SUMMARY BUSINESS IN EUROPE-3.pdf

BUSINESS IN EUROPE: EU HISTORY AND ECONOMY 1. History of the EU The European Union (EU) - Supranational organization of 27 Member States - Economic and political integration - Established in 1992 (Maastricht Treaty) - Dates back to the European Coal and Steel Community (1951) - S...

BUSINESS IN EUROPE: EU HISTORY AND ECONOMY 1. History of the EU The European Union (EU) - Supranational organization of 27 Member States - Economic and political integration - Established in 1992 (Maastricht Treaty) - Dates back to the European Coal and Steel Community (1951) - See video https://www.britannica.com/video/191091/overview-history-European-Union Background: Europe in ruins after WWII - Aim of the EU is to ensure peace, democracy, political stability, freedom and economic prosperity on the European continent - The main pillar of the European Union is the European Single Market The European Coal and Steel Community - Pooling coal and steel production would make war between historic rivals France and Germany - ‘Not merely unthinkable but materially impossible’ - Schuman Declaration, 9 May 1950 Founding members of the EU - France - (West) Germany - Italy - Belgium - The Netherlands - Luxembourg EU history in a nutshell April 1951 The Treaty of PAris, establishing the European Coal and Steel Community (ECSC) was signed in Paris on April 18 1951 and entered into force in 1952, it expired in 2002 March 1957 The 6 founding Members sign the Treaties of Rome, establishing the European Economic Community (EEC) and the European Atomic Energy Community (Euratom), in rome on March 25 1957 and came into force in 1958 January 1973 Accession of Denmark, Ireland and the United Kingdom Januari 1981 Accession of Greece January 1986 Accession of Portugal and Spain 1 February 1986 The Single european Act (SEA) was signed in February 1986 and came into force in 1987, it amended the EEC Treaty and paved the way for completing the single market February 1992 The Treaty on european Union (TEU) - The Maastricht Treaty was signed in Maastricht, The Netherlands on February 7 1992 and came into force in 1993, it established the EU, gave the parliament more say in decision-making and added new policy areas of cooperation January 1995 Accession of Austria, Finland and Sweden October 1997 The Treaty of Amsterdam was signed on October 2 1997 and came into force in 1999, it amended previous treaties February 2001 The Treaty of Nice was signed on February 26 2001 and entered into force in 2003, it streamlined the EU institutional system so that it could continue to work effectively after the new wave of Member States joined in 2004 May 2004 Accession of Cyprus, Czech Republic, Estonia, hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia January 2007 Accession Romania and Bulgaria December 2007 The Treaty of Lisbon was signed on December 13 2007 and came into force in 2009, it simplified working methods and voting rules, created a President of the European Council and introduced new structures with a view to making the EU a stronger actor on the global stage July 2013 Accession of Croatia February 2020 Brexit agreement, withdrawal of the United Kingdom 2 Treaties of the EU Signed Treaty 1951 Treaty establishing the European Coal and Steel Community (ECSC) Treaty of Paris 1957 Treaties of Rome - Treaty establishing the European Economic Community (ECC) - Treaty establishing the European Atomic Energy Community (Euratom) 1965 Merger Treaty - Brussels Treaty 1986 Single European Act (SEA) 1992 Treaty on european Union - Maastricht Treaty 1997 Treaty of Amsterdam 2001 Treaty of Nice 2007 Treaty of Lisbon Treaties of the EU currently in force - Treaty on European Union - Treaty on the Functioning of the European Union + Charter of Fundamental Rights of the European Union EU enlargement 1952 Belgium, France, Germany, Italy, Luxembourg, The Netherlands 1973 Denmark, Ireland, United Kingdom (2020 Brexit) 1981 Greece 1986 Spain, Portugal 1995 Austria, Finland, Sweden 2004 Czechia, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia 2007 Bulgaria, Romania 2013 Croatia The EU - summary on a map https://www.youtube.com/watch?v=4VCYHTGjr-U 3  2. The EU today The EU counts 27 Member States - 20 eurozone countries - 7 countries outside eurozone (Swede, Denmark, Poland, Czech Republic, Hungary, Romania, Bulgaria) 27 Schengen countries - The Schengen area is an area compromising 27 European countries that have officially abolished all passport and all other types of border control at their mutual borders What is the EU today? - Shared values: liberty, democracy, respect for human rights, fundamental freedoms and the rule of law - Largest single market - World’s most successful model for advancing peace and democracy - A unique institution: Member States voluntarily cede national sovereignty in many areas to carry out common policies and governance - Not a super-state to replace existing states, not just an organization for international cooperation - The world’s most open market for goods and commodities from developing countries The complexity of Europe - 27 political, legal and economic systems - 24 official languages - Corrupt? - Not democratic? - Shifting to the (far)right? 3. The EU’s values Europe’s mantra: “United in diversity” - Unity within broad general parameters Aims and values Governance - Diversity in terms of Economics Politics Legal system Culture 4  Human dignity - These values form the basis of the EU and are laid out in the Freedom Lisbon Treaty and the EU Charter of Fundamental Rights Democracy - The EU values are common to the EU countries in a society Equality in which inclusion, tolerance, justice, solidarity and Rule of law non-discrimination prevail Human rights - These values are an integral part of our European way of life 4. The EU economy EU GDP - US: $25.5 trillion - China: $17.9 trillion - EU: $15.9 trillion → the EU is the 3rd largest economy in the world Intra-EU trade vs extra-EU trade - Extra-EU trade 52021): 4.3 trillion - Intra-EU trade (2021): 6.8 trillion Challenges for the EU economy - Slowbalization - Economic activity shifting towards services, which are harder to sell across borders - Free trade agreements and farmers protests - Trade wars and protectionist policies - Rising debt - Geopolitical rivalry (for example, tech industry) EU strategic autonomy? The following events highlighted the EU’s dependence on third countries for the following strategic resources - Covid-19 Active pharmaceutical ingredients (APIs) and medical supplies - War in Ukraine (Russian) oil and gas - European Green Deal Critical raw materials for vehicle batteries, wind turbines, solar panels, … - Digital transition Microchips 5 BUSINESS IN EUROPE: EU INSTITUTIONS AND DECISION MAKING PROCESS 1. The EU’s key institutions How does the EU work? - See video: https://www.youtube.com/watch?v=9eufLQ3sew0&t=1s Key EU institutions - European Commission (Brussels) - European Parliament (Strasbourg, Brussels) - Council of the European Union (Brussels) - European Council (Brussels) Legal basis - The powers, responsibilities and procedures of the EU’s institutions are laid down in the founding treaties of the EU The Treaty on the Functioning of the European Union (1957) The Treaty on European Union (1992) - More recently, the Lisbon Treaty (2007) introduced certain amendments and additions to their competences - The 4 main EU institutions, with their distinct functions, work together closely to set the EU’s agenda and initiate and coordinate EU-law making Who are the leaders of the EU? Ursula von der Leyen President of the European Commission Roberta Metsola President of the European Parliament Charles Michel President of the European Council Joseph Borell EU High Representative for Foreign Affairs 6 The European Commission - Powers and responsibilities Represents the common interest of the EU Is the EU’s main executive body Manages EU policies and EU’s budget Ensures that countries apply EU law correctly Uses its ‘right of initiative’ to put forward proposals for new laws, which are scrutinized and adopted by the Parliament and the Council - College of Commissioners from 27 countries - Appointment of the Commission Commission President, elected by an absolute majority of the Parliament upon nomination by the European Council Commissioners, nominated by the European Council, hearing of each candidate commissioner before the relevant Parliament committee and approved by vote of consent by Parliament - The Commission administration The Commission is organized into policy departments, known ad Directorates-General (DGs), which are responsible for different policy areas DGs develop, implement and manage EU policy, law and funding programmes Around 32,000 permanent and contract employees work in the Commission, these include police officers, researchers, lawyers and translators - 6 Commission priorities for 2019-2024 A European Green Deal A European for for the digital age An economy that world for people A stronger Europe in the world Promoting our European way of life A