Business Environment and Society - the European Union - Coursework Example

Business Environment and Society Introduction I think the strongest rationale for forming the European Union was to increase unity of the country, enhance their growth and place Europe as one of the strongest players in world markets. All members of the European Union are a party to the treaties of the same. The members countries of the European Union are all bound by a common legislation and enjoy similar privileges and obligations. Personally I feel that unity is extremely important for the overall development of any country and in this context the formation of European Union is justified. The process of the European integration began in Western Europe and once the principles of the European Union were established firmly, it had spread to Eastern and Central Europe. As the European Union has undergone a sea of changes, since its inception in the post-war period, the initial objectives are almost redundant now. I think that adapting to changes is also very important for successful progression and with time European Union has just done that. There are two main institutions for the European Union, which decides policies for the member countries, namely the European Council and European Central Bank. The European Central Bank has the major autonomy in devising monetary and fiscal policies of the member countries. The countries which form a part of the EU have all accepted a common currency, Euro, to strengthen their trading position. Out of the 27 member countries of the EU, I have selected Germany, Netherlands, UK and Italy to show the way in which they are integrated in European Union. I have emphasized on law, society, government and commerce of these five countries. Trade policy and comparative industrial policies, industrial and commercial clusters Italy has been one of the countries of the European Union which had been severely affected by the global financial crisis because of prolong structural weakness of the country. The European Commission had identified the key factors that had lead to the weak macroeconomic performance of the country. The key points that were identified were: Lack of competitiveness in the external sector The high debt of the government Unimpressive growth in the productivity From the current news I think the country had been trying to improve its situation by planning corrective measures. However, the major problem lies in the implementation of the plans. Additionally the country has delayed the adaptation of the proper legislative framework which has hampered the smooth progress of the economy. The conditions in the labour market remain bleak as the educational achievement of the country is low and the wages are much below the European standards especially for the women and the youth. This I think is a major impediment for long-term sustainability of a country. The market for services in the country is not properly open to the market forces and this had severely constrained the performance of the economy. From studying the academic articles I have gathered that industrial networks are very important for propelling the growth of the economy and this is the reason that has restrained the performance of the Italian economy. So I think that European commission had recommended that the network industries must be open up to the market forces for enhancing the competitiveness of the economy. European Issues The key issues identified by the European Union at the present time that requires the attention of the government are the high rates of unemployment, the need for improvement in education, poverty reduction, research and innovation and climate change issues. These factors, according to me, have been perfectly pointed out as all of these major macroeconomic variables are extremely important for the overall development of any nation. The purpose of the European Union is to foster the integration between the various economies so that they can reinforce each other’s efforts to achieve the goals that have been set by the European Union for 2020. The promotion of industrial policy, youth employment factors and resource efficiency has been identified as the key factors to work with. Characteristics and Differentiation Legal structure I think the essence of multinational integration lies in commonality of the legislation among the countries. There are five different forms of legal instruments that are devised by the European Parliament and each of them has a different intensity of effect on member states. Some of the member states directly apply these legislative practices in place of national legislation and some of them progressively adjust the legislation to that of the European Union. The regulation of legal instruments has a common scope. It is relevant to all member states and like a national law; it brings about rights and obligations, directly applicable to citizens of the European Union. This I think is extremely important to promote the overall development because if the legal framework for 27 countries is not specified properly then this can create confusion and harbour corruption and inefficiency. The legal framework has a directive aspect, which only directs member states regarding their respective actions. The objectives to be attained by member states are written in the directives (Cini and Borragan, 2013). For the public procurement system, the European countries are required to describe the system of legislative reference, which will help the European Union law to be transformed into a national law. The main objective of the EC law is either to modify or repeal the national law. I think that this is a perfect arrangement for the governments of the member countries as they can exercise their administrative powers. According to me Italy is one of the member countries of the European Union, which has a unique national legislation to transpose the European Union law, in the sense that the regions have a large autonomy. According to provisions of the Italian constitution, the state, regions and autonomous provinces share the power to transpose EU law into national law. For Germany, Belgium and Austria, I have seen that this legislative power is allocated to the federations. For United Kingdom, I have found out that the stakeholders are consulted on a draft law for transposing an EU directive (Europedia, 2014). The basic legal system