ed., pp. 1-2). Pondicherry , India: SPI Publisher Services.
Rahim, S. (2011, July 5). U.S.-E.U. Showdown Over Airline Emissions Begins Today. Retrieved July 7, 2011, from The New York Times Web site: http://www.nytimes.com/cwire/2011/07/05/05climatewire-us-eu-showdown-over-airline-emissions-begins-88684.html?scp=6&sq=E.U.&st=cse