European Business in the EU

European Business in the EU

• The EU is a very active economic region, offering substantial growth and competition opportunities.

Characteristics of EU Business Culture

• EU business culture supports SMEs with funding to avoid market domination and to retain control, resulting in greater choice, quality, and competitive pricing.
• SMEs often seek partnerships to expand their reach across the EU.
• Joint ventures and partnerships are promoted to strengthen business relationships and encourage cooperation.
• Common laws and institutions streamline policies, with policies acting as a clear plan.
• The EU values its shared history
• A key strategy, highlighted in the Draghi report, involves shifting from defensive strategies to proactive approaches to stay competitive.
• Businesses in the EU must be prepared for competition, cooperation, and operating within common legal frameworks.
• Co-opetition, a mix of competition and cooperation, is vital and builds on the four key pillars of the EU business culture.

Benefits of Co-opetition

• It expands consumer choices by merging domestic markets with international options.
• Improves the quality of available ideas.
• Increases competition while lowering prices.
• Broadens market and customer bases due to fewer global restrictions.
• Offers access to new technologies, aimed at supporting job creation.
• Allows countries to specialize in their strengths, maximizing resource efficiency. It's easy to gain, but also easy to lose.

Comparative Advantage

• Identifying unique business features aids in market comparison and differentiation.
• Market's reliance is increased on businesses if they establish a unique, irreplaceable niche.
• A competitive edge should focus on quality instead of just quantity.
• Businesses benefit from multiple comparative advantages as this serves as back up plan

Determinants of Comparative Advantage

• Comparative advantage is dynamic, changing over time and depending on quantity/quality of production factors.
• Government intervention through legislation and subsidies affects comparative advantage.
• Value-added elements and patents impact non-price competitiveness.
• Fluctuations in the exchange rate can be dangerous.

Malta's Comparative Advantages

• The financial services sector has grown, contributing 12% to Malta’s GDP.
• Creative industries, including ICT, iGaming, and filming are also of benefit.
• Tourism constantly reinvents itself to compete with new destinations.
• Education focuses on medicine, English, maritime, and diplomatic studies.
• Transportation and logistics include yachting services and crew training.
• High-tech manufacturing is advancing in pharmaceuticals, biotechnology, aviation, and sophisticated technology.

Challenges

• The high-tech manufacturing sector faced challenges from 2012–2016.
• The slow economic recovery post-2008 led to reduced industrial investments.
• Fragmented digital and innovation policies hindered scaling tech companies.
• Competition with global players limited innovation due to R&D investment.
• Supply chain disruptions due to reliance on Asian imports impacted production.
• Overregulation and bureaucracy made it difficult to innovate.

Terms of Trade Explained

• Terms of trade measure the exchange rate between one good or service for another when countries trade.
• TOT Index formula: (100 X export price index) / import price index.

Interpreting Terms of Trade

• Improvement in TOT: Means a country can buy more imports for each unit of exports, boosting its purchasing power.
• Deterioration in TOT: Means a country has to export more to purchase the same amount of imports, reducing its purchasing power.

Factors Affecting Trade Terms

• Changes in commodity prices of key exports/imports, like oil, affect TOT.
• A stronger currency makes imports cheaper improving TOT, while a weaker rate has the reverse result.
• Global supply and demand impact a country's exports or imports.
• Trade policies can influence terms of trade by changing goods prices.
• A 10% rise in export prices and a 5% rise in import prices results in a 4.8% improvement in TOT.
• When terms of trade rise above 100 it is improved, when they fall below 100, it is worsening.
• An increase in export prices improves trade terms, while a fall worsens them.

Export Price Changes

• Export prices are affected by the exchange rate, value added, government intervention, production factors, and resource demand/ scarcity.

Balance of Payments

• Balance of Payments (BoP) summarizes economic transactions between a country's residents and the rest of the world over a period.
• For the EU, BoP includes trade, investment income, and financial transfers.
• BoP helps understanding the EU's global economic interactions.
• Each nation accounts for global finances.

BOP Classification

• Current account transactions: Flow of money, day-to-day transactions smaller money amounts.
• Capital/external transactions: Stocks of money, big/infrequent transactions.
• An example of current payments is interest rate recorded from a bank account yearly.
• Example of External transactions occur when a maltese citizen invests in Switzerland and deposits a large sum of money.

Invisible vs Visible Trade

• Visible Trade includes imports and exports of goods and is always negative for Malta.
• Invisible Trade includes imports and exports of services, receipts/payments, transfers of gifts/grants ect and is always positive

Capital and asset movement

• Assets are increased by negative value and decreased by a positive value.
• Liabilities are increased by a postive value and decreased by a negative value.

EU as a Trading Bloc

• The EU facilitates trade among members and non-members, promoting free trade by removing tariffs and quotas.
• It creates a single market where goods, services, capital, and labor move freely.
• A balance is needed between co-opetition and barriers that the EU is creating.

Balancing Co-opetition and Barriers

• Balancing co-opetition and barriers is a delicate aim for trade blocs.
• Co-opetition promotes internal growth, while external barriers safeguard domestic industries.
• Trade blocs like the EU cut down internal barriers and secure trade agreements to reduce external friction.

