1.

NATURE & SCOPE OF International marketing
From Wikipedia, the free encyclopedia

International marketing (IM) or global marketing refers to marketing carried out by companies overseas or across national borderlines. This strategy uses an extension of the techniques used in the home country of a firm.[1] It refers to the firm-level marketing practices across the border including market identification and targeting, entry mode selection, marketing mix, and strategic decisions to compete in international markets.[2] According to the American Marketing Association (AMA) "international marketing is the multinational process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives."[3] In contrast to the definition of marketing only the wordmultinational has been added.[3] In simple words international marketing is the application of marketing principles to across national boundaries. However, there is a crossover between what is commonly expressed as international marketing and global marketing, which is a similar term. The intersection is the result of the process of internationalization. Many American and European authors see international marketing as a simple extension of exporting, whereby the marketing mix4P's is simply adapted in some way to take into account differences in consumers and segments. It then follows that global marketing takes a more standardised approach to world markets and focuses upon sameness, in other words the similarities in consumers and segments.

Topics covering the micro-context of international marketing
According to Kotabe, the following topics covers the micro-context of international marketing.[4] Organisational and consumer behaviour:     organisational buying behaviour; international negotiations; consumer behaviour; country of origin.

Marketing entry decisions:   initial mode of entry specific modes of entry   exporting; joint ventures.

Local market expansion: marketing mix decisions:

     

global standardisation vs. local responsiveness Marketing mix: product policy; advertising; pricing; distribution.

Global strategy:  Competitive strategy:    conceptual development; competitive advantage vs. competitive positioning; sources of competitive advantage and performance implications.     Strategic alliances:

learning and trust; recipes for alliance success; performance of different types of alliance.  Global sourcing:

  

global sourcing in a service context; benefits of global sourcing; country of origin issues in global sourcing.  Multinational performance:

 

determinants of performance; a different interpretation of performance. Analytical techniques in cross-national research:  measuerment issues;  reliability and validity issues.

Differences between domestic marketing and international marketing
International marketing is developed by various multinational companies on a global level in order to set a common brand platform for their products and brands. It is then passed on to each local or domestic market who makes adjustments for their country and manages its implementation. Such a structure ensures a global brand consistency, pricing and messaging. It also can have significant cost savings as major advertising and marketing campaigns can be developed centrally and implemented locally. [edit]Mode

of engagement in foreign markets

After the decision to invest has been made, the exact mode of operation has to be determined. The risks concerning operating in foreign markets is often dependent on the level of control a firm has, coupled with the level of capital expenditure outlayed. The principal modes of engagement are listed below:    Exporting (which is further divided into direct and indirect exporting) Joint ventures Direct investment (split into assembly and manufacturing)

[edit]Exporting Direct exporting involves a firm shipping goods directly to a foreign market. A firm employing indirect exporting would utilize a channel/intermediary, who in turn would disseminate the product in the foreign market. From a company's standpoint, exporting consists of the least risk. This is so since no capital expenditure, or outlay of company finances on new non-current assets, has necessarily taken place. Thus, the likelihood of sunk costs, or general barriers to exit, is slim. Conversely, a company may possess less control when exporting into a foreign market, due to not control the supply of the good within the foreign market. [edit]Joint

ventures

A joint venture is a combined effort between two or more business entities, with the aim of mutual benefit from a given economic activity. Some countries often mandate that all foreign investment within it should be via joint ventures (such as India and the People's Republic of China). By comparison with exporting, more control is exerted, however the level of risk is also increased. [edit]Direct

investment

In this mode of engagement, a company would directly construct a fixed/non-current asset within a foreign country, with the aim of manufacturing a product within the overseas market. Assembly denotes the literal assembly of completed parts, to build a completed product. An example of this is the Dell Corporation. Dell possesses plants in countries external to the United States of America, however it assembles personal computers and does not manufacture them from scratch. In other words, it attains parts from other firms, and assembles a personal computer's constituent parts (such as a motherboard, monitor, CPU, RAM, wireless card, modem, sound card, etc.) within its factories. Manufacturing concerns the actual forging of a product from scratch. Car manufacturers often construct all parts within their plants. Direct investment has the most control and the most risk attached. As with any capital expenditure, the return on investment (defined by the payback period,Net Present Value, Internal Rate of Return, etc.) has to be ascertained, in addition to appreciating any related sunk costs with the capital expenditure.

Barriers – In domestic marketing there are no barriers but in international marketing there are many barriers such as cross cultural differences. On the other end. However. Marketing is an integral part of any business that refers to plans and policies adopted by any individual or organization to reach out to its potential customers. If we go by the definition of marketing given above. A web definition defines marketing as a process of planning and executing the conception. When a company caters only to local markets. even though it may be competing against foreign companies operating within the country. and distribution of ideas. the benefits in domestic marketing are less than in international marketing. pricing. Scope – The scope of domestic marketing is limited and will eventually dry up. Marketing is a ploy that is used to attract. goods and services to create exchanges that satisfy individual and organizational goals. Whether done at a local level or at the global level. Domestic Marketing The marketing strategies that are employed to attract and influence customers within the political boundaries of a country are known as Domestic marketing. According to another definition. Difference between domestic marketing and international marketing As explained earlier. language. With the world shrinking at a fast pace. International Marketing When there are no boundaries for a company and it targets customers overseas or in another country. the boundaries between nations are melting and companies are now progressing from catering to local markets to reach out to customers in different parts of the world. it is said to be engaged in international marketing. Furthermore.Difference Between Domestic marketing and International marketing Domestic marketing and International marketing are same when it comes to the fundamental principle of marketing. the process becomes multinational in this case. both domestic as well as international marketing refer to the same marketing principles. it is nothing but application of marketing principles across countries. promotion. many experts believe international marketing to be similar to exporting. The focus of companies is on the local customer and market only and no thought is given to overseas markets. currency. All the product and services are produced keeping in mind local customers only. and in a simplified way. traditions and customs. In America and Europe.2. international marketing has endless opportunities and scope. Political relations – Domestic marketing has nothing to do with political relations whereas international marketing leads to improvement in political relations between countries and also increased level of cooperation as a result. international marketing refers to business activities that direct the flow of goods and services of a company to consumers in more than one country for profit purposes only. the fundamental concepts of marketing remain the same. there are glaring dissimilarities between the two. Here it is interesting to note that the techniques used in international marketing are primarily those of the home country or the country which has the headquarters of the company. there is an added incentive of foreign currency that is important from the point of view of the home country as well. satisfy and retain customers. Sharing of technology – Domestic marketing is limited in the use of technology whereas international marketing allows use and sharing of latest technologies. Benefits – As is obvious. As such. it is said to be involved in domestic marketing. .

Still another change is the decoupling of the primary product market from the industrial economy. Employment is in decline whilst manufacturing output is growing or remaining static at 20-25% of GNP. whilst developed worlds concentrate on industrial and . The London Eurodollar market is worth about US$ 75 trillion per annum and foreign exchange transactions are US$ 35 trillion per annum.ECONOMIC ENVIRONMENT In the past fifty years the global economy has changed rapidly. they are at the mercy of world supply and demand movements. however. unless developing countries can break into noncomittally based products they are being further left behind in the global economic stakes. Taking each of these changes in turn.3. with the resultant fluctuations in prices. Secondly the rapid globalisation and focus away from domestic economies has created global competition and in turn. Unfortunately the prime producers have been dramatically affected. Sectors such as agriculture. yet industrial economies have been relatively affected. This has been grasped by Japan and Germany. Many commodity prices have collapsed. are achieving higher productivity through mechanisation but this is at the expense of employment. capital movements are much higher. However positively. this has pushed up quality. or Africa. Generally there have been four major changes: • capital movements rather than trade have become the driving force of the global economy • production has become "uncoupled" from employment • primary products have become "uncoupled" from the industrial economy and. Depressed world market prices can have a deleterious effect on developing economies. Firstly with developing countries' emphasis on the export of primary products. Nissan and Marlboro cigarettes are examples of products which serve nearly every market. the most significant change is the change of focus from domestic to the world economy as the chief economic unit.individual nations are not. Generally speaking. Finally. but not really by the USA. despite the large world economic share of the USA and Japan. world trade is about some US$ 3 trillion. • the world economy is in control . Coca Cola. Another change is the decoupling of employment from production. for example tea. Particularly marked has been the development of world economic integration and standardised products. These factors have repercussions on exporting by developing countries.

adopting new methods of marketing may give better results. Economic Structural Adjustment Programmes (ESAP) are supposed to remedy this situation by giveng "command economies" a market oriented focus. then marketing is superfluous. For example. with powerful navies which ruled the waves in the West. nationalism gave way to bullionism. East Germany.an excess of exports over imports. where countries were believed to be powerful if they had a favourable balance of trade . Nations like the UK. In current drought conditions in Africa. World trade Economic progress is linked to world trade and those who preach trade restrictions are denying this fact. adopting "marketing" could lead to the more efficient and effective use of productive and marketing resources and it may be able to focus on current needs and find better solutions. communications and merchandising can stimulate economic development.service products it leaves opportunities for developing countries to export more food based products. and the traders of the East. that one nation prospered at the expense of another. primary product producers. at fixed prices and slaughters) to an auction system by description. the growth of the modern global economy is marked by a number of features as follows: The legacy of mercantilism 1500-1750 The prevalent wisdom was one of nationalism. along with Adam Smith's tome on the "Wealth of Nations" which advocated market forces as the principal driving force to development and wealth. generally. Similarly. price. Mercantilism died with the development of the United Nations (UN) and the General Agreement on Tariffs and Trade (GATT). Countries like the old communist bloc (Russia. all actors in the system could benefit. Less developed countries (LDCs) have traditionally focused on production and domestic income generation. etc.) have not developed as fast as those with more outward orientation. By changing from the current system of marketing cattle (the CSC takes in cattle. dominated that area. However. The global economy The development of the global economy can be traced back many hundreds of years when traders from the east and west came together to exchange goods. However. Netherlands and later France and Germany. Another argument concerns whether marketing has relevance to the process of economic development. Still later. A good example is the Cold Storage Company of Zimbabwe (CSC). domination took another form. rather than other raw materials. became the basis of wealth. marketing addresses itself to needs and wants and it could be argued that where LDCs' productive capabilities are far less than unsatisfied needs and wants. Changing from fixed price systems to market based pricing could lead to the faster achievement of development objectives (for example "higher incomes"). techniques developed in the West for optimising transport resources could well be transferred to effect. The same can be said of African nations. that is. Over time. Also. governments could well benefit from advertising . Decisions in product. where the inability to industrialise and export in volume has locked them into. where gold and silver.

Table 2.1) . for example. However shifts are occurring (see table 2.5 1 Interestingly enough. particularly the USA. Comparative costs . those economies which have divested themselves of agriculture (or made it more efficient) and invested in manufacturing are those which have shown spectacular growth. Political influences can also be seen between trading partners. Table 2. East-West trade and West to the former communist bloc is likely to grow at the expense of North-South trade.cheaper prices based on different cost structures. Countries trade because they produce and export goods in which they enjoy a greater comparative advantage and import goods in which they have a least comparative advantage. Marketers need to identify trading patterns between nations and product trading patterns. fuels and manufactured goods figure most in world trade.other forms of nutritious food. fish.2 compares Zimbabwe with Thailand .5 1 Manufactures 17 4. and finally industrialised to developing countries (13%). 6 Patterns of trade Most industrialised nations trade with each other. especially labour. Western Europe and Japan which between them have 66% of world GNP and trade.5 1 14 Minerals 14 -5 14 Fuel 41 -3. for example Zimbabwe's trade with China. minerals. This had led to their continued domination. A further refinement of this is the international product cycle discussed fully in chapter one.1 Shift in commodity trade . rather than let the populace be left uninformed and disgruntled about the lack of maize. price has been called the immediate basis for international trade . 6 Table 2. . In 1985 industrialised trade to other industrialised countries accounted for 47% of trade.% of world trade Product 1980 1985% 1988% Agriculture 22.comparative advantage As discussed in chapter one. next came developing countries to industrialised (15%). Composition of world trade Agriculture.2 Structure of production Distribution of GDP % GDP $ m Agriculture Industry Manufacturing Services 1970 1992 1970 1992 1970 1992 1970 1992 1970 1992 Zimbabwe 1415 5350 15 22 36 35 21 30 49 43 Thailand 7087 110337 26 12 25 39 16 28 49 49 Country This pattern is repeated throughout Africa and Asia in general.