new push for European democracy 7 The European Parliament - Powers and responsibilities Has gradually seen its powers increase from advisory body to co-legislator Shares with the Council the power to adopt and amend legislative proposals and to decide on the EU budget Supervises the work of the Commission and another EU bodies and cooperates with national parliaments of EU countries to get their input - Has a total of 705 seats - Parliament's 7 political groups Group Political orientation Group of the European People’s Party Centre-Right (Conservatives and Christen (EPP) Democrats) Group of the Progressive Alliance of Centre-Left (Social Democrats) Socialists and Democrats in the European PArliament (S&D) Renew Europe Group Centrist (Liberals) Group of the Greens/European Free Leftist (Greens) Alliance (Greens/EFA) Identity and Democracy (ID) (Far-)Right (Nationalists) European Conservatives and Reformists (Centre-)Right (ECR) The Left (Far-)Left - Election of the European Parliament MEPs (= Member of European Parliament) have been elected in direct elections across the EU since 1979 The elections take place every 5 years and are the largest transnational elections in the world Last European elections were in MAy 2019 (next 6-9 June 2024) The number of members elected in each country depends on the population size (from 6 for Malta, Luxembourg and Cyprus to 96 for Germany) Elections are contested by national political parties, but once MEPs are elected, most opt to become part of transnational political groups 8 The Council of the European Union (also called Council or Council of Ministers) - Not to confuse with the Council of Europe (based in Strasbourg), that is an international organization on human rights and NOT a part of the EU - Powers and responsibilities IS an essential EU decision-maker, it negotiates and adopts new EU legislation, adapts it when necessary and coordinates policies Decides on EU legal acts together with the European Parliament through the ordinary legislative procedure Negotiates and adopts not only legal acts but also documents such as conclusions, resolutions and statements, which do not intend to have legal effects - Presidency of the Council Rotating presidency, a different EU Member State every 6 months The presidency chairs meetings at every level in the Council Member States holding the presidency work together closely in groups of three, called trios The current trio is made up from the presidencies of Spain, Belgium and Hungary (1 January - 30 June 2024) - Council meetings The Council of the EU is a single legal entity, but it meets in 10 different ‘configurations’, depending on the subject being discussed Council meetings are attended by representatives from each Member State at a ministerial level, participants can therefore be ministers or state secretaries Meetings are chaired by the minister of the Member State holding the 6 month Council Presidency - Council preparatory bodies The Council is supported by the committee of permanent representatives (COREPER) and more than 150 specialized working parties (WPs) and committees → Council of Ministers (minister level) → COREPER (ambassador level) → Working parties and committees (civil servant level) 9 The European Council - Powers and responsibilities Defines the general political direction and priorities of the EU Meets at least 4 times a year (EU summits), usually in March, June, October and December Adopts ‘conclusions’ during its meetings which identifies issues of concern and actions to take It is not one of the EU’s legislating institutions, so does not negotiate or adopt EU laws, except for possible EU Treaty amendments - Members of the European Council The heads of state or government of the 27 EU Member States The European Council President The President of the European Commission The European Council is chaired by a president who is elected for a term of 2.5 years, renewable once Other EU institutions - European Central Bank, Frankfurt (Christine Lagarde) - EU Court of Justice, Luxembourg (Koen Lenaerts) - European Court of Auditors, Luxembourg (Tony Murphy) The European Commission EXECUTIVE The European Parliament LEGISLATIVE The Council of the European Union LEGISLATIVE The European Council STRATEGIC The European Central Bank EURO STABILITY The EU Court of Justice JUDICIAL The European Court of Auditors AUDIT 2. The ordinary legislative procedure Law making in the EU - See video: https://www.youtube.com/watch?v=clmSKbV5Z9w Role of the institutions - There are 3 main institutions involved in EU law-making The European Commission, representing the EU’s overall interests The European Parliament, representing EU citizens The Council of the European Union, representing EU governments → in most cases, the Committee of the Regions and the Economic and Social Committee act as advisory bodies 10 EU decision making EU policy areas Exclusive competences Shared competences Supporting competences - Customs union - Single market - Public health - Competition rules for - Employment and - Industry the single market social affairs - Culture - Monetary policy for - Economic, social - Tourism the eurozone and territorial - Education and countries cohesion training, youth and - Trade and - Agriculture and sport international fisheries - Civil protection agreements (under - Environment - Administrative certain - Consumer protection cooperation circumstances) - Transport and - Marine plants and trans-European + Special competences animals regulated by networks - Coordination of the common - Energy economic and fisheries policy - Justice and employment policies fundamental rights - Common foreign and - Migration and home Security Policy affairs - Flexibility clause - Public health - Research and space - Development cooperation and humanitarian aid Subsidiarity and proportionality SUBSIDIARITY - The EU can only legislate when the objectives of an action cannot be sufficiently achieved by the Member States, but can be better achieved at Union level, by reason of the scale and effects of the proposed action PROPORTIONALITY (EU LAW) - Must be suitable to achieve the desired end - Must be necessary to achieve the desired end - Must not impose a burden on the individual that is excessive in relation to the objective sought to be achieved (proportionality in the narrow sense) 11 Primary vs secondary law - Every action taken b y the EU is founded on the treaties, these binding agreements between EU Member Countries set out EU objectives, rules for EU institutions, how decisions are made and the relationship between the EU and its members - Treaties are the starting point for EU law and are known in the EU as primary law - The body of law that comes from the principles and objectives of the treaties is known as secondary law and includes regulations, directives, decisions, recommendations and opinions Secondary law, types of EU legal acts - Regulations Regulations are legal acts that apply automatically and uniformly to all EU countries as soon as they enter into force, without needing to be transposed into national law, they are binding in their entirety on all EU countries - Directives Directives require EU countries to achieve a certain result, but leave them free to choose how to do so, EU countries must adopt measures to incorporate them into national law (transpose) in order to achieve the objectives set by the directive The ordinary legislative procedure - The ordinary legislative procedure gives the same weight to the European Parliament and the Council of the European Union on a wide range of areas (economic governance, immigration, energy, transport, …) - The vast majority of European laws are adopted jointly by the European Parliament and the Council - The co-decision procedure was introduced by the Maastricht Treaty on European Union (1992) - The Lisbon Treaty (2007) renamed it ‘ordinary legislative procedure’ and made it the main legislative procedure of the EU’s decision-making system - Once the Commission has presented its proposal, both the Parliament and the Council review it and can propose amendments during first reading - If the 3 institutions do not agree on a common final text, a second reading takes place, during which further amendments can be proposed - If they still cannot agree after the second reading, a conciliation committee is set up to try to find a solution 12 BUSINESS IN EUROPE: THE EUROPEAN SINGLE MARKET AND BREXIT 1. European single market: definition, history and principles EU Commissioner for Internal Market - Thierry Breton - Directorate General (DG) for Internal Market, Industry, Entrepreneurship and SMEs Definition - European single market = - European internal market = - European common market The European single market - 31 countries, 450 million consumers - 27 EU member states + Iceland, Liechtenstein, Norway (= European Economic Area) + Switzerland Four freedoms - Goods - Services - People - Capital → free movement What is the European Single Market? - See video: https://www.youtube.com/watch?v=Z9PX0jgm8TA Objectives - Economic integration: remove trade barriers (tariffs, quotas, taxes) between EU countries, make trade between countries as easy as within them - Harmonization of legislation, have the same regulation apply in all countries (product standards, health and safety) - Create level playing field for all member states - To avoid protectionism and the excesses of nationalism 13 History of the European Single Market 1951 Treaty of Paris: European Coal and Steel community (ECSC) 1957 Treaty of rome: European Economic Community, building on the success of the ECSC, the six founding members expanded their cooperation to other economic sectors → common market and customs union (including Common Agricultural Policy (CAP), Common Transport Policy and European Social Fund) 1986 Single European Act (SEA): Deadline for completion of the single market (1992) 1985-1992 282 laws were adopted to remove technical, legal and bureaucratic barriers that hindered free trade and movement 1993 Single market for goods was established incomplete for services (postal services, transport) 2022 Digital Services Act & Digital Markets Act: for a fair and competitive digital sector 2023 30th birthday of the single market - 6 countries (1951) - 12 countries (1986) - 27 + 4 countries (today) 30 years of the European Single Market - See video: https://multimedia.europarl.europa.eu/en/video/timeline-30-years-of-the-european-sin gle-market-1_N01_AFPS_220115_TSU2 Examples - Abolished roaming charges - Common charger for mobile devices - EU energy label - Right to repair → cooperation in the internal market is the core and engine of European integration Key principles of the internal market - Non-discrimination on national grounds (Art. 13 TEU) - Removal of tariff and non-tariff barriers - Mutual recognition (Cassis de Dijon) - Harmonization of legislation and CE marking of products - Home country control 14 Free movement of people - Cornerstone of EU citizenship, established by the Treaty of Maastricht in 1992 - Key milestone = Schengen agreement - Free movement of people includes Freedom to travel to any EU country (up to three months) Freedom to reside in any EU country (after three months: if ‘sufficient resources’) Freedom to work in any EU country Free movement of goods Mutual recognition: Cassis de Dijon - EU member states are obliged to allow goods that are legally produced and marketed in another member state to circulate and to be placed on their markets Harmonization of product legislation - EU-wide legally binding standards to be met in all member states - The adoption of harmonization laws has made it possible to remove obstacles and to establish common rules aimed at guaranteeing the free circulation of goods, including respect for other EU Treaty objectives such as protection of the environment and consumers or competition - Examples of harmonized sectors Electronic and electric equipment Machinery Lifts Medical devices CE marking - On commercial products the letters ‘CE’ mean that the manufacturer or importer affirms the good’s conformity with EU health, safety and environmental protection standards - Benefits Businesses know that products bearing the CE marking can be traded in the EEA without restrictions Consumers enjoy the same level pg health, safety and environmental protection throughout the entire EEA Free movement of services - Freedom of establishment Self-employed persons or companies legally operating in one EU member state have the right to set up a business in another member state - Freedom to provide services Self-employed persons or companies may offer services in other EU member states that the member state in which they are established 15 Free movement of capital - No restrictions on the movement of capital between EU countries - Unless they are necessary to pursue legitimate public interests - Individuals Opening bank accounts abroad Buying shares in non-domestic companies Investing where the best return is Purchasing real estate in another country - Businesses Invest in and own other European businesses Raise finance where it is cheapest EU Customs Union - The goal of the Rome Treaty (1957) to abolish customs barriers and introduce a common customs tariff was achieved in 1968 - This allowed free cross-border trade of goods for the first time - 27 EU member states + Monaco - Switzerland, Norway, £Iceland and Liechtenstein are part of the single market but not of the customs union - Turkey, Andorra and San Marino: bilateral customs union with the EU - No tariffs or non-tariff barriers to trade between members of the customs union - Common external tariff on all goods entering the union 2. Impact of the single market Benefits of the single market - Stimulates competition and trade - Improves efficiency and quality - Lowers prices and gives consumers more choice - Fuel growth, innovation and jobs - Makes the EU a more important global trading partner 16 Achievements of the Single Market - The single market enabled European consumers to enjoy a greater variety of products - From 1992 to 2006, the single market increased EU GDP by 2.2% representing 233 billion euros, or around 500 euro per citizen - From 1992 to 200§, the single market created 2.75 million jobs, representing a 1.4% increase in total employment - The single market increased intra-EU trade by 9% - In the absence of the single market, per capita European incomes would be 12% lower today - The reduction of trade costs resulted in additional trade flows - between 1992 and 2012, intra-EU trade intensity rose from about 12 to 22% of GDP - and higher benefits from existing trade flows - The single market has also increased the attractiveness of the EU as a trading partner for third countries and the ability of EU firms to compete on global markets - Between 199 and 2016, exports of goods and services as a share of EU GDP rose from 5 to 43% Intra-EU exports - Growth in intra-EU exports is associated with 3.5 million additional jobs between 2003 and 2015 GDP per capita - The average GDP in the EU increased faster because of European integration Salaries - Average salaries in the EU have increased because of European integration The EU’s position in global markets - The EU is the third largest economy in the world after the US and China - It is the world’s largest trader of manufactured goods and services (16% of world imports and exports) - The EU ranks first in both inbound and outbound international investments - The EU is the top export market for 80 countries 3. EU Digital Services Act and digital Markets Act Digital services - Online services used to communicate with each other, shop, order food, find information, watch films, listen to music, … - Provided by online platforms: online marketplaces, social networks, content-sharing platforms, app stores, and online travel and accommodation platforms - For example, Amazon, TikTok, Airbnb, … - All online operators offering services in the European single market, also if they are established outside of the EU 17 Stronger EU rules - The Digital Services Act and Digital Markets Act build on the e-commerce directive of 2000 - They aim to avoid the spread of illegal and harmful products (counterfeit goods) and content (hate speech, disinformation and misinformation) - Hence, they make digital companies accountable for the content posted on their platforms and create a safe online space for users Obligations for online platforms - Combatting the sale of illegal products and services - Countering and quickly reacting to illegal content (fake news, propaganda, hate speech, harassment and child abuse) - Using content moderation tools - Increasing transparency for users regarding terms and conditions and how algorithms recommend content - Banning advertising for children and the use of sensitive personal data to target ads (gender, sexual orientation, race, religion or political beliefs) - Banning ‘dark patterns’ = misleading interfaces intentionally designed to trick users into subscribing to services without noticing for instance Very large platforms (VLOPs) and search engines (VLOSEs) - Online platforms with more than 45 million active users are subject to even stricter rules - For example: Zalando, FaceBook, Instagram, Linkedin, TikTok, Snapchat, … 4. Brexit Brexit - The withdrawal of the United Kingdom from the EU on 31 January 2020 - The UK is the only country to have left the EU - The UK had been a member state of the EU (and its predecessor, the European Economic Community) since 1 January 1973 Brexit referendum - Organized on 23 June 2016 by (former) Prime Minister David Cameron - The referendum resulted in 51.9% of the votes cast being in favor of leaving the EU - Although the referendum was legally non-binding, the government promised to implement the result 18 The EU-UK withdrawal agreement - The Withdrawal Agreement concluded between the EU and the UK establishes the terms of the UK’s orderly withdrawal from the EU, in accordance with Art. 50 of the Treaty on European Union - The Withdrawal Agreement entered into force on 1 February 2020, after having been agreed on 17 October 