of the United Kingdom can be classified as a common law system. The legal structure is marked by non-binding judicial review of acts of parliament. The legal structure of Germany and Italy is based on civil law system. The basic law system of Netherlands is adopted from the French legal system. From this I can say that the member countries are found to differ widely regarding the extent to which constitutions and law are used to incorporate budget principles. I have analysed that the common characteristic of these countries is that they all have a written constitution. The regulations are imposed by the ministry of finance or legislatures, depending on the type of governmental structure. According to my understanding one of the important reasons to study the legal framework of a country is to understand the ease with which any business activity can be started in that country. Based on a study, conducted by The World Bank, it has been found that United Kingdom is the most business-friendly country in the EU, followed by Italy, Netherlands and Germany. I have observed that there may be certain factors responsible for this difference in ranking, like, legal, political and social requirements of each country. Over the time, various reforms have been introduced by the countries to increase the ease of business operations within them. Germany has increased efficiency of communication between the notary and commercial registry. It has also eliminated the need of publishing an announcement in the newspaper. Contrarily, Italy has put up an online registration system to increase the ease of operating a business there and to cope up with other countries (The World Bank, 2012). Society One of the chief rationales behind formation of the European Union was to promote unity among people of societies in the different countries. The civil societies comprise associations among a multitude of factors, namely the interest groups, voluntary associations, social movement organizations and non-government organizations (Maloney and Deth, 2008). I think that this will have significant impacts on demography of the country in the coming years. I think rising immigration is that it brings certain challenges with it, like, discrimination against refugees and acts of racial violence. One of the most important agenda of the European Union, in present times, is to promote integration between the civil societies, as it will contribute to long-term development of the entire EU. Culture, policy and traditions are important factors that influence the civil society. In contemporary times, civil society is at the core of bridging democratic deficit of the European Union. The U.K. is one of the countries that have had strong tradition of civil society and has overlapping historical traditions of welfare and policy work in the voluntary sector. The declaration of “Compact” policies in 1998 by the British government had a significant impact in altering the relation between the civil society and the government. The key feature of this agreement was to promote practices in a way that the government pays greater attention to the development of civil society. I think that this is a novel approach to bridge the gap among the cilvilians. Apart from the government that aims to improve living standards of the citizens, the non-government organizations also play a significant role to help members of the civil society. The voluntary association between governmental and non-governmental organizations, to improve the civil society, is relatively well-organized in U.K., compared to other member countries. (Lundberg, n.d.) Historically, on the other hand, the Italian government has tried to restrict the role of the civil society due to expansion of the public welfare system and authoritarian nature of the state there. Emergence of the civil society, in the end of 1960s, began with the slowdown of economic system, expansion of the elderly population and crisis of welfare in the political system. From the end of 80s, the government had also facilitated increased role of non-governmental organizations to help members of the civil society attain better standards of living (Maloney and Deth, 2010). It has been observed that in Germany that the civil society activists have been propagating the idea of federal European state order, along with central decision making. The federal union structure, which is portrayed by German civil society, is different from the federal nation state, which is upheld by other members of the European Union (Maloney and Deth, 2010). For Netherlands, it has been observed that private non-profit organizations have a strong influence on economic and cultural position of the country. The civil society in this country is heavily influenced by Dutch traditions. The factors that shape this civil society include non-authoritarian and partnership seeking nature. The private enterprises have public responsibilities and in quite a few ways, the attributes of non-government organizations and private enterprises are same, i.e. to promote best practices in the civil society (Lundberg, n.d.). After making these observations I think there is a requirement for the countries to promote a common method for social development. I think that this will work for the macroeconomic integration at a micro level through the society. Language and Culture As European Union comprises a number of states so diversity in language and culture is a well known phenomenon among the countries. As a result of this there is a problem of communication among the various language and culture in every part of the European Union. I think this was one of the reasons that had caused a number of problems in various fields ranging from asylum seekers to the effective legal cooperation in order among the various people. This had led to quite a large number of problems especially in the field of legal arena as miscommunication in legal field can cause disasters. In order to solve this crisis the Grotius project was introduced which could provide all the people the basic right of justice no matter from which language or culture he belonged to. The cross-border openness of the European Union has lead to greater movement of goods and services among the nations. This has also lead to greater movement of people among the European Union. My understanding is that this was a major development that has contributed for the overall