242 million deficit on its current account. Caribbean Community and Common Market (CARICOM). Its intention was to create a general system of preferences and negotiate tariffs for members' products on a nondiscriminant basis and provide a forum for consultation. free trade zones have occurred (all internal barriers abolished) economic unions (the EU). The capital account may show the nations which have control restrictions and hence be difficult to deal with. The Kennedy Round of the 1960s was superseded by the Tokyo round of the 1970s and that by the current Uruguay round signed in 1994. Council of Arab Economic Unity. export pricing zones (Mauritius) and other schemes. the USA had a US$ 109. Japan had a $ 131. In this regard. Economic Community of West African States (ECOWAS). Central American Common Market (Mercado Comùn Centro Americano). The major regional economic organisations are: Acuerdo de Cartegna (Andean Group). Some regional groupings have either market (EU) or command (China) or mixed economies (former communist countries and The Preferential Trade Area (PTA) and The Southern African Development Community (SADC). Government policy This refers to the government measures and regulations which have a bearing on trade tariffs. These can cause formidable barriers to marketers and will be dealt with at length later. With these developments. In 1989. after official transfers. UNCTAD furthers the development of emerging nations. quotas. The balance of payments account helps marketers select the location of supply for foreign markets and the selection of markets. Association of South East Nations (ASEAN). Tanzania a $ 778. which shows financial transactions. exchange controls and invisible tariffs. Preferential Trade Area (PTA) and the Southern African . showing trade in goods and services. African nations are generally disadvantaged.400 million surplus. GATT had over 120 members and associated and accounted for 80% of world trade.5 million deficit and Zimbabwe a $ 2. the European Union (EU). It also established a tariff preference system favouring developing nations. It seeks to improve the prices of primary goods exports through commodity agreements. Latin American Integration Association. Asian Pacific Rim countries (APC). Organisation Commune Africane et Mauricienne. Regionalism Regionalism is a major and important trade development. The balance of payments is made up of the current account.783 million deficit. World Institutions Institutions like GATT and the United Nations Conference on Trade and Development (UNCTAD) have been of help to countries in their development.Balance of payments This is the measure of all economic transactions between one nation and another. and the capital account.

These blocs are of various form. especially Japan and the Asian Tigers. IMF began to fade somewhat. The IMF deals with the International Monetary System. SADC and PTA are described in a little detail in appendix one and two of this chapter. Many developing countries have entered into trading blocks as a reaction against loss of developed country markets or as a base to build economic integration and markets. a relatively well developed bloc. However it still lends. itself. Other major lenders include the EU and bilateral donors and agencies who have provided money for developmental projects.Development Conference (SADC). or International Bank for Reconstruction and Development (IBRD) deals with international capital. The role of the World Bank has often been criticised especially on its conditionalities for loans to Africa in funding structural adjustment and trade liberalisation programmes. post World War II. To counteract the growing power of the EU. to countries with payment problems to help them continue trading. ASEAN is a collaboration of industry and agriculture. with SADC and the PTA which are well developed. Currently it has about US$ 22 billion annually for this operation. A principal donor is the United States Agency for International Development (USAID). Involved countries joined IMF to establish a par value for other countries in terms of the US dollar and maintain it with +/one percent of that value. and its agency USAID. Since that time. It provides long term capital to aid economic development. the USA and Canada have entered into an agreement with Mexico as a willing partner and created the North American Free Trade Agreement (NAFTA). SADC and PTA have had historically little impact but are now beginning to grow in importance in view of the normalisation of South Africa. The system fell down because large corporations were holding more funds than banks and so a "float" set in. Of these blocs. It is worth comparing the European Union. the USA has played an increasingly important role in the economic affairs of the world. The EU. However many developing countries require institutional funding to help them with trade and balance payment problems. The World Bank. saw the nascence of the International Monetary Fund (IMF) and World Bank. . The development of trading blocs can bring headaches and advantages to trade. so Bretton Woods. A principal collapse has been the Council for Economic Assistance (COMECON) with the disappearance of the communist bloc in Eastern Europe. on a short term basis. power. the balance of economic power in recent years. PTA in tariffs. have increasingly flexed their muscles. North American Union and the Pacific Rim Union will pose the greatest power blocs in future years. influence and success. The international financial system Global financing operations based on the gold standard gave rise to instability. However. The United States of America Since the Gulf War of 1991. the EU (reporting 33% of world trade) and EFTA are very important. has shifted towards the Pacific rim.

it could be serious. the Ivory Coast 6%. the USA spends more per capita than Bangladesh b) Income: No one has yet been able to assess accurately the impact of the AIDS pandemic on world population and economic activity. Low income countries and oil rich countries have the largest growth rates.7 billion by the year 2000 (Business Herald .1994). Growth rates have a dual edge . However.5% and 9% of the world's population. unless a cure or prevention is found. However the USA and UK had an infinitely higher GNP per capita income than Africa. 24. Per capita measures have therefore. there is an inverse correlation between GNP per capita and income elasticity of demand for food. China has 2 billion plus people. The distribution of the population is also important.791 but the USA only 65 persons per square mile. education and welfare. and Africa in general.520.Nov. a) Population: In general.they are good for sales but bad for world resources. Bangladesh 1. The world population. In 1993 the USA population of 252. the higher the better.how big is the market and what is it like? Currently there are over 200 individual countries in the world.16. 1. South Africa estimates AIDS will cost South African industry R16. especially in Africa and South East Asia. marketers must consider carefully individual economies. per capita. the world's "hot spots" Income is the most important variable affecting market potential. UK $17.2 million. the UK had an annual growth rate of 0. Interestingly. the UK 57.9 income elasticity of demand and the USA 0. Size of market General indications of market size include population (growth rates and distribution) and income (distribution. This bimodal distribution of income means marketers must analyse two economies in a country.Individual economies Whilst the global factors listed above have aided the development of a world economy. US$ 22. the larger the population. It is expected to reach 7 billion by the end of the century. The Netherlands have 1000 persons per square mile. A study of these helps answer the questions . GNP).1%. However there is no correlation between income level and population. were respectively 6%. Suffice to say. The strain on world resources is likely to be very large. Per capita judges a country's level of economic development and its degree of modernisation and progress in health. they do not have the same income per capita as the USA or UK. many limitations. the bigger the market. Different countries experience different population growth rates. India 1 billion. In the early 90s. Asia has a 0.4 million and Africa 400 million. Zimbabwe 8 million. In Kenya the lowest 20% of the population receive less then 3% of national resource.300 and Africa $ 270 respectively (1989). The distribution of income is very uneven. currently standing at 5 billion is experiencing a rapid growth rate. Markets are not markets without money to spend. 3% per annum. Different age groups have different needs and population density should mean good market potential. Half of . However.

If synthetic gold or tobacco were developed or. obviously. products are not available to export. Simply. In many of the less developed nations these items may be largely self provided and therefore not reflected in national income tables. Another limitation of per capita measures is the lack of comparability with the figures themselves. Gross National Product is a better indicator of potential than Gross Domestic Product as GDP includes more than "product". The use of exchange rates tends to distort real income or standard of living measures. The nature of economy More than money makes up an economy's economic environment. but only 7% in Italy. Topography may produce two. The US budget contains food. three or more submarkets in a country. the USA. 3 However. has "rural" and "urban" areas with different needs and wants.the world's population lives with an average per capita income of only US$ 270. Zambia. which has been used to derive more reliable and directly comparable estimates of per capita income. and this is not. Other limitations are that sales of goods are not well correlated with per capita income and if there is great unevenness in income distribution. Also in the UK.3 GDP and GNP of selected countries GDP % GNP % US$ bn of World US$ bn of World USA 5670 35 3000 29 UK 903 6 540 5 Africa 322 3 220 3 The United Nations International Comparison Project (ICP) developed a sophisticated method for measuring total expenditure. Product saturation can be equally troublesome in affecting market potential. Zimbabwe's economy would be ruined. in Africa and parts of Asia. Per capita is usually reflected in US dollars and is only valid for comparison if exchange rates are equal. became unfashionable. For example. The World Bank has published a comparison of ICP findings with its own Atlas figures based on the exchange rate conversion. . snow equipment is included. for example. Japan and Western Europe.like the Southern African drought in 1992 can devastate economies and derail any economic development plans and exports. Extremes of climate . Table 2. per capita figures are less meaningful. A vacuum cleaner in the Netherlands has a 95% household penetration rate. Natural resources -raw materials now and in the future are important. in the case of the latter. Belgium's GNP is better than India's but India's. World GNP figures reveal the concentration of wealth in the three nations. clothing and shelter. because they are being consumed by the domestic economy. Exchange rates reflect international goods and services in a country but not domestic consumption. when evaluating markets it is wise to consider individual product areas.3) . consumption of steel is 3 times that of Belgium's. Africa trails far behind (see table 2.

increasing competitive threat. innovations and raw materials plus fresh foods. high standard of living. China and India. OECD members and others. lower wage rates than developed countries. iv) High income economies. 40 nations including Zimbabwe.636 and US $ 5. mature product markets.356 or more. rising wages. Early stages of industrialisation.355.per capita between US$ 401 and US$ 1. ii) Middle income economies. iii) Upper middle income. iii) Developing countries . 17 nations including Brazil. heavy reliance on foreign aid. ii) Less developed countries .communist bloc. less machine based. political instability. low literacy rates. information processors. i) Preindustrial countries . lower middle income. Various methods have been derived to classify economies. iv) Industrialised countries . industrialisation. Product opportunities are in new products. Moving towards post industrialisation.per capita income between US$ 1. v) Other economies .per capita income in excess of US$ 10. high literacy rates. GNP per capita of between US$ 8.000.per capita income between US$ 5.695.676 and US$ 8. The World Bank classification The World Bank has drawn up a classification of economies based on GNP per capita.635. GNP per capita of between US$ 2.000. Little market potential. Parts of Sub-Saharan Africa. Limited industrialisation. 41 nations including Tanzania. Portugal and Greece. high birth rates. Zambia and Malawi. Kenya.The nature of economic activity Economic activity is often correlated to the type of economic activity. Decrease in percentage of agricultural workers. v) Advanced countries . Post industrialisation. These are: Stages of market development Global markets are at different stages of development which can be divided into five categories based on the criterion of gross national product per capita. knowledge based.501 and US$ 10.incomes less than US$ 400 GNP per capita. GNP per capita of between US$ 676 and US$ 2. . Mexico and Thailand.500. formidable competitors. growing domestic market. 24 nations including UK and the USA. i) Low income economies. other low-income-GNP per capita income of between US$ 675 or less.