2019, it consists among others of a Protocol on Ireland and Northern Ireland - This Protocol was subsequently changed under the Windsor Framework (effective on 1 October 2023) The EU-UK Trade and Cooperation Agreement - The EU-UK Trade and Cooperation Agreement concluded between the EU and the UK sets out preferential arrangements in areas such as trade in goods and services, digital trade, intellectual property, public procurement, aviation and road transport, energy, fisheries, … - European Commission: “While it will by no means match the level of economic integration that existed while the UK was an EU member state, the Trade and Cooperation Agreement goes beyond traditional free trade agreements and provides a solid basis for preserving our longstanding friendship and cooperation” - The Trade and Cooperation Agreement was signed on 30 December 2020, was applied provisionally as of 1 January 2021 and entered into force on 1 May 2021 Customs for UK products imported into the EU - The UK left the EU customs union, single market and VAT area - For customs, it is now treated as any other non-EU country - This means that customs procedures and formalities apply (including different VAT rules) - Customs controls ensure duties are paid on goods moving across the border and goods comply with safety, security, health and environmental requirements - BUT: no tariffs or quotas for products of UK origin Customs for EU products imported into the UK - The UK Government has been phasing in border controls for goods imports from the EU from 2021 - Customs declarations are now required for all imported goods - Businesses must pre-notify imports of animals, plants and high-risk food and feed Online shopping on UK websites - What charges might I have to pay? When the goods are delivered into the EU from a non-EU country, you have to pay VAT just like you do on goods bought within the EU Excise duty is also charged when you order tobacco or alcohol products from the UK If the total value of the ordered goods is above 150 euro and they were not manufactured in the UK, you will have to pay customs duties when they enter the EU 19 Pros and cons of Brexit (for the UK) + - Greater control of foreign affairs Benefits of being in a wider union (single market, …) Greater national sovereignty Better tackle threats to security (terrorism, and cross-border crime) as EU member Potential for new trade deals with fir Favorable trading relationship example the US Impact of Brexit on the UK: deal on goods, not on services - See video: https://www.youtube.com/watch?v=Hf8EHb5-HaM Economic importance UK (2019) - The UK’s ‘net contribution’ was estimated at nearly £9 billion or £173 million per week - The EU was the UK’s largest trading partner - UK exports to the EU were £294 billion (43% of all UK exports) - Imports from the EU were £374 billion (52% of all UK imports) - Exports to EU: 9% of British GDP - The EU was responsible for 2.3 million jobs in the UK 20 BUSINESS IN EUROPE: EU CONSUMER AND ENVIRONMENTAL POLICIES 1. Introduction European Single Market: four freedoms - Freedom of movement across borders of Goods Services People Capital Freedom of movement of goods Harmonization of product legislation - EU-wide legally binding standards to be met in all member states - The adoption of harmonization laws has made it possible to remove obstacles and to establish common rules aimed at guaranteeing the free circulation of goods, including respect for other EU Treaty objectives such as Protection of the environment Protection of consumers Protection of competition - Examples of harmonized sectors Electrical and electronic equipment Machinery Lifts Medical devices 2. EU consumer policy Commissioners responsible for consumer policy Internal Market Thierry Breton Equality Helena Dalli Consumers Didier Reynders Health and food safety Stella Kyriakides 21 BEUC: the European Consumer Organization - See video: https://www.youtube.com/watch?v=mZ70mMdOyU8 4 pillars of the EU consumer agenda - Promoting consumer safety by introducing new rules on product safety, market surveillance and product traceability - Enhancing knowledge of consumer rights by providing educators and consumers with adapted information and materials on consumer protection - Strengthening the enforcement of consumer rules/rights - Integrating consumer interests into the key sectoral policies 5 EU consumer rights - See video: https://www.youtube.com/watch?v=PQnM-k4k0Z8 - Right to truthful advertising - Right to fair contracts - Right to return goods or cancel a service bought online within 14 days (right of withdrawal) - Right to have defective goods repaired or replaced for free (two-year legal guarantee) - Right to free assistance in your own country from a European Consumer Centre (in all 27 member states) Passenger rights - Non-discrimination - Access and assistance for disabled passengers and passengers with reduced mobility - Information - Choice to cancel trips due to disruption - Rerouting or rebooking - Assistance in event of long delay - Compensation - Carrier liability - Easy complaint handling - Effective enforcement of rights The General Product Safety Regulation - Currently the General Product Safety Directive, the new General Product Safety Regulation will apply as of 13 December 2024 - Applies for all non-food products - Ensures that only safe products are sold in the internal market - Complements sector-specific legislation (electronics, toys, cosmetics, …) - Does not cover pharmaceuticals, medical devices or food, which fall under separate legislation 22 Product safety - No (exposure to) toxic materials - No small pieces (children) - No injuries - Electrical safety - Instructions on safe handling/safe equipment Safe use of chemicals - REACH regulation Registration, Evaluation, Authorisation and restriction of Chemicals - Principle of ‘no data - no market’ No chemical substance can be manufactured, used or imported into the EU without registration with the European Chemicals Agency (ECHA) - Manufacturers of chemicals must pass safety information down the supply chain - Some chemicals have been banned in the EU (asbestos, mercury, microplastics) - Others require authorisation for their use to be continued Labeling of chemicals - CLP regulation Classification, Labeling and Packaging of chemicals Mandatory product labeling - Different requirements apply to different product categories CE marking (batteries, household appliances, electronics, medical devices, toys → not for pharmaceuticals, cosmetics and food) Energy label (household appliances, electronic displays, lamps, tyres, …) Food labeling (ingredients, allergens, nutrition, …) Textile label (fiber composition) CE marking - On commercial products, the letters ‘CE’ mean that the manufacturer or importer affirms the good’s conformity with EU health, safety and environmental protection standards - Benefits Businesses know that products bearing the CE marking can be traded in the EEA without restrictions Consumers enjoy the same level of health, safety and environmental protection throughout the entire EEA Voluntary product labeling - EU organic logo - EU ecolabel - EU EMAS label (ECO-Management and Audit Scheme) 23 EU consumer policy: key takeaways - Consumers are generally at a disadvantage compared to businesses (fewer resources, difficult to organize, lack of information) - The EU paid little attention to consumers in its early years - However, consumer policy became a spillover of the progressing single market initiatives (also as a means for the EU institutions to generate legitimacy with its constituents) - The EU now has a strong consumer policy, including rules on advertising, contracts, specific goods and services, passenger rights, … 3. EU environmental policy Commissioner responsible for environmental policy European Green Deal Maros Sefcovic Energy Kadri Simson Climate Action Wobke Hoekstra Environment, Ocean and Fisheries Virginijus Sinkevicius Safe use of chemicals - The previously mentioned REACH Regulation and CLP Regulation are not only meant to protect human health but also the environment - Toxic chemicals can cause air, water and/or soil pollution - Persistent organic pollutants (pesticides, industrial chemicals) or ‘forever chemicals’ accumulate in waste, air, water and soil (3M and PFOS) - Also microplastics are not biodegradable and accumulate in living organisms (humans, fish) and the environment (oceans, drinking water) The Polluter Pays principle - The polluter pays is a core principle of EU environmental policy - It means that those responsible for environmental damage should pay to cover the costs - This applies to the prevention of pollution, remediation, liability and the costs imposed on society of pollution that does happen - The EU itself recognizes that the polluter pays principle has only partially been implemented so far Examples of the Polluter Pays - Taxes, charges and fees - Tradable permits (EU EMission Trading System) - Deposit refund schemes/ EPR schemes - Offsetting schemes - Payments for ecosystem services 24 Extended