BSA CORE 6

INTERNATIONAL BUSINESS AND TRADE

MODULE 16 (MONDAY)
BUSINESS BEHAVIOR IN EUROPEAN UNION

European Commission
 The European Commission is the main executive body of the EU and the most
independent one.
o Among its many functions, the most crucial ones are to initiate legislation,
draft the annual budget, and oversee the implementation of EU legislation
in the member states.

 Council of Ministers
o The Council of Ministers is the main decision-making body of the EU.

Source: Katsioloudes, Marios & Hadjidakis, Spyros. 2013. International Business: A Global Perspective.
Elsevier Inc.
 o Its main responsibility is to make decisions on the Commission’s
proposals, although decision-making processes vary according to the
issue being discussed (ranging from unanimity to simple majority to QMV).

 European Parliament (EP)

o The EP acts as a legislative body within the EU, sharing some co-decision
powers with the Council.
o It can draft directives and regulations, and is also authorized to approve
the budget.

 European Court of Justice (ECJ)

o The ECJ is responsible for deciding whether member states comply with
EC law.
o It has the power to rule against members brought before it, which are not
in full compliance.
o Moreover, the ECJ can give an opinion on the correct interpretation of EU
treaties and legislations.

 Court of Auditors
o The Court of Auditors is there to oversee the financial affairs of the Union,
and make sure that these are carried out lawfully.
o Some other important bodies of the EU are the European Economic and
Social Committee, the Committee of the Regions and Local Authorities
(CoR), the European Ombudsman, the European Central Bank (ECB),
and the European Investment Bank.

 National diversity
o National diversity is a major issue in the EU, which involves millions of
citizens.
o People’s affinities are primarily with their national roots.
o Along with national affinities come traditional and cultural ones also, which
largely determine people’s attitudes toward the EU.

The Significance of Europe’s Single Market: The Four Freedoms of Movement

 Free movement of goods
o Prior to looking at the steps taken toward freeing up the movement of
goods in Europe’s single market, it is vital to appreciate first the
importance of the goods market in the EU.

Source: Katsioloudes, Marios & Hadjidakis, Spyros. 2013. International Business: A Global Perspective.
Elsevier Inc.
 This can be understood by considering the Union’s share of the

world’s total trade in goods.
o For the year 2001, in the 15 states that made up the EU at the time (EU-
15).
 Total trade in goods, in that year, reached 19.4 percent, only 0.6
percentage points, in other words, below the US’ share, and 11.7
percentage points above the level of Japan.
 This is indeed a comparatively high percentage, which represents
the significance of the goods market in the EU.
 The free movement of goods in Europe’s single market has been made possible
through a gradual reduction of the barriers to trade.
o The underlying objective of removing these hurdles was to enable
businesses to trade their products freely throughout the EU, without
having to undergo the inconvenience and bear the costs of a fragmented
market.
o At the same time, on the consumer side, the objective was to make it
possible for them to buy goods in any country of the Union, without, once
again, incurring any costs.
o Elimination of trade barriers essentially meant dealing with physical, fiscal,
and technical restrictions.
 Removing physical barriers to trade signified the abolition of custom
checks and checks on borders.
 Red tape had to be removed, for both cost and efficiency
requirements.
 Elimination of fiscal barriers involved control over direct and indirect
forms of taxation.
 The former relates to personal income tax and corporation
tax, and the latter to excise duties and value-added tax
(VAT).
o As far as technical barriers are concerned, these relate mainly to
discrepancies, across member states, in their definitions of various
standards, specifications, and regulations.
 Such barriers involved, for example, health, safety, and quality
controls on products, environmental requirements, standards on
consumer protection, as well as public procurement practices.
 The Cassis de Dijon Case was an example of technical barrier to
trade, which was devised by the West German government in an
attempt to promote its locally produced liqueurs (at the expense of
the French-imported Crème de Cassis).

 Free movement of services

Source: Katsioloudes, Marios & Hadjidakis, Spyros. 2013. International Business: A Global Perspective.
Elsevier Inc.
 o The free movement of services, albeit involving a very significant sector
and despite the fact that it is unquestionably an important objective of the
Union, still remains an area in which a great amount of progress needs to
be made.
o Insurance, banking, legal aid, architecture, and many more are examples
of sectors in which work remains largely unfinished.
o The idea of achieving a free market is to be able to offer to the consumers
the opportunity to enjoy these services in any member state of the Union,
regardless of the country of origin of the producer or provider of that
service.

 Free movement of people

o The removal of checks at common borders, replacing them with external
border checks
 A common definition of the rules for crossing external borders
 Separation in air terminals and ports of people traveling within the
Schengen area from those arriving from countries outside the area
 Harmonization of the rules regarding conditions of entry and visas
for short stays
 Coordination between administrations on surveillance of borders
(liaison officers, harmonization of instructions, and staff training)
 The definition of the role of carriers in the fight against illegal
immigration

 Requirement for all non-EU nationals moving from one country to another to
lodge a declaration
o The drawing up of rules for asylum seekers (Dublin Convention)
o The introduction of rights of surveillance and not pursuit
o The strengthening of legal cooperation through a faster extradition system
and faster distribution of information about the implementation of criminal
judgments
o The creation of the Schengen Information System (SIS)

 Free movement of capital

o Freeing up capital movement essentially means removing all restrictions
on payments between member states.
o This mainly involves FDI and provisions of financial services.
o As with regard to this sector, progress has indeed been made in Europe’s
single market, thus bringing about benefits for companies and private
investors, even though fragmentation is still evident.

Source: Katsioloudes, Marios & Hadjidakis, Spyros. 2013. International Business: A Global Perspective.
Elsevier Inc.