Transportation. modern techniques in agriculture and production. has also a relatively poor internal rural infrastructure. what inputs go into a particular industry's output? What combination of labour. • Stage 4 the drive to maturity.Mozambique and Switzerland are the two extreme ends of the spectrum with US$ 80 per capita and US$ 29. for example. whilst having direct access to the coast. For example African exporters would look to stage 4 and 5 economies to obtain the greatest revenue opportunities for other produce.059 per 1000. low level of literacy • Stage 2 the preconditions of takeoff. Energy consumption shows the overall industrialisation of a society as does its infrastructure. India has only some 10 million telephones to a population of 1 billion people. large amounts of These classifications enable marketers to assess where and how to operate in countries which may display the stage characteristics. Without being able to get produce to the point of exportation.is it farm or factory generated? Farm workers tend to have low incomes. developments in infrastructure and social institutions • Stage 3 the takeoff. no modern science application systematically. good social environment. Chaos can therefore ensue. is vital. production of durable goods and services. Input-output tables provide other insights into a country's potential. Rostow: Whilst economic in nature. Zambia has 680 radios per 1000 population. especially during the rainy season. Tanzania. little increase in productivity. that is. The less energy is consumed. normal growth patterns. Rostow (1971) produced a five stage model of economic takeoff: • Stage 1 traditional society. Zambia and Zimbabwe are landlocked and have relatively poor transport facilities. . countries will suffer poor export performance accordingly. can produce anything • Stage 5 the age of high mass consumption. Media availability is important. rapid agricultural and industrial modernisation. France 2. materials and equipment? Infrastructure Infrastructure is a very important element in considering whether to market in a country or not. modern technology applied to all fronts.880 per capita respectively. Another way to assess the market alternatives to a potential global marketer is to look at the origin of its national product . Malawi has no domestic television service but access to satellite television. international involvement. Communications are essential. the less likely the development of the market resulting in a not too attractive market proposition.

including the growth of regional economic blocs. but they also can cause internal economic upheavals for long periods of time. They can create market opportunities.Commercial infrastructure is also vital . creating jobs. This can seriously undermine economic development and trade. . Economic factors are just some of the "environmental uncontrollables" which marketers must consider when deciding to market globally. Other Inflation causes havoc with economies and foreign exchange. more developed communications and access to new products. all aimed at increasing cooperation between the grouped nations. detracting from investment by outsiders and limiting the export opportunities. accountants. Many African countries are undergoing structural adjustment and trade liberalisation programmes. flows from developed countries to less developed ones are generally one way. to sub optimal opportunity and.banks. but without the accompanying incomes characteristic of developed countries. Failure to do so will lead. Through the legacy of mercantilism up to the current GATT Round. which makes it difficult and expensive to access capital for investment and obtain pre-export finance. especially if interest rates rise. Similarly. The economic environment is one of the major determinants of market potential and opportunity. exporting cannot take place. as is often the case. Less developed countries like Africa. or forever to be at the mercy of world demand and prices. This leads to instability in the underdeveloped country because it has no "hostage" leverage. Developing countries tend to suffer from rural drift. Urbanisation Differences exist between "urban" and "country" dwellers. The role of Government is essential. advertising agencies and other services. at best. Without these " transaction " facilities. It behoves these nations in the continent to derive policies and strategies for rapid industrialisation. are at a disadvantage. at worst. particularly income and the stage of economic development is essential. This has led to calls for protectionism. but gives rise to negative feelings because access to Japan is not so easy. Markets differ widely in their size and state of development world wide. Repatriation or transfer of dividends can be an issue which can detract from investment if negative facilities exist. City dwellers may have more income. So when assessing market opportunities widespread urbanisation is no guarantee of a good market potential. to disaster. these have met with limited success. Japan's investment in the USA and UK is high. For example Zambia has an unofficial inflation rate of over 100%. others do not. The global economy can be traced back hundreds of years when traders from the east and west came together to exchange goods. marketers have had to contend with changes and developments in the economic environment. Careful analysis of this. In some cases. The number of international companies operating in an economy can be both good and bad. due to their primary material export dependence. Some encourage joint ventures and investment.

.[4] Scholars and economists continue to debate whether regional trade blocs are leading to a more fragmented world economy or encouraging the extension of the existing global multilateral trading system. Scott of the Peterson Institute for International Economics notes that members of successful trade blocs usually share four common traits: similar levels of per capita GNP. formed on the basis of the German Confederation and subsequently German Empirefrom 1871.[2] Economist Jeffrey J. and political commitment to regional organization.[5][6]Trade blocs can be stand-alone agreements between several states (such as the North American Free Trade Agreement (NAFTA) or part of a regional organization (such as theEuropean Union).4. Surges of trade bloc formation were seen in the 1960s and 1970s. they argue. similar or compatible trading regimes. encourage regional as opposed to global free trade. often part of a regional intergovernmental organization. trade blocs can fall into different categories.[3] Advocates of worldwide free trade are generally opposed to trading blocs. (tariffs and non-tariff barriers) are reduced or eliminated among the participating states. which. Depending on the level of economic integration. more than 50% of all world commerce was conducted under the auspices of regional trade blocs. such as:[7] preferential trading areas. where regional barriers to trade.TRADING BLOCKS A trade bloc is a type of intergovernmental agreement. free trade areas. geographic proximity. as well as in the 1990s after the collapse of Communism. By 1997. customs unions.[1] One of the first economic blocs was the German Customs Union (Zollverein) initiated in 1834.common markets and economic and monetary unions.

formed by six countries in 1958. was established in 1999 and is currently composed of 17 member states. Through the Common Foreign and Security Policy the EU has developed a limited role in external relations and defence.[16] A monetary union.[8] The latest amendment to the constitutional basis of the EU.[15] fisheries and regional development. and in power by the addition of policy areas to its remit. the Council of the European Union. the Court of Justice of the European Union.[7] The EU traces its origins from the European Coal and Steel Community (ECSC) and the European Economic Community (EEC). the G8 and the G-20. The Maastricht Treaty established the European Union under its current name in 1993. the European Council. the Treaty of Lisbon. and capital.[19] European Union [show] Flag Motto: United in diversity[1][2][3] Anthem: Ode to Joy . Within the Schengen Area (which includes EU and non-EU states) passport controls have been abolished. [14] agriculture.[12] EU policies aim to ensure the free movement of people. In the intervening years the EU has grown in size by the accession of new member states.3% of the world population.[13] enact legislation in justice and home affairs. services. The EU has developed a single market through a standardised system of laws which apply in all member states. came into force in 2009.[9][10][11] Important institutions of the EU include the European Commission.242 billion US dollars in 2010. The European Parliament is elected every five years by EU citizens. With a combined population of over 500 million inhabitants. and the European Central Bank.[18] the EU generated a nominal GDP of 16. goods. which represents an estimated 20% of global GDP when measured in terms of purchasing power parity. Permanent diplomatic missions have been established around the world and the EU is represented at the United Nations.European Union The European Union (EU) i/ˌjʊərəˈpiːənˈjuːnjən/ is an economic and political union of 27 member states which are located primarily in Europe. the eurozone. and maintain common policies on trade. The EU operates through a hybrid system of supranational independent institutions and intergovernmentally made decisions negotiated by the member states. the WTO.[17] or 7.

Anthem of the European Union Ode to Joy[2] (orchestral) Political centres Brussels Luxembourg Strasbourg Official languages 23[show] Demonym European[4] Member States 27[show] Leaders -European Council -European Commission -European Parliament -Council of the European Union Herman Van Rompuy José Manuel Barroso Jerzy Buzek Donald Tusk(Poland) Legislature Legislature -Upper House Council .

782 km2 1.486.2/km2 300.537 Gini (2009) 30.807 sq mi -Water (%) 3.242 trillion $32.9/sq mi GDP (PPP) -Total -Per capita 2010 (IMF) estimate $15.455 GDP (nominal) -Total -Per capita 2010 (IMF) estimate $16.-Lower House Parliament Establishment -Paris Treaty -Rome Treaty -Maastricht Treaty -Lisbon Treaty 23 July 1952 1 January 1958 1 November 1993 1 December 2009 Area -Total 4.669.499 [5] 116.324.7 (EU25)[6] (low) HDI (2010) 0.835 (very high) Currency euro (€) (EUR)[show] .203 trillion $30.08 Population -2011 estimate -Density 502.

The EEC was headed by Walter Hallstein (Hallstein Commission) and Euratom was headed by Louis Armand (Armand Commission) and then Etienne Hirsch. starting with the aim of eliminating the possibility of further wars between its member states by means of pooling the national heavy industries. which were collectively referred to as the European Communities (EC). The treaty came into force in 1958. The executives of the new communities were called Commissions. although they shared the same courts and the Common Assembly. (EEC) establishing a customs union and the European Atomic Energy Community (Euratom) for cooperation in developing nuclear energy.[20] One such attempt to unite Europeans was theEuropean Coal and Steel Community. Paul Henri Spaak.Time zone -Summer (DST) (UTC+0 to +2) (UTC+1 to +3[nb 1]) Internet TLD . Luxembourg. which extended the earlier cooperation within the European Coal and Steel Community (ECSC) and created the European Economic Community.Italy. although commonly just as the European Community. moves towards European integration were seen by many as an escape from the extreme forms of nationalism which had devastated the continent.[26][27] Jean Rey presided over the first merged Commission (Rey Commission).[23][24][25] Throughout the 1960s tensions began to show with France seeking to limit supranational power. Robert Schuman. as opposed to the "High Authority". The originators and supporters of the Community include Jean Monnet.[22] In 1957. However. and Alcide De Gasperi.[21] The founding members of the Community were Belgium. in 1965 an agreement was reached and hence in 1967 the Merger Treaty was signed in Brussels. France. It came into force on 1 July 1967 and created a single set of institutions for the three communities.[28] . Euratom would integrate sectors in nuclear energy while the EEC would develop a customs union between members.eu[nb 2] Website History 1945–1958 After World War II. and West Germany. the six countries signed the Treaties of Rome. the Netherlands. which was declared to be "a first step in the federation of Europe".[ 1958–1972 The EEC and Euratom were created separately from ECSC.

Since then. In 1990. Ireland. and in July 2009 Iceland formally applied for EU membership. Portugal and Spain in 1986. the EU saw its biggest enlargement to date when Cyprus. In 1979. the Copenhagen criteria for candidate members to join the European Union were agreed. the eurozone has increased to encompass 17 countries. In 2004. the Czech Republic. In the same year Slovenia adopted the euro. democratic elections to the European Parliament were held. the first of which is Herman Van Rompuy. and the United Kingdom. by Slovakia in 2009 and by Estonia in 2011. [35] On 1 January 2007. Hungary.[34] With enlargement towards European formerly communist countries as well as Cyprus (Greek part) and Malta on the agenda.1973–1993 In 1973 the Communities enlarged to include Denmark (including Greenland. the former East Germany became part of the Community as part of a newly united Germany. the Lisbon Treaty entered into force and reformed many aspects of the EU.[36] . 1993–present The European Union was formally established when the Maastricht Treaty came into force on 1 November 1993. which later left the Community in 1985). the European flag began to be used by the Community[33] and the Single European Act was signed. Poland. and it created a permanent President of the European Council. and a strengthened High Representative. euro notes and coins replaced national currencies in 12 of the member states.[32] In 1986. On 1 December 2009.Lithuania.[29]Norway had negotiated to join at the same time but Norwegian voters rejected membership in a referendum and so Norway remained outside. the 2009 Parliament elections were held leading to a renewal of Barroso's Commission Presidency. Slovakia and Slovenia joined the Union.[8] and in 1995 Austria. In June 2009. merging the EU three pillars system into a single legal entity provisioned with legal personality. Estonia. Romania and Bulgaria became the EU's newest members. Finland and Swedenjoined the newly established EU. In particular it changed the legal structure of the European Union. the first direct.[35] followed in 2008 by Cyprus and Malta. after the fall of the Iron Curtain. In 2002. Malta. Latvia.[30] Greece joined in 1981. the Schengen Agreement led the way toward the creation of open borders without passportcontrols between most member states and some non-member states.[31] In 1985. Catherine Ashton.

Treaties Main article: Treaties of the European Union Signed 1948 In forc 1948 Docum els 1951 1954 1952 1955 s ty ed els Treaty 1957 1965 1975 1958 1967 N/A e es er y n conclus ion 1985 1985 gen 1986 1987 1992 1993 1997 1999 am Treaty 2001 2003 Treaty 2007 2009 Lisbon Treaty e Bruss Pari Modifi Rom Merg Europea Schen Single ent Treaty Trea Bruss treati Treat Council Treaty Maastrich Amsterd Nice European Act t Treaty Three pillars of the European U nion: European Communities: European Atomic Energy Community (EURATOM) European Coal and Steel Treaty expired in Europe .