Producer Responsibility (EPR) - EPR is an application of the polluter pays principle - It requires the producer of a product to contribute to waste collection and treatment costs - EPR schemes currently exist for Electrical and electronic equipment Lamps Cars Packaging Batteries Oils Mattresses - Also proposed for Textile products Clothing Footwear The Circular Economy Action Plan - See video: https://www.youtube.com/watch?v=a3qIFfyYdzA&t=52s - A wide range of initiatives and legislation on product design, sustainable consumption, resource efficiency and waste prevention - 1st Circular Economy Action Plan (2015) focused on waste management and recycling - 2nd Circular Economy Action Plan (2020) adopted under the European Green Deal: focus on products Circular Economy Action Plan examples - EU Textiles Strategy - https://environment.ec.europa.eu/strategy/textiles-strategy_en - When was the initiative launched? Has it been adopted already? Who needs to approve it? - What are the objectives of the initiative? - Does the initiative include binding legislation (in the form of an EU directive or regulation)? What will be the obligations of producers? The European Green Deal - See video: https://www.youtube.com/watch?v=zf74KGVOhm4&t=5s - Presented by the EU Commission in December 2019 - Aims Reduce greenhouse gas emissions by 55% by 2030 Make Europe climate-neutral by 2050 - Includes a wide range of initiatives and legislation on emissions, energy and circular economy (includes the Circular Economy Action Plan) - The EU’s implementation of the UN PAris Agreement (2015) 25 Fit for 55 - The European Commission’s fit for 55 package intends to cut EU greenhouse gas emissions by 55% by 2030 compared to 1990 levels - When implemented by all 27 member states, the fit for 55 legislation would level the way to achieve climate neutrality by 2050 for Europe’s economy - Without the package, under current EU climate legislation, Europe will only achieve a 60% emissions reduction by 2050 Transforming the EU economy and society - The EU Commission wants to build a new economic model and proposed a blueprint for a transformational change - With the reduction of emissions, the EU Commission wants to create new opportunities (business models) for innovation, investment and jobs (clean technologies and products) - At the same time, it wants to address energy poverty, reduce external energy dependency (strategic autonomy) and strengthen the competitiveness of EU companies Revolutionizing the energy system - Increase the share of renewable energies (40% by 2030) - Greater energy efficiency (reduction of energy use by 36-39) - A tax system for energy products that gives the right incentives to support the energy transition - Mitigating the social impact and supporting vulnerable citizens Sustainability reporting and due diligence EU Corporate Sustainability Reporting Directive (CSRD) - Applies to large companies (as of 2024) and listed SMEs (as of 2026) - Requires companies to report on the sustainability (environmental, social and governance) of their activities across the supply chain - Sustainability statement should be part of the management report and should be audited - Will become an important tool for investors EU Corporate Sustainability Due Diligence Directive (CSDDD) - Directive has not been adopted yet, its scope is till being defined - Due diligence means that companies should collect information on the environmental and social impact of their activities and prevent and mitigate negative outcomes - Companies will have to look at their entire supply chain (but noy clear yet if only upstream or also downstream) - They will need a code of conduct and a procedure to make sure that stakeholders comply with the code of conduct - Not clear if climate change will be a requirement, also biodiversity does not seem to be a priority, other environmental issues will be covered (pollution) 26  4. Case study, the EU Emissions Trading System Scope - Greenhouse gas emissions from ca. 10,000 installations in the following sectors Energy (electricity and heat generation) Manufacturing (energy-intensive industry sectors, including oil refineries, steel works and production of iron, aluminum, metals, cement, lime, glass, ceramics, pulp, paper, cardboard, acids and bulk organic chemicals) Aircraft operators flying within the EEA Maritime transport (from 2024) Carbon Adjustment Border Mechanism - To avoid unfair competition (carbon leakage) from non-EU companies, which are not subject to the strict EU climate regulations - A carbon tax on products imported into the EU: EU importers will buy carbon certificates corresponding to the carbon price that would have been paid, had the goods been produced under the EU’s carbon pricing rules - There will be a levy on the CO content of imported steel, iron, aluminum, fertilizers, cement and electricity which will be set at an equivalent price to the cost borne by EU producers Non-ETS sectors - Transport - Buildings - Agriculture - Industry - Waste 27 BUSINESS IN EUROPE: FISCAL AND MONETARY POLICY 1. Introduction Stages of economic integration Complete economic integration involves - A single market - A common trade policy - A common monetary policy (EMU) - A single fiscal policy, tax and benefit rates → complete harmonization of all policies, rates and trade rules Monetary vs fiscal policy Monetary policy Fiscal policy Interest rates Tax and government spending EU competence National competence 2. EU monetary policy Monetary policy is primarily concerned with the management of interest rates and the total supply of money in circulation - The European Central Bank (Frankfurt) is responsible for EU monetary policy - Central banks typically use monetary policy to either stimulate and economy or to check its growth By incentivizing individuals and businesses to borrow and spend money, monetary policy aims to spur economic activity Conversely, by restricting spending and incentivizing savings, monetary policy can act as a brake on inflation and other issues associated with an overheated economy The European Central Bank (see video: https://www.youtube.com/watch?v=vRzFAvgBhU0) - Responsible for monetary policy (interest and exchange rate policy) - Independent and supranational - Primary objective is price stability (keep inflation close to 2%) - Fiscal policy remains a national competence, but the Stability and Growth Pact shall stop member states from undermining monetary policy 28 European Monetary Union (EMU) - Economic and monetary union, abbreviated as EMU, refers to the economic and monetary integration of the 27 member states of the European Union - It involves 3 stages Coordinating economic policy Achieving economic convergence (bringing economic cycles broadly in step) Adopting the euro, the EU’s single currency Introduction of the euro (a single, common currency) - 1999 Introduction of the euro for commercial and financial transactions only in 11 EU countries (joined by Greece in 2011) - 2002 Introduction of euro notes and coins The euro becomes the legal currency in 12 EU countries Denmark, Sweden and the UK decide not to adopt the euro Eurozone current status (20 euro area countries) - EU member states including some of their overseas departments, territories and islands (Madeira, Tenerife, …) - A country needs to fulfill the ERM II (Exchange Rate Mechanism) convergence criteria before it can join the Eurozone - 5 countries (Bulgaria, Czechia, Hungary, Poland and Romania) are expected to adopt the euro in the coming years - Denmark opted out from the euro and is not obliged to introduce it - Sweden is legally required to adopt the euro, but does not have a target date to do so - The euro is also used in countries outside the EU Four states (Andorra, Monaco, San Marino and Vatican City) have signed formal agreements with the EU to use the euro and issue their own coins Kosovo and Montenegro officially adopted the euro as their sole currency without an agreements and therefore have no issuing rights EMU: economic benefits - Removes exchange rate uncertainty on intra-EMU trade - Avoids competitive devaluations - Eliminates transaction costs - Increases price transparency - Low and stable inflation and interest rates - Promotes international specialization and improves EU competitiveness - Boosts the EU’s international economic profile EMU: economic risks - Can one monetary policy fit all? - Loss of economic sovereignty? - Asymmetric shocks (especially if European single market and EMU lead to specialization)? - Lack of real economic convergence - Burden of adjustment on wages and prices, flexible enough? 