The EU's Open Strategic Autonomy

• The EU's foreign aims to respond to global challenges with its policy.
• Balance integration with the capacity to act when required.
• Single market emergency is effective and secures supply of critical goods/services and improves governance.
• It is established due to Covid-19 discruptions that firms must report on.
• Export control regulation provides authorization criteria and control measures.

Foreign Regulations

• Regulations establish minimum FDI for security.
• Enforcement regulation allows EU to suspend trade due to impacted intersts by third counteries.
• The mechanism would impose levies to account for true carbon content.
• Instrument would effectivly condition access to contracts on reciprocal access.
• Mirror Clause would be to reciprocate similar standards

Legislation

• Regulations could also apply technical requirments.
• Anti-dumping duties investigate / impose subsidies against european produces.
• The instrument aims to punish behaving third countries.
• Shifting towards "bilateral trade" deals as the EU has launched more negotiations that other countries
• EU and WTO insist trade regulatiosn are compatabile, but it used to tailor its policy.
• EU used to push countries to accept property restrictions - not just trade related.
• It has been criticised for potecting pofits against waiving patents.
• Apporachs are more recoprocal than non-recoprocal.
• The EU has become generous towards "poorer" economies
• No longer focuses on making gloabilisation equal or balanced

The Eurozone: Advantages and Disadvantages

• The Eurozone eliminates exchange rate fluctuations, thereby reducing speculation and transaction costs.
• Promotes price transparency, benefiting consumers and businesses alike.
• Increase in trade and employment.
• Requirements for Eurozone members increases economic stability.
• The Euro serves as a leading global reserve currency.
• A unified Eurozone enhances negotiating power in global discussions.
• Travelers enjoy seamless travel and a boost to local economies.
• Loss of national sovereignty is a disadvantage and creates financial dependency.

Convergence Criteria for the Eurozone

• Convergence criteria: Price stability, Sound and stable public finances, Sustainable public, Durable convergence can increase economic stability.

EU Decision-Making

• The main insitutions headed by: Presidents of the European Council, Council of the EU, European Commission, Parliament
• Decision-making institutes were previously single tasked.
• Council and Parliment identify - Commission propose - Parliament discusses - Council Decide
• It has had a big impact that the identifying problem aspect is influenced politically more than on real citizens.
• Process stayed the same, roles have been changed in institutions:
• The Orindary legislatiev Procude (OLP) is responsible dor approx 99% of the laws in the EU, It is for money security and natural disasters.
• The process begins when EU Comission submits and proposal.

Readings, Council of Ministers and conciliation.

• The Parliment examines the proposal in its first reading where it can approve or amend suggestions.
• First readin in the Council of Ministers - they revies the Parliment position if accepted it becomes law. If not it is sent to parliment for a second reading.
• Then parliament examines councils position, the council reviews parliment amendments. If its not approved it is sent to Conciliation committee where represetntives see a joint text. If not accepted it is rejected. - the prposal is resubmitted.
• Bodies approve act, directives are made by member states. and decesions are mad ein specific cases.

Law classification

• If Council makes "Specia Legislatie Prodedures", Parlements role is limited to one of two. Consultation/Consent
• Consents is when legisalture has power to accept/reject BUT, cannot modify (use whn combating discrimination0
• During consultaitons, Europeean partliemnt approve, modify or reject legistlation.

EU Policies

• EU drectives are apart of their policy and funding.
• They cover area such as Agriculture, fisheries, cultures / eduaction / Economy/finance/ tax. etc
• Longest and mot successful is regions and local Devloplents.

Cohesion Policy

• Aims to reduce economic and social between EU regions and foster SUstainable Devlopment. . Help to balance devlopment and socie economic integration.
• Key objective of Policy: TO help reduce dispariteis by addressing lag by growing with eco dev and growing.
• Promoting econ growth for jobs for sustainable growth. _ Supporting Environmental Sustainability. in reducing Carbon for sustainability.
• Innovatio and digital transorfmation. and Globalisation.
• Theim is also to improve econmic regios and avoid disparities.
• budget are devote dot remove economic / social /territorisl disparities.
• EU is covered by Europeand regions.

regional devlopments - devlopement

• More (GDP average capiat>90%)
• Les devlopements <0%)

ERDF Funing

• THE aim is to strenghtn economic and social chesion.
• Focused around: Iniviation & rEaserch, Digital agenda, Support SMEs, low carbon econmy

ESF Funding

• Eu main intrusment to ensure better jobs for citizens.
• Distributes money to members stats to recive finance on op peratioal ptofamnes. These programes then find related projects,

Harmonzation Policy - Standardiation policy

Standization policy

• Remove conflicting nat stand,
• achives single market for goods and services.
• Harmonized stand is based request to recognize EU stand organizantio to devlop "decm"

3 European sandidaztion organizations

• CEN, centlec (electric) ETST CEN - consrtuciton products. Role: CEN is responsible for voluntary European Standards.

Harmonisation Policy and CE Marking

• The Mark enables free movement of products in EU
• CE mark also for products made for EU and EFFA
• Before putting on market, prodcuts must have it. To meet safety, health.
• Not all, only those listed in specific EU derivatives like toys etc