Community (ECSC) European Economic Community (EEC) Schengen Rules 2002 European Community (EC) Justice and TREVI Home Affairs (J HA) Police and Judicial Co-operation in Criminal Matters (PJCC) an Union(E U) European Political Cooperation ( EPC) Common Foreign and Security Policy (CFSP) Unconsolida ted bodies Western European Union (WEU) Treaty terminated in 2011 Member states Main article: Member State of the European Union See also: Special Member State territories and the European Union. Future enlargement of the European Union. and Withdrawal from the European Union . Enlargement of the European Union.

The member states of the European Union (European Communities pre-1993). Albania Austria Belarus Belgium Bos. & Herz. Bulgaria Croatia Cyprus . Only territories in and around Europe are shown. animated in order of accession.

Macedonia. lakes. Liechtenstein and Norway. Bulgaria. the Polish government sought to build a motorway through the Rospuda valley. the Czech Republic.[50] Four countries forming the EFTA (that are not EU members) have partly committed to the EU's economy and regulations: Iceland (a candidate country for EU membership). Malta.[42] The Union's membership has grown from the original six founding states—Belgium.[51][52] The relationships of theEuropean microstates. France. Latvia. Germany. France. Cyprus.[54] In 2007. These protections however only directly cover animals and plants. which has similar ties through bilateral treaties. but the Commission has been blocking construction as the valley is a wildlife area covered by the programme. a functioning market economy capable of competition within the EU. including EU law. ground and coastal waters to be of "good quality" by 2015. wasteand water pollution. Italy. defined at the 1993 Copenhagen European Council. Albania.[49] Kosovo is also listed as a potential candidate but the European Commission does not list it as an independent country because not all member states recognise it as an independent country separate from Serbia. Andorra. Ireland.[nb 4] [48] Montenegro and Turkey.[45] The Lisbon Treaty now provides a clause dealing with how a member leaves the EU. Luxembourg. Portugal. Bosnia and Herzegovina andSerbia are officially recognised as potential candidates. subject to a national referendum.[57] This . Poland. member states agreed that the EU is to use 20% renewable energy in the future and that it has to reduce carbon dioxide emissions in 2020 by at least 20% compared to 1990 levels. the thinning of the ozone layer. fungi and micro-organisms have no protection under European Union law. Romania. Monaco. theNetherlands. Spain. Greece. which are a part of the single market through theEuropean Economic Area. noise pollution. Slovenia.[55] The directives are implemented through the Natura 2000 programme and covers 30.[46] Croatia is an acceding country and may become the 28th member of the EU on 1 July 2013. (then-West) Germany.[56] In 2007. Belgium. and the United Kingdom.000 sites throughout Europe. Evaluation of a country's fulfilment of the criteria is the responsibility of the European Council. air quality. Italy. and Switzerland. although Greenland (an autonomous province of Denmark) withdrew in 1985. Luxembourg and the Netherlands—to the present day 27 by successive enlargements as countries acceded to the treaties and by doing so. Hungary.[47] There are four candidate countries: Iceland.[43] To join the EU a country must meet theCopenhagen criteria.[44] No member state has ever left the Union.Denmark. These require a stable democracy that respectshuman rights and the rule of law. The Water Framework Directive is an example of a water policy. Lithua nia. aiming for rivers.[53] [edit]Environment Further information: European Commissioner for the Environment and European Climate Change Programme The first environmental policy of the European Community was launched in 1972. pooled their sovereignty in exchange for representation in the institutions. San Marino and the Vatican include the use of the euro and other areas of cooperation. Sweden. Since then it has addressed issues such as acid rain. and the acceptance of the obligations of membership. Finland. Estonia.[54] The Birds Directive and theHabitats Directive are pieces of European Union legislation for protection of biodiversity and natural habitats. Slovakia.The European Union is composed of 27 sovereign Member States: Austria.

[58] [edit]Politics Main article: Politics of the European Union European Union This article is part of the series: Politics and government of the European Union Parliament[show] Council of Ministers[show] European Council[show] Commission[show] Court of Justice[show] Other institutions[show] Policies and issues[show] Foreign relations[show] Elections[show] Law[show]  v  d  e . This is considered to be one of the most ambitious moves of an important industrialised region to fight global warming. 10% of the overall fuel quantity used by cars and trucks in EU 27 should be running on renewable energy such as biofuels.includes measures that in 2020.

[60] It is actively involved in the negotiation of thetreaty changes and defines the EU's policy agenda and strategies. international agreements and treaties).[62] driving consensus and settling divergences among members are tasks for the President both during the convocations of the European Council .Herman Van Rompuy The European Council gives direction to the EU. The European Council uses its leadership role to sort out disputes between member states and the institutions. the President of the European Commission and one representative per member state. There are also a number of ancillary bodies which advise the EU or operate in a specific area. On 1 December 2009.[59] [edit]Governance Main articles: EU institutions and Legislature of the European Union The European Union has seven institutions: the European Parliament. the European Central Bank. Ensuring the external representation of the EU. Generally speaking they can be classified into two groups: those which come into force without the necessity for national implementation measures. and those which specifically require national implementation measures. The monetary policy of the eurozone is governed by the European Central Bank.[61] On 19 November 2009. either its head of state or head of government. It comprises the President of the European Council. It acts externally as a "collective Head of State" and ratifies important documents (for example. theTreaty of Lisbon entered into force and he assumed office. Herman Van Rompuy was chosen as the first permanent President of the European Council. the European Commission. Competencies in scrutinising and amending legislation are divided between the European Parliament and the Council of the European Union while executive tasks are carried out by the European Commission and in a limited capacity by the European Council (not to be confused with the aforementioned Council of the European Union). Laws made by the EU institutions are passed in a variety of forms. and to resolve political crises and disagreements over controversial issues and policies.The EU operates solely within those competencies conferred on it upon the treaties and according to the principle of subsidiarity (which dictates that action by the EU should only be taken where an objective cannot be sufficiently achieved by the member states alone). [edit]European Council President of the European Council. the Council of the European Union. the Court of Justice of the European Union and the European Court of Auditors. The European Council has been described by some as the Union's "supreme political authority". and convenes at least four times a year. the European Council. The interpretation and the application of EU law and the treaties are ensured by the Court of Justice of the European Union.

[63] The other 25 Commissioners are subsequently appointed by the Council of the European Union in agreement with the nominated President. [edit]Commission Commission PresidentJosé Manuel Barroso The European Commission acts as the EU's executive arm and is responsible for initiating legislation and the day-to-day running of the EU. the most prominent Commissioner is the High Representative of the Union for Foreign Affairs and Security Policy who is ex-officio Vice President of the Commission and is chosen by the European Council too. The European Council should not be mistaken for theCouncil of Europe. One of the 27 is the Commission President (currently José Manuel Durão Barroso) appointed by the European Council. with 27 Commissioners for different areas of policy. France The European Parliament (EP) forms one half of the EU's legislature (the other half is the Council of the European Union. one from each member state. [edit]Parliament The European Parliament building inStrasbourg. see below). though Commissioners are bound to represent the interests of the EU as a whole rather than their home state. the 27 Commissioners as a single body are subject to a vote of approval by the European Parliament.and in the time periods between them. It operates as a cabinet government. The Commission is also seen as the motor of European integration. The 736 (soon to be 751) Members of the European Parliament (MEPs) are directly elected by EU citizens every five years on the basis of proportional . After the President. an international organisation independent from the EU. Eventually.

It consists of a government minister from each member state and meets in different compositions depending on the policy area being addressed. This also applies to the EU budget. [68] In addition to its legislative functions. [edit]Budget Main article: Budget of the European Union . the Commission is accountable to Parliament. the Council also exercises executive functions in relations to the Common Foreign and Security Policy. The EP President and Vice Presidents are elected by MEPs every two and a half years. requiring its approval to take office. The Parliament and the Council of the European Union pass legislation jointly in nearly all areas under the ordinary legislative procedure. having to report back to it and subject to motions of censure from it. Notwithstanding its different configurations. The President of the European Parliament carries out the role of speaker in parliament and represents it externally. Each country has a set number of seats and is divided into sub-national constituencies where this does not affect the proportional nature of the voting system.[65] [edit]Council The Council of the European Union (also called the "Council"[66] and sometimes referred to as the "Council of Ministers"[67]) forms the other half of the EU'slegislature.representation to the share of votes collected by each political party.[64] The ordinary legislative procedure of the European Union. they sit according to political groups rather than their nationality. it is considered to be one single body. Finally. Although MEPs are elected on a national basis.

and France was estimated to have spent €801 billion.[71] In the 2010 budget of €141. were materially affected by error. In other areas the EU and its member states share the competence to legislate.[74] The Court has not given an unqualified approval of the Union's accounts since 1993. agriculture and the cohesion fund. In some areas the EU enjoys exclusive competence.05% of the EU-27's GNI forecast for the respective periods.[78] That a particular policy area falls into a certain category of competence is not necessarily indicative of what legislative procedure is used for enacting legislation within that policy area. [72] "Administration" accounts for around 6%. member states can only legislate to the extent to which the EU has not. The Parliament uses this to decide whether to approve the Commission's handling of the budget.5 billion.[70] representing 1.[72] Next comes "agriculture" with approximately 31% of the total. commitment appropriations):[69] Cohesion and competitiveness for growth and employment (45%) Citizenship. By comparison. The Court also gives opinions and proposals on financial legislation and antifraud actions. These are areas in which member states have renounced any capacity to enact legislation. security and justice (1%) The EU as a global player (6%) Rural development (11%) Direct aids and market related expenditures (31%) Administration (6%) The 27 member state EU had an agreed budget of €120.7 billion for the year 2007 and €864.[77] [edit]Competences EU member states retain all powers not explicitly handed to the European Union.3 billion for the period 2007–2013. [75] In their report on 2009 the auditors found that five areas of Union expenditure. The court provides an audit report for each financial year to the Council and the European Parliament. In other policy areas the EU can only co-ordinate. The distribution of competences in various policy areas between Member States and the Union is divided in the following three categories: .[72] "Rural development. security and justice" bring up the rear with approximately 6% and 1% respectively.[73] The Court of Auditors is legally obliged to provide the Parliament and the Council with "a statement of assurance as to the reliability of the accounts and the legality and regularity of the underlying transactions".The 2011 EU budget (€141.9 bn.863 million. and even with the same policy area. In 1960. support and supplement member state action but cannot enact legislation with the aim of harmonising national laws.10% and 1.[76] The European Commission estimated that the financial impact of irregularities was €1. the budget of the then European Economic Community was 0. Different legislative procedures are used within the same category of competence. freedom. the United Kingdom's expenditure for 2004 was estimated to be €759 billion. While both can legislate.03% of GDP. freedom.[72] The European Court of Auditors aims to ensure that the budget of the European Union has been properly accounted for. the largest single expenditure item is "cohesion & competitiveness" with around 45% of the total budget. environment and fisheries" takes up around 11%. in total.[72] The "EU as a global partner" and "citizenship.