29 Pros and cons of EMU - See video: https://www.youtube.com/watch?v=4_RMvju8dYg 3. EU fiscal policy Changes in government spending or tax policies Expansionary fiscal policy Contractionary fiscal policy If a government believes there is not A measure to increase tax rates and enough business activity in an economy, it decrease government spending can increase the amount of money it spends (stimulus spending) It occurs when government deficit spending is lower than usual If there are not enough tax receipts to pay This has the potential to slow economic for the spending increases, governments growth if inflation, which was caused by a borrow money by issuing debt securities significant increase in aggregate demand such as government bonds and, in the and the supply of money, is excessive process, accumulate dept (deficit spending) Deficit vs debt - Budget deficit occurs when spending is greater than the revenue received in that year - When spending exceeds revenue, it’s called deficit spending - The national debt is the accumulation of each year’s deficit - When revenue exceeds spending, it creates a budget surplus, a surplus reduces the debt EMU formal entry requirements: convergence criteria - Stability and Growth Pact (1997), last modified by european Fiscal Compact (2012) - Fiscal criteria National budget deficit not exceeding 3% of GDP National debt not exceeding 60% of GDP (= debt to GDP ratio) or heading in the right direction - Monetary criteria Inflation no more than 1.5 percentage points above the average of the 3 countries with the lowest rates Long-term interest rates no more than 2 percentage points above the average of the 3 countries with the lowest rates Exchange rate within normal band of ERM for previous 2 year 30 EU economic governance: a shared responsibility (monetary and fiscal policy) - The European Council sets the main policy orientation - The Council of the EU decides whether a member state may adopt the euro - The ‘Eurogroup’ coordinates policies of common interests for the euro-area member states - Member states set their national budgets within agreed limits for deficit and debt and determine their own structural policies involving labor, pensions and capital markets - The European Commission monitors performance and compliance - The ECB sets monetary policy, with price stability as the primary objective and acts as central supervisor of financial institutions in the euro-area - The European Parliament shares the job of formulating legislation with the Council, and subjects economic governance to democratic scrutiny in particular through the new Economic Dialogue European fiscal union? - Monetary policy in the EU has been harmonized, but fiscal policy largely remains a national competence - In a fiscal union (US), spending and tax levels are determined by a central fiscal authority (in the euro-area, countries are responsible for their own budgets - Also debt would be financed by a common bond (eurobonds) rather than by individual country bonds - with eurobonds, there would be greater pressure for countries to stick to limits and rules about levels of spending and borrowing - The European Financial Stabilization Mechanism (EFSM) (now European stability Mechanism (ESM)) was a partial attempt to share some fiscal burden amongst different EU countries 4. Case study: the financial crisis of 2008 The European debt crisis - See video: https://www.youtube.com/watch?v=kbcvdKwmCtg - Link to global financial crisis of 2008 Structural deficit and debt-to-GDP ratio - Structural deficit = a budget deficit that results from a fundamental imbalance in government receipts and expenditures, as opposed to one based on one-off or short-term factors - If a country’s debt-to-GDP ratio gets too high, investors are afraid that the government will default on its debt - In 2011, many EU countries had structural deficits leading to a crisis of confidence (also called the PIIGS crisis: Portugal, Ireland, Italy, Greece and Spain) regarding their ability to pay of this debt - The debt crisis was preceded by the global financial crisis of 2008 31 European Fiscal Compact (2012) - Treaty on Stability, Coordination and Governance on the Economic and Monetary Union, a reaction to the European debt crisis (stricter rules) The general government budget must be balanced or in surplus A government’s structural deficit must not be more than 0.5% of GDP per year to reduce excessive debt If the structural deficit is more than 0.5% of GSP, the government is obliged to work towards reducing it, this must be done within the time limits set by the EU If the government debt is significantly below 60% of GDP and the public finances are sustainable in the long term, the structural deficit may be up to 1% of GDP 32 BUSINESS IN EUROPE: TRADE POLICY 1. Introduction Trade policy, an exclusive EU competence - This means that the EU is responsible for the trade policy of the member countries and negotiates trade agreements for them - Speaking as one voice, the EU carries more weight in international trade negotiations than each individual member would - It is no longer possible for and individual EU country to have ots own trade agreements with third countries EU trade policy - The EU’s responsibilities cover Trade in goods and services The commercial aspects of intellectual property, such as patents Public procurement Foreign direct investment → art. 207 of the Treaty on the functioning of the European Union sets out the rules on EU trade policy The EU’s rules in the WTO - Both the EU and the individual EU countries are members of the WTO - The EU Trade Commissioner represents the EU in the WTO Ministerial Conference - The European Commission also represents the EU in The General Council of the WTO, which acts on behalf of the Ministerial Conference and meets regularly Subsidiary WTO bodies on specific areas of world trade (environment) 2. EU trade statistics The EU’s position in global markets - The EU is the third-largest economy in the world after the Us and China - It is the world’s largest trader of manufactured goods and services (16% of world imports and exports) - The EU ranks first in both inbound and outbound international investments - The EU is the top export market for 80 countries The value of intra-EU trade in goods was 1.5 times as high as the value of extra-EU trade in goods in 2022 The EU’s main trading partners are - The US - China - The UK - Switzerland - Turkey 33 10 benefits of trade - Economic growth - More jobs - Greater variety of goods - Reduces poverty - The best products and services - New ideas and innovation - Economic ties between nations - Boosts competition and competitiveness - Easier to do business - Exchange of innovative or high-technology products Advantages of businesses - See video: https://www.youtube.com/watch?v=N-5Cs64dZHc 3. EU trade policy explained How does the EU trade policy work? - See video: https://www.youtube.com/watch?v=IiOC5XG2I5Y&t=116s Areas of EU trade policy - Global trade EU trade policy wants to ensure that Europe’s trade adapts to a fast-changing world The EU also works with the WTO to keep the global economy open and based on fair rules - Opening foreign markets The EU opens markets by making trade deals with partner countries or regions It also tries to solve trade barriers that prevent European Businesses from properly accessing a partner’s market - Trade disputes and defense The EU preserves its standards with its trade partners and ensures European businesses and workers thrive in the world economy - Morals, values and ethics The EU includes rules about the environment, labor rights and sustainable development in its trade deals Europe has also opened its market to trade from the world’s poorest countries and helps developing countries take advantage of world trade 34 How the EU negotiates trade deals - The European Commission requests authorization from the Council of the EU to negotiate a trade agreements with a trade partner - The Council’s authorization mandate sets out what they Commission should achieve in the agreement - A special trade policy committee is appointed by the Council to assist the Commission in this task - The European Parliaments is being kept informed - Trade Agreements need to be approved by the Council, the European Parliaments and the national parliaments (if the trade agreement covers areas where EU countries have responsibilities) The EU’s trade strategy: open strategic autonomy - The EU pursues a strategy of strategic autonomy alongside an open economy - The EU’s new trade strategy builds on the EU’s openness to contribute to economic recovery by supporting the green and digital transformation - The strategy includes a renewed focus on strengthening multilateralism and reforming global trade rules to ensure that they are fair and sustainable - Where necessary, the EU will take a more assertive stance in defending its interests and values Strategic economy alongside an open economy - See video: https://www.youtube.com/watch?v=IiOC5XG2I5Y&t=116s https://www.youtube.com/watch?v=045pSKtBeMA The EU’s dependence on third countries - The EU depends on other countries for several strategic resources Active pharmaceutical ingredients and medical supplies Oil and gas Critical raw materials for vehicle batteries, wind turbines and solar panels Microchips The Critical Medicine Alliance (launched in April 24) - Alliance of the EU and national authorities, industry and healthcare organizations to address and avoid shortages of critical