SEM essay 2

Single european market

Currency is a barrier for SEM

Economic is doing well currency -> appreciate

  • Deem to be safe to invest in currency

Japanese Yan

Swiss Frank

4 freedoms movement

People: Not authorised.

The freedom movement of people is by far the most disputed (tranh chấp) of the 4 freedoms, fears of increasing unemployment, downward pressure on wages and so-called welfare tourism, especially following the enlargement of 2004 and 2007, were heard in many of the old member states, public sector jobs can be restricted to nations.

Mostly for work purpose, is very important concept for EU, but one which raises nationalistic passions and issues which are treating to break the union.

Capital: Tariffs, Quotas. Not VAT.

It remained difficult for non-resident EU citizen to open a bank account in an other EU country.

The freedom of movement of capital enables capitals to move freely within the EU other than tax-related restrictions. The single curency Euro) makes it easier to move capital around.

Services:

The bloc is made up of multitude of nationalities with their own language and dialects and this natural barriers keeps the steady of goods and services from being effective.

This introduces a natural implicit barriers to the single market which is language

The freedom of provision of services is fraught with implicit barriers, namely due to the imposition of warrants and constrain on the mutual recognition of qualifications achieved by nationals of other nationalities.

Goods:

Labelling is another implicit barriers, with some government still imposing certain regulations which may be deemed as a barrier. Ex: Buying medicines from certain countries a local doctor's written recommendation and one from the patient's country won't do.

All the product in the EU must achieve the CEI marks, which is established according to specific rules and regulations and delegated to national authorities in each member state.

Eliminate all barriers such as customs: This is most liberalised (Tự do hoá). No members state has imposed any long term tariffs, customs duties, quotas or other explicit barriers for any goods from one EU country to another.

Agreement on quality standards

Trade barrier

Implicit trade barriers

Govervment procurement policies, Macro economic policies, competition policies, Govenment actions, Government Financed polices

Explicit trade barries

Tariffs, export subsidiaries, import quotas, antidumping duties, countervailing duties (thuế chống bán phá giá)

Eliminating trade barriers and at the same time putting a common tariff around member states as in the customers union of EU will have 2 effects

Trade diversion: switching from buyng goods from outside the EU to within the EU even though it may be cheaper to trade with country from outside the EU, but desist (stop) from doing so due to the common market tariff imposed on goods from outside EU.

Trade creation: The lowering of barriers creats new opportunities for trade, and this trade increases.

Monetary polocies
. Harmonised by European Centre Bank.
. Fiscal policy: is still in jurisdiction of local government.

Mọi quốc gia đều có trụ sở của ECB vậy nên ECB sẽ ko bh có động thái tích cực hay tiêu cực đến nước đó mà chỉ là điều chỉnh Euro sao cho hài hoà.

ECB -> Totally independent of any government.
Government Give up control on the Euro -> All control is in the hand of ECB.

The advantages and disadvantages of a free market economy:

Advantages:

Optimum allocation of resource: Resource in the market are better distributed and allocated. Since consumers are willing to pay for a certain quantity of a product, producers are willing to pay to acquire raw materials, otherwise, producers produce too much of a good that no one wants. Its also encourages firms to be more efficient as thay seek to produce at the lowest price possible to maximise their profit.

Motivation influence of free enterprise: Guided by invisible hand, entrepreneurs take a risk to fulfill consumer demand. Those entrepreneurs who succeed are rewarded with profits (The invisible hand is an economic concept where market demand act as signals for producers). Ex: Because consumers want and willing to pay for bread, a baker has the incentive to produce bread.

Absent of bureaucracy: Free market reduce cost, lead to more innovation and R&D through the absence of red tape (quan liêu). Entrepreneurs don't have to wait for the government to tell them what to make. They study demand, research trends and meet the customer's needs through innovation. This also encourages competition amongst firms to improve their product and services.

Consumer sovereignty (Chủ quyền): In a free market, producers produce what consumers ưant at a reasonable price. It gives the customer more choice for their purchases.

Disadvantages:

Unemployment: Certain members of society will not be able to work with the elderly or the unemployed (because their skills aren't marketable). They will be left and will fail into poverty (remember if there is no government they can not be helped)

Firm power: Large firms can still dominant certain markets, even where there is competition and exploit suppliers (by squeezing their prices down) and consumers (by charging higher selling prices) to maximise profits. Amazon has done this in the book industry by dictating unfair terms to publishers.

Merit goods: Goods and Services that are not profitable will not be produced/run. Rural communities will suffer as a result. Ex: regarding transport and post for example, rural hospital may not be profitable to run but are necessary.

Poor Quality: Since profit maximisation is the biggest motivation for firms, they may try to reduce their costs, unethically by polluting the environment or by exploiting workers.