" "Union exercise of competence shall not result in Member States being prevented from exercising theirs in:"   the internal market social policy. employment and social policies  common foreign.Exclusive competence: "The Union has exclusive competence to make directives and conclude international agreements when provided for in a Union legislative act. for the aspects defined in this  research."      the customs union the establishing of the competition rulesnecessary for the functioning of the internal market monetary policy for the Member States whose currency is the euro the conservation of marine biological resources under the common fisheries policy common commercial policy Shared competence: "Member States cannot exercise competence in areas where the Union has done so. not covered elsewhere" conservation of marine biological resources        environment consumer protection transport trans-European networks energy the area of freedom. excluding the  development cooperation. security and defence policies matters. for the aspects defined in this Treaty . security and justice common safety concerns in public health  coordination of economic. social and territorial cohesion agriculture and fisheries. humanitarian aid "The Union coordinates Member States policies or implements supplemental to theirs common policies. technological development and space Treaty   economic.

the General Court. sport and vocational training civil protection (disaster prevention) administrative cooperation Legal system The EU is based on a series of treaties.[81] The Court of Justice primarily deals with cases taken by member states. with the right to sign agreements and international treaties.[84] Decisions from the General Court can be appealed to the Court of Justice but only on a point of law.[82] The General Court mainly deals with cases taken by individuals and companies directly before the EU's courts.[80] Under the principle of supremacy. and the European Union Civil Service Tribunal.Supporting competence: "The Union can carry out actions to support. These legal powers include the ability to enact legislation[nb 5] which can directly affect all member states and their inhabitants.[nb 7] [edit]Courts of Justice The judicial branch of the EU—formally called the Court of Justice of the European Union—consists of three courts: the Court of Justice. national courts are required to enforce the treaties that their member states have ratified. Together they interpret and apply the treaties and the law of the EU. even if doing so requires them to ignore conflicting national law. youth. coordinate or supplement Member States' actions in:"        the protection and improvement of human health industry culture tourism education. the institutions. and thus the laws enacted under them. and (within limits) even constitutional provisions.[85] .[nb 6] The EU has legal personality.[79] These are power-giving treaties which set broad policy goals and establish institutions with the necessary legal powers to implement those goals.[83] and the European Union Civil Service Tribunal adjudicates in disputes between the European Union and its civil service. and cases referred to it by the courts of member states. and then made amendments to those founding treaties. These first established the European Community and the EU.

under certain conditions. The EU opposes the death penalty and has proposed its world wide abolition. Decisions offer an alternative to the two above modes of legislation. Regulations become law in all member states the moment they come into force. freedom.[nb 10] The Lisbon Treaty and Protocol 14 to the ECHR have changed this: the former binds the EU to accede to the Convention while the latter formally permits it. The charter is a codified catalogue of fundamental rights against which the EU's legal acts can be judged.Fundamental rights The last amendment to the constitutional basis of the EU came into force in 2009 and was the Lisbon Treaty.[88] The Charter of Fundamental Rights was drawn up in 2000. It consolidates many rights which were previously recognised by the Court of Justice and derived from the "constitutional traditions common to the member states. or on rulings on State Aid. non-discrimination. democracy. The treaties declare that the EU itself is "founded on the values of respect for human dignity. justice.[nb 8] previously.[90] [edit]Acts The main legal acts of the EU come in three forms: regulations. the rule of law and respect for human rights."[87] The Court of Justice has long recognised fundamental rights and has. they may. companies or a particular member state. including the rights of persons belonging to minorities .[nb 11] and automatically override conflicting domestic provisions. directives. They are legal acts which only apply to specified individuals.[89] Abolition of the death penalty is a condition for EU membership.[nb 12] When the time limit for implementing directives passes. The EU also promoted human rights issues in the wider world. invalidated EU legislation based on its failure to adhere to those fundamental rights. tolerance. the EU itself could not accede to the Convention as it is neither a state[nb 9] nor had the competence to accede. The details of how they are to be implemented are left to member states. but are also frequently used for procedural or administrative matters within the institutions. Regulations.[91] . and decisions are of equal legal value and apply without any formal hierarchy."[86] In 2009 the Lisbon Treaty gave legal effect to the Charter of Fundamental Rights of the European Union. Although signing the European Convention on Human Rights (ECHR) is a condition for EU membership. in a society in which pluralism.. equality. havedirect effect in national law against member states. and decisions. on occasion. They are most often used inCompetition Law..[nb 5] Directives require member states to achieve a certain result while leaving them discretion as to how to achieve the result. solidarity and equality between women and men prevail. directives. Although originally not legally binding the Charter was frequently cited by the EU's courts as encapsulating rights which the courts had long recognised as the fundamental principles of EU law. without the requirement for any implementing measures.

and racial discrimination. [97] and criminal justice. Since the creation of the EU in 1993. age. initially at an intergovernmental level and later by supranationalism.[93] and Frontex for co-operation between border control authorities. agencies have been established that co-ordinate associated actions: Europol for co-operation of police forces.[96] asylum law. age discrimination. Furthermore.[nb 15] [edit]Foreign relations Main articles: Foreign relations of the European Union. disability. security and justice The Schengen Area comprises most member states ensuring open borders.[95] family law. To this end. it has developed its competencies in the area of justice and home affairs. Common Foreign and Security Policy.[edit]Justice and home affairs Further information: Area of freedom.[92] Eurojustfor co-operation between prosecutors. religion. the Union has legislated in areas such as extradition.[94] The EU also operates the Schengen Information System[12] which provides a common database for police and immigration authorities. and European External Action Service .[nb 14] By virtue of these powers.[nb 13] In more recent years. and sexual orientation. This cooperation had to particularly be developed with the advent of open borders through the Schengen Agreement and the associated cross border crime. the EU has enacted legislation on sexual discrimination in the work-place.[98] Prohibitions against sexual and nationality discrimination have a long standing in the treaties. these have been supplemented by powers to legislate against discrimination based on race.

when member states negotiated as a bloc in international tradenegotiations under the Common Commercial Policy. Catherine Ashton. such as those which occurred over the war in Iraq.High Representative of the Union for Foreign Affairs and Security Policy.[106] This influence on the internal affairs of other countries is generally referred to as "soft power".[99] Steps for a more wide ranging coordination in foreign relations began in 1970 with the establishment of European Political Cooperation which created an informal consultation process between member states with the aim of forming common foreign policies. Foreign policy cooperation between member states dates from the establishment of the Community in 1957. The High Representative heads up the European External Action Service (EEAS). and are considered an important factor contributing to the reform of European formerly Communist countries. EPC was renamed as the Common Foreign and Security Policy (CFSP) by the Maastricht Treaty. and the rule of law. until 1987 when European Political Cooperation was introduced on a formal basis by the Single European Act. It was not. The perceived benefits of becoming a member of the EU act as an incentive for both political and economic reform in states wishing to fulfil the EU's accession criteria.[101] The CFSP requires unanimity among the member states on the appropriate policy to follow on any particular issue.[100] The aims of the CFSP are to promote both the EU's own interests and those of the international community as a whole. as opposed to military "hard power". The EU participates in all G8 and G20summits. and has the task of articulating the positions expressed by the member states on these fields of policy into a common alignment. (G20 summit in Seoul) The co-ordinator and representative of the CFSP within the EU is the High Representative of the Union for Foreign Affairs and Security Policy (currently Catherine Ashton) who speaks on behalf of the EU in foreign policy and defence matters. respect for human rights. democracy. a unique EU department[103] that has been officially implemented and operational since 1 December 2010 on the occasion of the first anniversary of the entry into force of the Treaty of Lisbon. including the furtherance of international co-operation.[105] Besides the emerging international policy of the European Union.[104] The EEAS will serve as a foreign ministry and diplomatic corps for the European Union. the international influence of the EU is also felt through enlargement. The unanimity and difficult issues treated under the CFSP makes disagreements. however.[107] [edit]Military Main article: Military of the European Union .[102] not uncommon.

backed by credible military forces. 50 per cent of its military capacity and 70 per cent of all spending in military research and development. The predecessors of the European Union were not devised as a strong military alliance because NATO was largely seen as appropriate and sufficient for defence purposes. the means to decide to use them. the fourth largest. France.[117] EU military operations are supported by a number of bodies. the Western European Union.[116] EU forces have been deployed on peacekeeping missions from Africa to the former Yugoslavia and the Middle East. Spain. was disbanded in 2010 as its role had been transferred to the EU. France and the United Kingdom account for 45 per cent of Europe's defence budget. each of which is planned to be able to deploy quickly about 1500 personnel.[110] However the compatibility of their neutrality with EU membership is questioned (including by the Prime Minister of Finland)[111] and with mutual solidarity in the event of disasters.[114] In 2000. European Union Satellite Centre and the European Union Military Staff. The European Union does not have one unified military.[113] Together. placing it third in the world after the US and China. the European Council agreed that "the Union must have the capacity for autonomous action. substantial security and defence cooperation is increasingly relying on great power cooperation. After much discussion.[115] Following the Kosovo War in 1999. the United Kingdom.The Eurofighter Typhoon and Eurocopter Tiger are built by a consortium of some EU states.[112] According to the Stockholm International Peace Research Institute (SIPRI). France spent more than $44 billion on defence in 2010.[108] 21 EU members are members of NATO[109] while the remaining member states follow policies of neutrality.[118] In an EU consisting of 27 members.[119] [edit]Humanitarian aid Further information: ECHO (European Commission) . a military alliance with a mutual defence clause. terrorist attacks and armed aggression covered by TEU Article 42 (7) and TFEU Article 222 of the EU treaties. To that end. a number of efforts were made to increase the EU's military capability. in order to respond to international crises without prejudice to actions by NATO". and the readiness to do so. and Germany accounted for 97% of the total military research budget of the then 15 EU member states. while the United Kingdom spent almost €39 billion. notably the Helsinki Headline Goal process. the most concrete result was the EU Battlegroups initiative. including theEuropean Defence Agency.

9 billion.[127] [edit]Economy Main articles: Economy of the European Union and Regional policy of the European Union . foreign students. four countries have reached the 0. Caribbean and Pacific countries. 48% of which went to the African. and on humanitarian principles. some charities such as ActionAid have claimed European governments have inflated the amount they have spent on aid by incorrectly including money spent on debt relief. The European Commissions Humanitarian Aid Office. provides humanitarian aid from the EU to developing countries.[121] In 2005 EU aid was 0. or "ECHO". €16.7 bn. which contains some relevant programmes.[122] The EU's external action financing is divided into 'geographic' instruments and 'thematic' instruments. the EU is the largest contributor of foreign aid in the world. and refugees. has called for aid to be delivered more rapidly.[122] The EU's aid has previously been criticised by the eurosceptic think-tank Open Europe for being inefficient. 2007– 2013).[125] However.34% of the GNP which was higher than that of either the United States or Japan.7% target: Sweden.[121] Humanitarian aid is financed directly by the budget (70%) as part of the financial instruments for external action and also by the European Development Fund(30%). the EU is the largest aid donor in the world. €22. Under the deinflated figures. the Netherlands and Denmark. and from the European Neighbourhood and Partnership Instrument (ENPI). mis-targeted and linked to economic objectives. In 2006 its budget amounted to €671 million. but there is pressure to merge the EDF into the budgetfinanced instruments in order to encourage increased contributions to match the 0. which must spend 95% of its budget on overseas development assistance(ODA).[123] Furthermore.Collectively. to greater effect.[120] Counting the EU's own contributions and those of its member states together. Luxembourg.[122] The 'geographic' instruments provide aid through the Development Cooperation Instrument (DCI.[122] The European Development Fund (EDF.7% target and allow the European Parliament greater oversight. Louis Michel.[126] The previous commissioner for aid. 2008–2013) is made up of voluntary contributions by member states.7% of gross national income until 2015. the EU as a whole did not reach its internal aid target in 2006[124] and is expected not to reach the international target of 0.

[140] [edit]Internal market Main article: Internal Market (European Union) . TACIS has now become part of the worldwide EuropeAid programme.[132] India. inflation at 2. from 26% of the EU27 average in the region of Severozapaden in Bulgaria.4% of GDP.[137] The difference between the richest and poorest regions (271 NUTS-2 regions of the Nomenclature of Territorial Units for Statistics) ranged. areSeverozapaden with €6. Nord-Est and Severen tsentralen with €6. and SAPARD).800.000 (about US$7. while the poorest regions. It is the largest exporter. 161 have their headquarters in the EU. A monetary union. [139] Several funds provide emergency aid.000 to US$69. Such regions are primarily located in the new member states of East-Central Europe.000. by GDP (2011)[128] The EU has established a single market across the territory of all its members. Of the top 500 largest corporations measured by revenue (Fortune Global 500 in 2010). and the biggest trading partner to several large countries such as China. On the high end. using a single currency comprises 17 member states.2% and public deficit at −0. support for candidate members to transform their country to conform to the EU's standard (Phare.[138] Structural Funds and Cohesion Funds are supporting the development of underdeveloped regions of the EU.[130] the largest importer[131] of goods and services.000).9% of GDP. The EU Seventh Framework Programme (FP7) sponsors research conducted by consortia from all EU members to work towards a single European Research Area. and support to the former USSRCommonwealth of Independent States (TACIS).242 billion international dollars) share of the global gross domestic product[19] making it the largest economy in the world.[136] There is a significant variance for annual per capita income within individual EU states. Inner London has €83.000 to €50.[133] and the United States.The ten largest economies in the world counting the EU as a single entity. and Bruxelles-Cap €55. these range from €5. in 2007.600 and Yuzhen tsentralen with €6. to 334% of the average in Inner London in the United Kingdom.[134] In May 2007 unemployment in the EU stood at 7%[135] while investment was at 21. Luxembourg €68.[129] In 2010 the EU generated an estimated 26% (16.400 PPP per capita. ISPA. the eurozone.200 PPP per capita.500.