medicines - A direct response to the call of more than 23 member states for more strategic autonomy in the sector - The alliance will Work to enhance the security of supply Strengthen the availability of medicines Reduce EU supply chain dependencies 35  4. EU trade relations with the US The US is the EU’s largest bilateral trade and investment partner - EU-US trade relations represent the most integrated economic relationship in the world - Although overtaken by china in 2020 as the largest trading partner specifically for goods, when services and investment are considered, the US remains the EU’s largest trading partner by far TTIP (Transatlantic Trade and Investment Partnership) - Despite the US being the EU’s largest trade and investment partner, there is no free trade agreement between the EU and the US - TTIP negotiations were launched in 2013 but ended without conclusion at the end of 2016 - They were formally closed in 2019 - Nevertheless, transatlantic trade continues to enjoy one of the lowest average tariffs (under 3%) in the world, governed by WTO rules The EU-US Trade and Technology Council (TTC) - Launched in 2021 - A forum to coordinate approaches to trade, economic and technology issues - Areas of cooperation Strengthening semiconductor supply chains Curbing non-market trade practices Adopting a more unified approach to regulating global technology firms Exchanging information on investment trends affecting security Sharing best practices on analyzing and addressing risk, focusing on sensitive technologies and data TTC achievements - Advancing transatlantic leadership in emerging technologies - Enhancing our respective economic security - Addressing Russia's war of aggression against Ukraine - Enhancing transatlantic trade and investment - Converging on democratic digital governance - Promoting secure connectivity around the world - A platform for coordination on the global stage - Enhancing the labor and SME dimension Trade wars - See video: https://www.youtube.com/watch?v=P2OhfgeAWb4 36 EU-US trade disputes (airbus-boeing dispute) - For decades, the EU and the US have accused each other of subsidizing their own aircraft manufacturer, several procedures have been filed at the WTO - In one decision, the WTO permitted the US to impose tariffs on about $7.5 billion worth of EU goods - In another decision, the WTO ruled that the EU can impose penalties of $4 billion on Us goods, the EU’s retaliation list included aircrafts, chemicals and agri-food products - In 2021, the EU and Us agreed to suspend all tariffs linked to the airbus and Boeing disputes The USA-EU relationship is broken, here is why - See video: https://www.youtube.com/watch?v=7xCPYuQPFXE 37 BUSINESS IN EUROPE: COMPETITIVENESS AND INDUSTRY 1. Introduction The benefits of competition - See video: https://www.youtube.com/watch?v=D1lvJeYsYL0 Competition in the EU - The European Single Market (27 member states + Liechtenstein, Norway, Iceland and Switzerland) has increased competition among European businesses - Companies can now easily offer products and services in other European markets (free movement of products and services) - Through the free movement of capital and people, also managing finance and recruiting staff from other european countries have been made a lot easier Competitiveness - Competitiveness of companies within the European Single Market: EU competition policy - Competitiveness of European companies/industry compared to other countries/regions: EU trade and industrial policy - Open strategic autonomy is the strategy for a competitive and self-sufficient EU 2. EU competition policy EU competition policy aims to protect consumers - Competition policy provides governments with a legal framework to regulate markets and monopolies - Competition policy generally aims to Prevent companies from obtaining a dominant position in the market (monopoly) Prevent companies from abusing their dominant position Reduce barriers to market entry and keep markets competitive Liberalization of markets - Efforts to open markets up to competition (liberalization) in areas such as transport, energy, telecommunication and postal services are also part of the EU’s competition policy - Many of these sectors used to be controlled by state-run monopolies - It is essential to ensure that liberalization is carried out in a way that does not give an unfair advantage to these old monopolies 38 7 short stories that explain how competition policy protects your interests - Promoting the Green Transition - Aggressive tax planning - Competitive pricing and choice - Enabling cross border trade - Excessive pricing - Geoblocking - Excessive card fees Who is responsible for EU competition policy? - Competition policy is an exclusive EU competence - The European Commission ensures the correct application of EU competition rules, it has wide range of inspection and enforcement powers - EU member states must notify any planned support for business - the Commission works with the competition authorities of the member states to apply and enforce EU competition law - Competition cases are heard by the EU’s General Court with appeals going to the European Court of Justice (ECJ) EU competition policy - The Commission prevents or corrects anti-competitive behavior by monitoring Anti-competitive agreements (and hardcore cartels in particular) Abuse by companies of dominant market positions (monopolies) Mergers and acquisitions Government support (state aid) Monopolies - Charging excessive prices - Predatory pricing = selling below cost to force a rival out of business - Vertical restraints = firms using their market power to pay lower prices to supplier - Limiting competition by preventing competitors from being sold in a shop (an ice cream manufacturer may give a free freezer t a shop, on the condition that they only sell their ice cream) - Tie-in sales (buyers of a printer are forced to purchase the firm’s very expensive iwn brand ink) Is Google a monopoly? - See video: https://www.youtube.com/watch?v=7rH_W5PN8ns 2018 2019 The Commission fines Google €4.3 billion The Commission fines Google €1.5 billion for abusing its dominance by illegally using for abusing its dominance by forcing its Android operating system to strengthen customers of its AdSense business to sign the dominance of its search engine contracts stating they would not accept advertising from rival search engines https://www.youtube.com/watch?v=uZfZRnv https://www.youtube.com/watch?v=xOAViU wW4o S2V-k 39 Breaking the monopolies of Facebook, Google and Amazon - See video: https://www.youtube.com/watch?v=k4m-phHynmE Mergers: Siemens-Alstom rail merger - See video: https://www.youtube.com/watch?v=aA9368xLqAA State aid - See case study EU vs Apple Foreign subsidies - By addressing distortions caused by foreign subsidies, the European Commission ensures a level playing field for all companies operating in the European Single Market, while remaining open to trade and investment - In recent years, foreign subsidies appear to have distorted theEU’s internal market, including by providing their recipients with an unfair advantage to acquire companies or obtain public procurement contracts in the EU to the detriment of fair competition - See case study Chinese electric cars Digital Markets Acts - The DMA establishes a set of clearly defined objective criteria to identify gatekeepers - Gatekeepers are large digital platforms providing so-called core platform services, such as online search engines, app stores and messenger services - Gatekeepers will have to comply with the do’s (obligations and don’ts (prohibitions) listed in the DMA - The DMA is one of the first regulatory tools to comprehensively regulate the gatekeeper power of the largest digital companies - The DMa complements but does not change EU competition rules, which continue to apply fully 3. EU industrial policy What is industrial policy? 