integration. This is because if people cannot communicate with each other properly then this will lead to confusion and development will be hampered. I think that there should be a common language which will enable the people to speak and conduct business with each other. The European Union also promotes cultural policies for European integration in a better manner. This is done through proper legal activities and funding from the government. The common agenda of these policies is to promote education and cultural conventions and these are generally conducted by the NGOs or cultural groups working in the field of cinema, music and arts. The Cultural Program (2007-2013) was one such initiative that was launched by the European Commission to promote cultural integration among the diverse group of people. The EU has also launched awards for the cultural project so that they can provide an incentive to the member states to promote cultural networking among citizen (Hertog, n.d.). Government I think that government structure of European Union is quite unique as it shares characteristics of both the federal and inter-governmental attributes. The executive functions of the government are shared by two institutions, namely the European Council and the European Union. All the major decisions of the European Union are taken by the European Council. It is the European Council that has the responsibility of establishing a common currency for the European Union. This was executed by forming the European Monetary system in 1979. The Council had also advocated the passing of Single European Act in 1985, under which there was establishment of common markets for goods, services and labour. As the European Council is an intergovernmental organization, members of the Council are deeply concerned about the well-being of their respective countries. According to me it is this inherent duality in nature of the government structure that causes conflicts among the member countries. This is because the European Union puts the agenda of Europe first, while the member countries may sometimes be concerned about their own interests, instead of the entire EU. The decisions are primarily taken at the European Union level to propagate the idea of nation state. I think in this regard establishment of the European Monetary Authority has been quite successful in promoting integration between the member countries. Research in the field of European studies has shown that the European Union has adopted a bottom-up approach in its interaction with the member states. The intergovernmental approach of member states reflected their need to protect their geo-political interests and economic concerns. In recent times, there has been a change in the bottom-up perspective of the member states. Now, more importance is being given to the top-down approach and the idea is to build a strong nation state (Racheter and Wagner, 2001). I have seen that there are certain differences between the governmental structures of the countries under study. In United Kingdom, the type of government is constitutional monarchy and commonwealth realm. The constitution of the country is unwritten, however, there are partly statutes and laws and practices, which enjoy the status of absolute authority. There are explicit divisions in the government structure to create a strong administrative regime. A broad specification can, nonetheless, be made regarding tier-structure of the government. I think that the countries can be divided either into a two-tier government structure or a single-tier one. Netherlands also have a constitutional monarchy, like, United Kingdom. The former is characterized by an adopted constitution, which has been amended a number of times. Italy, on the other hand, has a republican form of government. The country, also, has a written constitution, which is amended from time to time, according to occurring changes. In contrast to the structure of United Kingdom, the government of Germany is based on a federal republic framework. The country has a written constitution, which was previously known as the basic law. The administrative structure is simpler than United Kingdom with considerable connectivity between various levels of the government. I have observed that one of the striking similarities between the governments of the member countries, of Netherlands, Germany and United Kingdom, is that here local governments take up majority of the share of government expenditures from the national budget, compared to the national governments. Germany has been one of the major countries that has been instrumental in supranational institution-building and formulation of European policies. There are three factors, which have been responsible for Germany playing an integral role in the European Union, including coordination of constitutional order, norms and conventions and patterns of meso-level governance between Germany and the European Union. This is also the reason why Germany had to make only little changes to adjust its domestic institutions, policies and processes for complying with the European Union standards. Netherlands, on the contrary, has played a significant role in exporting its environmental standards, which has become a standard measure for the European Union, thereby enabling its industries to enjoy competitive advantage compared to other countries. It, also, has the resources to shape the European policies in relation to environmental standards. Contrarily, Italy lacks both the resources and policies to influence the European Union. Overall, the United Kingdom, as a whole, was successful in adapting their domestic policies to suit the needs of European Union (Börzel, 2003). Commerce The decision making on foreign trade remains the prerogative of the European Union as it is centralized. However, coincidence of bilateral and multilateral trade makes it difficult to assess economic performance of the member countries. Though tariffs have been reduced in a phased manner, the EU is largely dependent on the non-tariff barriers (OECD, 2000). One of the fundamental changes, which have occurred after liberalization of trade, is an increase in the number of regional trade agreements between the member countries. Regional trade integration has been taken up simultaneously with multilateral liberalization to increase efficiency of regional trade. Personally I think that this was required