This lacuna has been addressed by the recently passed Directive on services in the internal market which aims to liberalise the cross border provision of services. a symbol.[nb 16] The Commission as the competition regulator for the single market is responsible forantitrust issues. The single market involves the free circulation of goods.[145] . Post-Maastricht there has been a rapidly developing corpus of ECJ judgements regarding this initially neglected freedom. study or retire in another country. people and services within the EU. [edit]Competition Further information: European Union competition law and European Commissioner for Competition The EU operates a competition policy intended to ensure undistorted competition within the single market. This required the lowering of administrative formalities and recognition of professional qualifications of other states. Liechtenstein and Switzerland participate in the single market but not in the customs union. and acustoms union between its member states. The free movement of persons means that EU citizens can move freely between member states to live. breaking up cartels. The free movement of capital is unique insofar as it is granted equally to non-member states. and the words "European Union" given in their official language(s). discriminatory taxes or import quotas. work. Once goods have been admitted into the market they cannot be subjected to customs duties. capital. While services account for 60–70% of GDP.EU Member States have a standardised passportdesign with the name of the member state.[144] According to the Treaty the provision of services is a residual freedom that only applies if no other freedom is being exercised.[51] Half the trade in the EU is covered by legislation harmonised by the EU. working for economic liberalisation and preventing state aid. Norway.[129] and the customs union involves the application of a common external tariff on all goods entering the market.[142] Until the drive towardsEconomic and Monetary Union the development of the capital provisions had been slow. legislation in the area is not as developed as in other areas. The non-EU member states of Iceland. approving mergers. [141] Free movement of capital is intended to permit movement of investments such as property purchases and buying of shares between countries.[143] The free movement of services and of establishment allows self-employed persons to move between member states in order to provide services on a temporary or permanent basis. as they travel internally. subsequently renamed the single market. (Ireland model) Two of the original core objectives of the European Economic Community were the development of a common market.

when euro notes and coins were issued and national currencies began to phase out in the eurozone.The Competition Commissioner. The eurozone (constituted by the EU member states which have adopted the euro) has since grown to 17 countries. however only a few countries have set target dates for accession. It remained an accounting currency until 1 January 2002. On this date the euro was duly launched by eleven of the then 15 member states of the EU.[nb 17] The euro is designed to help build a single market by. eliminating exchange rate problems. creating a single financial . notable for the ability to affect the commercial interests of trans-national corporations. resulted in the Commission fining Microsoft over €777 million following nine years of legal action.[146] For example. is one of the most powerful positions in the Commission. which by then consisted of 12 member states. However. for example: easing travel of citizens and goods. The creation of a European single currency became an official objective of the European Economic Community in 1969. currently Joaquín Almunia. the most recent being Estonia which joined on 1 January 2011. except Denmark and the United Kingdom. in 2001 the Commission for the first time prevented a merger between two companies based in the United States (GE and Honeywell) which had already been approved by their national authority. Sweden has circumvented the requirement to join the euro by not meeting the membership criteria. it was only with the advent of the Maastricht Treaty in 1993 that member states were legally bound to start the monetary union no later than 1 January 1999.[147] Another high profile case against Microsoft. providing price transparency. are legally bound to join the euro[149] when the convergence criteriaare met. The European Central Bank in Frankfurt governs the monetary policy.[148] [edit]Monetary union Main articles: Economic and Monetary Union of the European Union and Eurozone The eurozone (in darker blue) is constituted by 17 member states adopting the euro as legal tender. All other EU member states.

and providing a currency used internationally and protected against shocks by the large amount of internal trade within the eurozone. and the monetary policies of those who have adopted it in agreement with the EU. there is also a European Systemic Risk Board under the responsibility of the ECB. It is at the centre of the European System of Central Banks.[154] [edit]Energy Main article: Energy policy of the European Union EU energy production 46% of total EU primary energy use Nuclear energy[nb 18] 29. and thus controls monetary policy in that area with an agenda to maintain price stability. theEuropean Insurance and Occupational Pensions Authority and the European Securities and Markets Authority. the Vice-President of the ECB.4% Other 1.4% Renewable energy 14. [151] The euro. The aim of this financial control system is to ensure the economic stability of the EU. who is appointed by the European Council.[153] [edit]Financial supervision The European System of Financial Supervisors is an institutional architecture of the EU's framework of financial supervision composed by three authorities: the European Banking Authority. To complement this framework. and the governors of the national central banks of all 27 EU member states.4% Net imports of energy . It is also intended as a political symbol of integration and stimulus for more.market.6% Oil 13.9% Gas 19. price stability and low interest rates.[150] Since its launch the euro has become the second reserve currency in the world with a quarter of foreign exchanges reserves being in euro. consisting of the President of the ECB. are under the control of the European Central Bank (ECB).3% Coal & lignite 21. which comprehends all EU national central banks and is controlled by its General Council.[152] The ECB is the central bank for the eurozone.

4% In 2006. encourage investment and boost interconnections between electricity grids.[155] In these statistics. The EU is attempting to diversify its energy supply.[155] Around 46% of the energy consumed was produced within the member states while 54% was imported. and the first draft policy was published in January 2007.825 million tonnes of oil equivalent (toe). the 27 member states of the EU had a gross inland energy consumption of 1. establish a new treaty framework for energy co-operation with Russia while improving relations with energy-rich states in Central Asia[158] and North Africa. nuclear energy is treated as primary energy produced in the EU. use existing energy supplies more efficiently while increasing use of renewable energy. and finally increase funding for new energy technologies.54% of total primary EU energy use Oil & petroleum products 60.[156] The EU has had legislative power in the area of energy policy for most of its existence. The introduction of a mandatory and comprehensive European energy policy was approved at the meeting of the European Council in October 2005.48% of its uranium[156] demands. diversify energy resources with better systems to respond to a crisis. of which less than 3% is produced in the EU.4% Other 13. regardless of the source of the uranium. There are concerns that Europe's dependence on Russian energy is endangering the Union and its member countries.2% Gas 26. 57% of its gas[159] and 97.[157] The EU currently imports 82% of its oil.[157] The EU has five key points in its energy policy: increase competition in the internal market.[160] [edit]Infrastructure Further information: European Commissioner for Transport and European Commissioner for Industry and Entrepreneurship . this has its roots in the original European Coal and Steel Community.

demanding approximately €17 billion. and still accounts for around 34%.600 roads needed to be upgraded to EU standards. providing certainty in food supplies. or farmers were offered subsidies (amounting to the difference between the Community and world prices) to . to be built by the EU and launched by the European Space Agency (ESA). 270 maritime harbours. stabilising markets. the Fréjus Rail Tunnel. These wereintervention stores of produce bought up by the Community to maintain minimum price levels. given the aged nature of the GPS system. In the pre-2004 EU members. 330 airports. for example through the Trans-European Networks (TEN). 4. 78. the largest budgetary expenditure.000 kilometres (48. Until the 1990s.000 mi) of railways. In 2001 it was estimated that by 2010 the network would cover: 75. and 210 internal harbours. The EU is working to improve cross-border infrastructure within the EU.[166] [edit]Agriculture Main article: Common Agricultural Policy EU farms are supported by the CAP.The Öresund Bridge between Denmark and Sweden is part of the Trans-European Networks.200 kilometres (46. resulting in so-called butter mountains and wine lakes. LGV Est. and ensuring reasonable prices for consumers.700 mi) of roads.[167] The policy has the objectives of increasing agricultural production. The Galileo project was launched partly to reduce the EU's dependency on the US-operated Global Positioning System. delays. ensuring a high quality of life for farmers.[164][not in citation given] The Galileo positioning system is another EU infrastructure project . and their perception of redundancy given the existence of the GPS system. the major problem in transport deals with congestion and pollution. Projects under TEN include the Channel Tunnel.[168] The policy's price controls and market interventions led to considerable overproduction.[nb 19] It was.[163] The Polish road network in particular was in poor condition: at Poland's accession to the EU.[165] It has been criticised by some due to costs. the new states that joined since 2004 added the problem of solving accessibility to the transport agenda. they were often sold on the world market at prices considerably below Community guaranteed prices. operated by a system of subsidies and market intervention. the policy accounted for over 60% of the then European Community's annual budget. the Brenner Base Tunnel and the Strait of Messina Bridge. until recently. After the recent enlargement. In order to dispose of surplus stores. but also to give more complete global coverage and allow for far greater accuracy. the Öresund Bridge. and is to be operational by 2012. (Vineyard in Spain) The Common Agricultural Policy (CAP) is one of the oldest policies of the European Community.[161][162] The developing European transport policies will increase the pressure on the environment in many regions by the increased transport network. Galileo is a proposed Satellite navigation system. and was one of its core aims.

the CAP has been subject to a series of reforms. Agriculture expenditure will move away from subsidy payments linked to specific produce. . This is intended to allow the market to dictate production levels. In education. These programmes are designed to encourage a wider knowledge of other countries and to spread good practices in the education and training fields across the EU.export their produce outside the Community. milk quotas (by the McSharry reforms in 1992) and. However. more recently. toward direct payments based on farm size. while maintaining agricultural income levels.[171] There are now similar programmes for school pupils and teachers. especially those in the developing world. This system has been criticised for under-cutting farmers outside of Europe.[172] Through its support of the Bologna process the EU is supporting comparable standards and compatible degrees across Europe. the policy was mainly developed in the 1980s in programmes supporting exchanges and mobility. The most visible of these has been the Erasmus Programme. in what would otherwise be an economically unviable way of life.[170] [edit]Education and science Main articles: Educational policies and initiatives of the European Union and Framework Programmes for Research and Technological Development Renewable energy is one priority in transnational research activities such as the FP7 Education and science are areas where the EU's role is limited to supporting national governments.[169] The overproduction has also been criticised for encouraging environmentally unfriendly intensive farming methods. In its first 20 years it has supported international exchange opportunities for well over 1. which previously divided the sugar market between member states and certain African-Caribbean nations with a privileged relationship with the EU. the 'de-coupling' (or disassociation) of the money farmers receive from the EU and the amount they produce (by the Fischler reforms in 2004).5 million university and college students and has become a symbol of European student life. for trainees in vocational education and training. Initially these reforms included the introduction of set-aside in 1988.[169] Supporters of CAP say that the economic support which it gives to farmers provides them with a reasonable standard of living. where a proportion of farm land was deliberately withdrawn from production. and for adult learners in the Lifelong Learning Programme 2007–2013. [169] Since the beginning of the 1990s. the EU's small farmers receive only 8% of CAP's available subsidies. a university exchange programme which began in 1987. [167] One of these reforms entailed the abolition of the EU's sugar regime.