40 Industrial policy - The strategic effort by the state to encourage the development and growth of (a sector of) the economy - A horizontal framework in which industry can develop and prosper where the market mechanism alone fails (= interventionist measures) - Improving the global competitiveness and capabilities of domestic firms and promoting structural transformations - For example, subsidizing export industries or imposing temporary trade barriers on key sectors (the car industry) Why business depends on a real industrial strategy - See video: https://www.youtube.com/watch?v=2pXYkPT8cRo&t=10s New European industrial strategy (2020) - To uphold Europe’s industrial leadership, a new Industrial Strategy will help deliver on three key priorities - A dedicated strategy for SMEs - Fair competition at home and abroad Addressing distortive effects caused by foreign subsidies and tackling foreign access to EU public procurement and funding - Strengthening global rules on industrial subsidies in the WTO and actions to address the lack of reciprocal access for public procurement in third countries - Comprehensive measures to enable the energy, mobility and digital transitions - Securing the supply of critical raw materials and pharmaceuticals Approaches to industrial policy - National vs supranational (EU) policies - Interventionist vs liberal - Clash of cultures France (national champions) Germany (state as a catalyst) UK (ultra free market) Examples of industrial policy measures - R&D - Competition - Education - Infrastructure - Taxes - Trade Why should the EU intervene? - Will the market deliver without intervention? - High costs and risks of R&D per head in Europe - Europe falling behind (?) - Avoids supplication within the EU 41 BUSINESS IN EUROPE: DOING BUSINESS IN EUROPE 1. Being an entrepreneur in Europe Benefits of the single market from a corporate perspective - Easy access to a wider array of customers - Exploiting ownership advantages - Realizing locational advantages - Configuration and coordination of a pan-European value network - Exploitation of comparative advantages between member states - Realizing greater experience curves - Learning effect - Specialization effect - Economies of scale effect However, border hinder the realization of these benefits - Differences in governmental requirements and regulations - Differences in infrastructure and culture - Differences in consumer preferences - Differences in distribution channels The two conflicting competitive pressures in the (European) marketplace - Pressure for cost reductions force a company to lower unit costs - Pressures to be locally responsive Require a company to adapt its product to meet local demands in each market Limit the ability of companies to realize (full) location economies and experience effects, leverage products and transfer skills within the company When are the pressures for cost reductions the highest? - In industries producing commodity-type products that fulfill universal needs (the tastes and preferences of consumers in different nations are similar if not identical) where price is the main competitive weapon - When major competitors are based in low-cost locations - Where there is persistent excess capacity - Where consumers are powerful and face low switching costs When are the pressures for local responsiveness the highest? - When consumer tastes and preferences differ significantly between countries - When there are significant differences in infrastructure and/or traditional practices between countries - When there are differences in distribution channels between countries - When the host government imposes specific economic and/or political demands 42  2. The European Company (SE) If you have a business and want to expand to another European country, you could consider creating a European Company The European Company - also known as SE (Societas Europaea) - is a type of public limited-liability company that allows you to run your business in different European countries using a single set of rules The European Company - A public company registered under EU corporate law - Introduced in 2004 with the Council Regulation on the Statute for a European Company (SE) - Can more easily transfer to or merge with companies in other EU member states - Examples: Airbus, Porsche, Allianz, … Background - Since the 1970’s: efforts to harmonize European corporate governance systems By harmonizing national regulations on PLCs (public limited companies) But also by establishing one pan-European regulation on PLCs, independent of national regulations 43  - Societas Europaea (effective since October 2004) Council Regulation (EC) no. 2157/2001 (company structure) and Council Directive (EC) no. 2001/68 (employee involvement) Still acknowledges European country differences (27 different options, depending on the country of origin) The European company coexists with the existing corporate forms of each member state The European Company is (beyond the EU regulations) subject to, and governed by, the national laws of the country of origin Advantages of a European Company - Easier to run an business in multiple EU countries Reorganize activities under a single European brand name Run the business without setting up a network of subsidiaries - Greater mobility in the single market For example, transfer the registered office to another EU country without having to dissolve the company - Set a framework system for involving staff employed in more than one country - European Companies can establish subsidiaries that are also European Companies Requirements to set up a European Company - Registered office and head office must be in the same EU country - Company presence in more than one EU member state (subsidiaries or branches) - Separate legal entity, minimum registered share capital of EUR 120,000 - the company’s employees’ representatives must have reached a decision on employee participation in the company bodies and on how employees will be consulted and informed Facts and figures - More than 3000 European Companies - Countries with the highest number of European Companies Czech Republic (2054) Germany (491) Slovakia (140) 3. Doing business with different cultures Determinants of culture - Education - Religion - Political philosophy - Economic philosophy - Language - Social structure Cultural differences in negotiation - See video: https://www.youtube.com/watch?v=rSDntIn6ekE 44 National culture - National culture impacts leadership and leadership styles - National culture is a term for the shared beliefs, ideas and customs that set people apart from those of other countries - Language, religion, laws, politics, social system, economics, technology, education, beliefs, behaviors, conventions, habits, perceptions of time, music and art are all components of the national cultural complex - National culture can be defined as Mental programming, the pattern of thinking, feeling and acting that every person acquires in their childhood and then applies throughout their lifetime A set of assumptions, values, norms and attitudes manifested through symbols developed by national community which helps its members determine the meaning of the world around them and how to behave in it Culture has an impact on business Geert Hofstede defined national culture in five dimensions - Power distance Measures the degree to which a less powerful person accepts inequality in power and considers it normal Less powerful persons can better tolerate decisions associated with inequality than those who have more power In a high power distance society, members seek more guidance and direction from their superiors - Individualism Measures the extent to which people believe in personal freedom and achievement, or rather that the group is more important than the individual The former believe that you make your own decisions and that you must take care of yourself The latter believe that the group provides help and safety, in exchange for loyalty, and that the group always comes before the individual - Masculinity Measures the degree of difference in the social role between different genders In a highly masculine society, female members tend to care for non-materialistic needs, while male members are expected to pursue materialistic needs - Uncertainty avoidance Measures the extent to which members are made uneasy when faced with situations that are unstructured, unclear or unpredictable A society with high uncertainty avoidance tends to be more security-seeking, intolerance to changes and less aggressive Conversely, a society with low uncertainty avoidance avoidance tends to be more risk-taking, more tolerant of changes and more aggressive - Long-term orientation Measures the degree to which persons plan and invest for the future In a society with long-term orientation, traditions are valued and making changes can be more difficult 45 National culture and management styles - National cultures differ mostly at the level of values, while organization cultures differ mostly at the level of the more superficial practices: symbols, heroes and rituals - Markus Reihlen differentiates fove stereotypical European management styles British: Pragmatic Management French: Centralized Management Italian: Dependent Management Swedish: Participative Management German: Professional Management European culture and management styles - The focus on culture involves for a foreign enterprise the study of Systems of shared ideas The value of diversity Conceptual designs supporting learning behaviors Beliefs, values, norms Patterns of symbols and artifacts - Combining different sets in one organization in difficult - Centralization vs acknowledgement of differences European management styles 46 A tentative comparison of two selected HR models in Europe The Anglo-Saxon model The Rhineland model Short term benefits Long-term orientation A highly flexible and fluid labor market Low degrees of flexibility in labor markets Generalist management training Specialist management education High degree of specialization of staff Low staff specialization Low degree of vocational training Close industrial relations Cross cultural management - See video: https://www.youtube.com/watch?v=rJ4IbhXrqnc 47