to enhance the overall efficiency of the Euro Zone and make it competitive in the world economy. The following table compares the rate of reduction of tariff of the member countries with the liberalization of trade: Figure 1: Rank of countries (Source: Hoeller, Girouard and Colecchia, 1998) According to my observations from the above table, after the Kennedy Round, tariff rates in Germany were the lowest and for Italy, it was the highest. Germany is one of those countries, which have concentrated on the liberalization of trade of commodities, but it has not been equally liberal in its policies towards services and agriculture. At an aggregate level, it has been observed that Germany, United Kingdom and Netherlands have been following a liberal regime, but Italy, on the contrary, has a slower pace of adaptation to policies of the European Union. It has been observed that though there were differences in the approach of member countries towards acceptance of international trade policies, yet the common denominator of all trade policies was abolition of trade barriers (Hoeller, Girouard and Colecchia, 1998). I think that the establishment of the European Committee, as a customs union, has been widely successful in bringing trade. The chief rationale behind trade liberalization was twofold: Firstly, it would improve market access for suppliers outside the European Union, which in turn would increase efficiency of markets in the home country. Secondly, there was a strong belief that the position of suppliers in the European Union would change. I thionk that trade liberalization of the European Union has been largely concentrated on the industrial and services sector as a whole and has been protecting the agricultural sector ever since. This protectionist approach had further increased with implementation of Common Agricultural Policy. The most crucial aspect of the member countries, regarding acceptance of trade liberalization, is the extent to which their economies would be affected due to liberalization. This is the primary reason that can be attributed to the dissimilarities among member countries in their trade liberalization measures. For instance, the primary economic concern for Germany was the liberalization of industrial and financial sectors. This is why Germany had followed up with liberalization of these sectors. Conditions of trade were similar in United Kingdom, for which they had also followed with the liberalization of these two sectors. Italy and Netherlands have focused on agriculture liberalization more than that of secondary and tertiary sectors of the economy (Benedictis and Salvatici, 2011). Therefore, I can conclude that countries were driven by their own welfare objectives towards acceptance of the trade policies. Conclusion The four aspects included in the study cover the legal structure, government structure, societal structure and the trade. Four member countries were chosen for the purpose of study, namely United Kingdom, Germany, Italy and Netherlands. After close studying the government sector, I think that all the countries do not have an even power in manipulation of policies of the European Union. This is because some countries like, Germany and United Kingdom, had found themselves in a relatively better position to influence decisions of the European Union. Countries like, Italy, have not been quite successful in influencing the Union. Netherlands, on the other hand, has been successful in setting the environmental standards applicable for the entire European Union, which has endowed them with added advantage. The analysis of legal structure has studied in details the legal framework of the entire EU, along with its member countries and I think that United Kingdom is the most business-friendly country, owing to its flexible legal structure. The analysis of the societal structure has suggested that concept of civil society is stressed on by all member countries. Finally, as far as trade is concerned I think that each country looks into its own economic benefits, before implementing trade liberalization reforms. One of the important observations I have made from from the study is that the rationale for forming the EU has been quite reasonable, as it has created common markets and a common currency for all member countries. The integration of Europe, through establishing the European Union, has definitely improved its position as a player in the world market. Personally I think that common monetary policy for member countries; integration of the societies; and the trade practices, have collectively established it as one of the strongest players to influence the global economy. Reference List Benedictis, L. and Salvatici, L., 2011. The trade impact of European Union preferential policies: an analysis through gravity models. Massachusetts: Springer. Börzel, T. A., 2003. How the European Union Interacts with its Member States. [pdf] University of Heidelberg. Available at: [Accessed 30 January 2014]. Cini, M. and Borragan, N. P. S., 2013. European Union politics. London: Oxford University Press. Europedia, 2014. The legal system of the European Union. [online] Available at: [Accessed 30 January 2014]. Hertog, E., n.d. Access to Justice across Language and Culture in the EU. [pdf] Lessius Hogeschool. Available at: [Accessed 11 March 2014]. Hoeller, P., Girouard, N. and Colecchia, A., 1998. The European Union’s Trade Policies And Their Economic Effects. [pdf] OECD. Available at: [Accessed 30 January 2014]. Lundberg, E., Brundin, P., Amnå, E. and Bozzini, E., n.d. European civil societies and the promotion of integration. [pdf] Oriebro Universitat. Available at: [Accessed 30 January 2014]. Maloney, W. A. and Deth, J. W. V., 2008. Civil society and governance in Europe: from national to international linkages. Cheltenham: Edward Elgar Publishing. Maloney, W. A. and Deth, J. W. V., 2010. Civil Society and Activism in Europe: Contextualizing engagement and political orientations. London: Taylor & Francis. OECD, 2000. The European Union’s Trade Policies and their Economic Effects. [pdf] OECD. Available at: [Accessed 30 January 2014]. Racheter, D. P. and Wagner, R. E., 2001. Federalist government in principle and practice. Massachusetts: Springer. The World Bank, 2012. Regional Profile: European Union (EU). [pdf] The International Bank for Reconstruction and Development. Available at: [Accessed 30 January 2014]. Read More