Article 35 of the Charter of Fundamental Rights of the European Union affirms that "A high level of human health protection shall be ensured in the definition and implementation of all Union policies and activities". All the member states have either publicly sponsored and regulated universal health care or publicly provided universal health care. The European Commission's Directorate-General for Health and Consumers seeks to align national laws on the protection of people's health. on the safety of food and other products.[173] The Seventh Framework Programme (FP7) deals in a number of areas. their citizens can purchase supplemental insurance for additional coverage. the Directive on crossborder healthcare. the first of which started in 1984. the combined population of all 27 member states was forecast at 501. for example energy where it aims to develop a diverse mix of renewable energy for the environment and to reduce dependence on imported fuels.[175][176] [177] Health care in the EU is provided through a wide range of different systems run at the national level.[5] . Private funding for health care may represent personal contributions towards meeting the non-taxpayer refunded portion of health care or may reflect totally private (non-subsidised) health care either paid out of pocket or met by some form of personal or employer funded insurance.[174] [edit]Health care European Health Insurance Card.[178] A specific directive. on a reciprocal basis. All EU and many other European countries offer their citizens a free European Health Insurance Card which. The independent European Research Council allocates EU funds to European or national research projects. on the consumers' rights. The systems are primarily publicly funded through taxation (universal health care).211 as of 1 January 2010.[179][180][181] [edit]Demographics Main article: Demographics of the European Union On 23 October 2010. (French version pictured) Although the EU has no major competences in the field of health care. The aims of EU policy in this area are to co-ordinate and stimulate research.Scientific development is facilitated through the EU's Framework Programmes. The public plans in some countries provide basic or "sick" coverage only.064. provides insurance for emergency medical treatment insurance when visiting other participating European countries. aims at promoting cooperation on health care between member states and facilitating access to safe and high-quality cross-border healthcare for European patients.

3 million people lived in the EU.7 million). Frankfurt/Rhine-Main approx. France (5.761.)[185] In 2010.000 Madrid 3.228. Brussels. Italy (3. who were born outside their resident country.457.8 million (Frankfurt.395 2. Denmark and Malmö.3%) were born outside the EU and 16.5 million (urban area in between Antwerp.000 11. Wiesbaden et al. Spain (4.359 5. Dortmund.).500. 31.089. This corresponds to 9.410.000 4. the EU also includes several densely populated regions that have no single core but have emerged from the connection of several cites and now encompass large metropolitan areas.).672 63. Leuven and Ghent).761 12.4% of the total EU population.2%) were born in another EU member state.330 9.829 6. 5.).000 12.000 3.880 3.4 million).804.5 million inhabitants (Cologne. 3.900 9.928.098 Rome 2.000 11.460 4.0 million (3.105 5. 5.000 The EU is home to more global cities than any other region in the world.990.815 9.4 million (6. 3. the Öresund Region approx.512. and the Upper Silesian Industrial Region approx.7 million (Copenhagen.000 London 7.000 3. the Flemish diamond approx.450 2. Düsseldorf et al.331 4. and the Netherlands (1.332.1 million). The Hague. 47. Sweden).400 4. the United Kingdom (4.4 million). Besides many large cities.124 12.600 24.867. Randstad approx.2 million).153. 7 million (Amsterdam.089.500.690 3. Of these. the largest being London.[186] [edit]Languages Main article: Languages of the European Union . Rotterdam.[184] It contains 16 cities with populations of over one million.300. The largest are Rhine-Ruhr having approximately 11.000 5.971. The largest absolute numbers of people born outside the EU were in Germany (6.917.5 million (Katowice.Population of the 5 largest cities in the EU[182] City City limits (2006) Density/km² Density /sq mi Urban area (2005) LUZ (2004) Metropolitan Area[183] (2011) Berlin 3.198 13.000 Paris 2.1 million).325. Sosnowiec et al.708. Utrecht et al.

European official languages report (EU-251) Language Native Speakers Total English 13% 51% German 18% 32% French 12% 26% Italian 13% 16% Spanish 9% 15% Polish 9% 10% Dutch 5% 6% Greek 3% 3% Czech 2% 3% Swedish 2% 3% Hungarian 2% 2% Portuguese 2% 2% Slovak 1% 2% Danish 1% 1% Finnish 1% 1% .

Polish. are translated into every official language.[189][190] Important documents.Galician. based on population with a minimum age of 15. The European Parliament provides translation into all languages for documents and its plenary sessions. English. [192] Catalan. Czech. Hun garian. Danish. Scottish Gaelic and Welsh are not official languages of the EU but have semi-official status in that official translations of the treaties are made into them and citizens of the EU have the right to correspond with the institutions using them. Lithuanian. German. andSwedish. Maltese. Dutch. Irish.[194] German is the most widely spoken . Slovene. Romanian. such as legislation. French. Portuguese.[nb 20][193] English is the most spoken language in the EU and is spoken by 51% of the EU population counting both native and non-native speakers. Basque. Latvian.Finnish. Greek. Native: Native language[187] Total: EU citizens able to hold a conversation in this language[188] Among the many languages and dialects used in the EU. but EU institutions promote the learning of other languages. Sp anish. Language policy is the responsibility of member states.European official languages report (EU-251) Language Native Speakers Total Lithuanian 1% 1% Slovenian 1% 1% Estonian <1% <1% Irish <1% <1% Latvian <1% <1% Maltese <1% <1% 1 Published in 2006. Survey conducted in 2005. Slovak. it has 23 official and working languages: Bulgarian.[191] Some institutions use only a handful of languages as internal working languages. Italian. before the accession of Bulgaria and Romania. Estonian.

spoken by up to 50 million people. numerous Protestant denominations (especially in northern Europe). [edit]Religion Main article: Religion in the European Union The percentage of Europeans in each member state who believe in "a God". Catalan/Valencian. in the preamble of the text. the EU had an estimated Muslim population of 13 million.[202] and an estimated Jewish population of over a million. and Orthodoxy (in Greece. religious and humanist inheritance of Europe". are also represented in the EU population. Finnish.[203] Eurostat's Eurobarometer opinion polls showed in 2005 that 52% of EU citizens believed in a god. and 18% had no form of belief. only the Spanish regional languages (that is. Galician. As of 2009. such as Islam and Judaism. 56% of EU citizens are able to engage in a conversation in a language other than their mother tongue.[201] Christians in the EU are divided among followers of Roman Catholicism.mother tongue (about 88. and Welsh[197] can be used by citizens in communication with the main European institutions. The European Charter for Regional or Minority Languages ratified by most EU states provides general guidelines that states can follow to protect their linguistic heritage. which is an Afroasiatic language.[196] Besides the 23 official languages.[204] The countries where the .[199] The EU is a secular body with no formal connection with any religion. which belong to theUralic language family. Cyprus.[200] Discussion over the draft texts of the European Constitution and later the Treaty of Lisbon included proposals to mention Christianity or "God" or both. and Maltese. Scottish Gaelic. 27% in "some sort of spirit or life force". but the idea faced opposition and was dropped. Bulgaria and Romania).[200] The preamble to the Treaty on European Union mentions the "cultural. the protection of linguistic rights is a matter for the individual member states. Most EU official languages are written in the Latin alphabet except Bulgarian. Other religions. and Greek. but Article 17 of the Treaty on the Functioning of the European Union recognises the "status under national law of churches and religious associations" as well as that of "philosophical and non-confessional organisations". there are about 150 regional and minority languages.[198] Although EU programmes can support regional and minority languages. and the non-Indo-European Basque). written in the Greek alphabet.[196] Of these.7 million people as of 2006). and Hungarian.[199] Many countries have experienced falling church attendance and membership in recent years.[195] Most official languages of the EU belong to the Indo-European language family. except Estonian. written in Cyrillic.

there are some EU policies that have had an impact on sport. predominantly Roman Catholic). as part of the Football 4 Peace project. and those "positioning themselves on the right of the political scale (57%). belief was higher among women.[206] the Media Plus programme.[209] Sport is mainly the responsibility of an individual member states or other international organisations rather than that of the EU.[213] [edit]See also Geogr aphy portal .fewest people reported a religious belief were Estonia (16%) and the Czech Republic (19%). Jordanian.[212] The EU does fund a program for Israeli.[199] The most religious countries are Malta (95%. those with religious upbringing.[207] orchestras such as the European Union Youth Orchestra[208] and theEuropean Capital of Culture programme – where one or more cities in the EU are selected for one year to assist the cultural developmentof that city.[205] the European Cultural Month event. those who left school at 15 with a basic education. Across the EU. which prohibited national football leagues from imposing quotas on foreign players with European citizenship. such as the free movement of workers which was at the core of theBosman ruling. due to objections over the applications of free market principles to sport which led to an increasing gap between rich and poor clubs."[199] [edit]Culture and sport Main articles: Cultural policies of the European Union and Sport policies of the European Union Turku in Finland (left) and Tallinn in Estonia (right) are the European Capitals of Culture in 2011 Cultural co-operation between member states has been a concern of the EU since its inclusion as a community competency in the Maastricht Treaty. increased with age.[210] The Treaty of Lisbon requires any application of economic rules to take into account the specific nature of sport and its structures based on voluntary activity. However.[211] This followed lobbying by governing organisations such as the International Olympic Committee and FIFA. and Cyprus and Romania both with about 90% of the citizens believing in God (both predominantly Eastern Orthodox). Irish and British football coaches.[205] Actions taken in the cultural area by the EU include the Culture 2000 7-year programme.

The North American Free Trade Agreement (NAFTA) has two supplements.[6] and NAFTA Revisitedby the Institute for International Economics. NAFTA also seeks to eliminate non-tariff trade barriers. and Canada. have been quantified by several economists. It superseded the Canada – United States Free Trade Agreement between the U.Europe portal European Union portal Book: European Union Wikipedia books are collections of articles that can be downloaded or ordered in print.[7] Some[who?] argue that NAFTA has been positive for Mexico. Mexico. all US-Mexico tariffs would be eliminated except for some U. In terms of combined GDP of its members. 1994. Mechanisms Chapter 20 provides a procedure for the interstate resolution of disputes over the application and interpretation of NAFTA. North American Free Trade Agreement The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada. Canada and Mexico. Within 10 years of the implementation of the agreement. Provisions The goal of NAFTA was to eliminate barriers to trade and investment between the US.S.[4] NAFTA's effects. agricultural exports to Mexico that were to be phased out within 15 years. imports from Mexico and more than one-third of U. creating a trilateral trade bloc in North America. the North American Agreement on Environmental Cooperation (NAAEC) and theNorth American Agreement on Labor Cooperation (NAALC).S. as of 2010 the trade bloc is the largest in the world.[5] NAFTA's Impact on North America.S. exports to Mexico. Most U. The implementation of NAFTA on January 1.S.S. which has seen its poverty rates fall and real income rise (in the form of lower prices.-Canada trade was already duty free. It was modeled after Chapter 18 of the Canada-United States Free Trade Agreement. especially food). and the United States. both positive and negative. . whose findings have been reported in publications such as the World Bank's Lessons from NAFTA for Latin America and the Caribbean. The agreement came into force on January 1. 1994 brought the immediate elimination of tariffs on more than one-half of U.

and red meats. US exports of private commercial services. from 2009. [edit]Imports At $276. they were the second and third largest suppliers of goods imports to the United States in 2010.7 billion). and precious stones (gold) ($13.9 billion).5 billion. electrical machinery ($56. snack foods (excluding nuts) ($1. they were the top two purchasers of US exports in 2010.4 billion for Canada and $229. but has had negative impacts on farmers in Mexico who saw food prices fall based on cheap imports from US agribusiness. snack foods including chocolate ($4. NAFTA allowed agriculture goods to be tariff-free such as eggs.0 billion). US imports of agricultural products from NAFTA countries totaled $29.2 billion). Since the implementation of NAFTA. US goods imports from NAFTA totaled $506. and Mexico.2 million). fresh/chilled/frozen ($2.8 billion in 2010.6 billion). .4 billion in 2010.2 billion for Canada and $163. but up 125% since 1994. vehicles ($86. and negative impacts on US workers in manufacturing and assembly industries who lost jobs.6 billion) from 2008. and fresh vegetables ($1. US exports to NAFTA accounted for 32. US exports of agricultural products to NAFTA countries totaled $31. vehicles (parts) ($56. and plastic ($22. excluding military and government.7 billion for Mexico.9 billion). live animals ($2. to NAFTA were $63. up 25. Leading categories included red meats.6 billion). Mexico must invest more in education and promote innovation in infrastructure and agriculture. the countries involved have been able to do the following: [edit]Exports At $248. poultry and other meats and crops.[8] Others[who?] argue that NAFTA has been beneficial to business owners and elites in all three countries.S. and implementing equality between Canada. coarse grains ($2.even after accounting for the 1994–95 economic crisis.2 billion).6% ($103 billion). Some have suggested that in order to fully benefit from the agreement.5% of overall U. mineral fuel and oil ($26.4 billion). electrical machinery ($61. fresh/chilled/frozen ($2. This allowed corporations to trade freely and import and export various goods on a North American scale. Some economists believe that NAFTA has not been enough (or worked fast enough) to produce an economic convergence.8 billion). Critics also argue that NAFTA has contributed to the rising levels of inequality in both the US and Mexico.7 billion).2 billion).2% of overall US exports in 2010.[9] nor to substantially reduce poverty rates.3 billion). fresh fruit (excluding bananas) ($2. machinery ($51. Leading categories include fresh vegetables ($4. The top export categories (2-digit HS) in 2010 were machinery ($63.3 billion for Mexico. US imports from NAFTA accounted for 26. and up 235% from 1993.7 billion).7 billion).8 billion in 2009 (the latest data available). up 184% from 1994. America.4% ($78 billion) from 2009 and 149% from 1994 (the year prior to Uruguay Round) and up 190% from 1993 (the year prior to NAFTA). imports in 2010.0 billion).3 billion). fresh fruit ($1. The five largest categories in 2010 were mineral fuel and oil (crude oil) ($116. [edit]Trade The agreement opened the door for open trade. down 7% ($4.0 billion). US goods exports to NAFTA in 2010 were $411. up 23.8 billion).1 billion in 2010. ending tariffs on various goods and services.

2 billion in 2009 (the latest data available). The framework was designed to produce a focused and systematic body of evidence with respect to the initial hypotheses about NAFTA and the environment. finance/insurance. all three larger in population than Tijuana. or the hope that NAFTA would pressure governments to increase their environmental protection mechanisms. and Reynosa. a 36.5 billion) from 2008 but up 100% since 1994.S. These are plants that moved to this region from the United States.5% since the implementation of NAFTA in 1994. The US goods trade deficit with NAFTA accounted for 26.[10] In response to this mandate. [edit]Environment For more details on this topic. goods trade deficit in 2010.6 billion in 2010. the first regional trade agreement between a developing country and two developed countries. and the share of exports from non-border states has increased in the last five years while the share of exports from maquiladora-border states has decreased. the North American Agreement on Environmental Cooperation (NAAEC).] of Canada and Mexcico in the United States (stock) was $237.[2][3][4] [edit]Industry Maquiladoras (Mexican factories that take in imported raw materials and produce goods for export) have become the landmark of trade in Mexico. Ciudad Juárez. one of the first ex post frameworks for the environmental assessment of trade liberalization.7 billion in 2009 (latest data available).US imports of private commercial services excluding military and government were $35. This has allowed for the rapid growth of non-border metropolitan areas.4% increase ($25 billion) over 2009. León and Puebla.8% of the overall U. which led to the creation of the Commission for Environmental Cooperation (CEC) in 1994. [edit]Trade Balances The US goods trade deficit with NAFTA was $94. Securing U.2% ($4. and mining sectors. and in the manufacturing. The [[foreign direct investment. the CEC was given a mandate to conduct ongoing ex post environmental assessment of NAFTA.8% from 2008. up 8. The Clinton administration negotiated a side agreement on the environment with Canada and Mexico. The US had a services trade surplus of $28. congressional approval for NAFTA would have been impossible without addressing public concerns about NAFTA’s environmental impact.5 billion in 2009 (latest data available). Other sectors now benefit from the free trade agreement. To alleviate concerns that NAFTA. Hufbauer's (2005) book shows that income in the maquiladora sector has increased 15.S. down 11. would have negative environmental impacts. In keeping with the CEC’s overall strategy of .5% from 2008. the CEC created a framework for conducting environmental analysis of NAFTA. such as the concern that NAFTA would create a "race to the bottom" in environmental regulation among the three countries.3 billion with NAFTA countries in 2009 (the latest data available). [edit]Investment The US foreign direct investment (FDI) in NAFTA Countries (stock) was $357. hence the debate over the loss of American jobs. see NAFTA's Impact on the Environment. The US direct investment in NAFTA countries is in nonbank holding companies. such as Toluca. up 16.[11]The CEC has held four symposia using this framework to evaluate the environmental impacts of NAFTA and has commissioned 47 papers on this subject.

S. export market to the 2nd largest importer of U. such as efficient railroads and highways.S.[15] One of the most affected agricultural sectors is the meat industry. internal corn demand has increased beyond Mexico's sufficiency. the CEC commissioned these papers from leading independent experts. the causes of rural poverty cannot be directly attributed to NAFTA[citation needed].transparency and public involvement.[13] The most serious overall increases in pollution due to NAFTA were found in the base metals sector. and imports have become necessary. leading to an increase in sales and profits for the U. whereas the Mexico–U. or mechanisms. The rise in corn prices due to increased ethanol demand may improve the situation of corn farmers in Mexico. meat industry.[17] Zahniser & Coyle have also pointed out that corn prices in Mexico.S. NAFTA-related environmental threats instead occurred in specific areas where government environmental policy. implying that Mexicans can now afford to buy more meat and thus per capita meat consumption has grown. dairy.9 percent a year during the same period.[citation needed] .S. as was originally feared. three separate agreements were signed between each pair of parties. environmental policy was neglected in the wake of trade liberalization. many of the same rural people who would have been likely to produce higher-margin value-added products in Mexico have instead emigrated. [18] The logical result of a lower commodity price is that more use of it is made downstream. Mexico did not invest in the infrastructure necessary for competition.[12] Overall. agricultural agreement is a matter of dispute. The allowance of free trade removed the hurdles that impeded business between the two countries. As a result. were unprepared for the increasing scale of production under trade liberalization. such as Chapter 11. production has remained stable since 2000.S.[16] Production of corn in Mexico has increased since NAFTA's implementation. Mexico has gone from a small-key player in the pre-1994 U. instead. The Canada–U. have drastically decreased. creating more difficult living conditions for the country's poor.[14] [edit]Agriculture From the earliest negotiation. in fact.. in other cases. yet through a program of subsidies expanded by former president Vicente Fox. Still. none of the initial hypotheses were confirmed. adjusted for international prices.4 percent annually between 1994 and 2001. infrastructure.S. while imports increased by only 6. and NAFTA may be credited as a major catalyst for this change.[citation needed] In some cases. agreement contains significant restrictions and tariff quotas on agricultural products (mainly sugar. The overall effect of the Mexico–U. and measures against non-tariff trade barriers. as it has been with almost all free trade agreements that have been signed within the WTOframework. and poultry products).S. agricultural products in 2004.[citation needed] NAFTA did not inherently present a systemic threat to the North American environment. pact allows for a wider liberalization within a framework of phase-out periods (it was the first North–South FTA on agriculture to be signed). Mexico's agricultural exports increased 9. Agriculture is the only section that was not negotiated trilaterally. Mexico has provided a growing meat market for the U. Unfortunately. far beyond the quotas Mexico had originally negotiated. apart from potentially the ISDS provisions of Ch 11. the Mexican petroleum sector. However. but not in Canada. This coincides with a noticeable increase in Mexican per capita GDP that has created large changes in meat consumption patterns. and the transportation equipment sector in the United States and Mexico. agriculture was (and still remains) a controversial topic within NAFTA. NAFTA's measures for investment protection. threatened to discourage more vigorous environmental policy.

In a study published in the August 2008 issue of the American Journal of Agricultural Economics, NAFTA has increased U.S. agricultural exports to Mexico and Canada even though most of this increase occurred a decade after its ratification. The study focused on the effects that gradual "phasein" periods in regional trade agreements, including NAFTA, have on trade flows. Most of the increase in members’ agricultural trade, which was only recently brought under the purview of the World Trade Organization, was due to very high trade barriers before NAFTA or other regional trade agreements.
[19]

[edit]Mobility

of persons

According to the Department of Homeland Security Yearbook of Immigration Statistics, during fiscal year 2006 (i.e., October 2005 through September 2006), 73,880 foreign professionals (64,633 Canadians and 9,247 Mexicans) were admitted into the United States for temporary employment under NAFTA (i.e., in the TN status). Additionally, 17,321 of their family members (13,136 Canadians, 2,904 Mexicans, as well as a number of third-country nationals married to Canadians and Mexicans) entered the U.S. in the treaty national's dependent (TD) status.[20] Because DHS counts the number of the new I-94 arrival records filled at the border, and the TN-1 admission is valid for three years, the number of non-immigrants in TN status present in the U.S. at the end of the fiscal year is approximately equal to the number of admissions during the year. (A discrepancy may be caused by some TN entrants leaving the country or changing status before their three-year admission period has expired, while other immigrants admitted earlier may change their status to TN or TD, or extend TN status granted earlier). Canadian authorities estimated that, as of December 1, 2006, a total of 24,830 U.S. citizens and 15,219 Mexican citizens were present in Canada as "foreign workers". These numbers include both entrants under the NAFTA agreement and those who have entered under other provisions of the Canadian immigration law.[21] New entries of foreign workers in 2006 were 16,841 (U.S. citizens) and 13,933 (Mexicans).[

Non-tariff barriers to trade
From Wikipedia, the free encyclopedia

Non-tariff barriers to trade (NTBs) are trade barriers that restrict imports but are not in the usual form of a tariff. Some common examples of NTB's are anti-dumping measures and countervailing duties, which, although they are called "non-tariff" barriers, have the effect of tariffs once they are enacted. Their use has risen sharply after the WTO rules led to a very significant reduction in tariff use. Some nontariff trade barriers are expressly permitted in very limited circumstances, when they are deemed necessary to protect health, safety, or sanitation, or to protect depletable natural resources. In other forms, they are criticized as a means to evade free trade rules such as those of the World Trade Organization (WTO), the European Union (EU), or North American Free Trade Agreement (NAFTA) that restrict the use of tariffs. Some of non-tariff barriers are not directly related to foreign economic regulations, but nevertheless they have a significant impact on foreign-economic activity and foreign trade between countries. Trade between countries is referred to trade in goods, services and factors of production. Non-tariff barriers to trade include import quotas, special licenses, unreasonable standards for the quality of goods, bureaucratic delays at customs, export restrictions, limiting the activities of state trading, export subsidies, countervailing duties, technical barriers to trade, sanitary and phyto-sanitary measures, rules of origin, etc. Sometimes in this list they include macroeconomic measures affecting trade.

Six Types of Non-Tariff Barriers to Trade
1. Specific Limitations on Trade:

1. 2.
3.

Quotas Import Licensing requirements Proportion restrictions of foreign to domestic goods (local content

requirements) 4. Minimum import price limits Embargoes Valuation systems Anti-dumping practices Tariff classifications Documentation requirements Fees Standard disparities Intergovernmental acceptances of testing methods and standards

5.
2. 1.

Customs and Administrative Entry Procedures:

2.
3. 4. 5. 3. 1. 2.

Standards:

3. 4. 1. 2. 3. 4. 5. 1. 2. 3. 4. 5. 6. 6. Others: 1. 2. [edit]Examples

Packaging, labeling, and marking Government procurement policies Export subsidies Countervailing duties Domestic assistance programs Prior import deposit subsidies Administrative fees Special supplementary duties Import credit discrimination Variable levies Border taxes Voluntary export restraints Orderly marketing agreements

Government Participation in Trade:

Charges on imports:

of Non-Tariff Barriers to Trade

Non-tariff barriers to trade can be:           Import bans General or product-specific quotas Rules of Origin Quality conditions imposed by the importing country on the exporting countries Sanitary and phyto-sanitary conditions Packaging conditions Labeling conditions Product standards Complex regulatory environment Determination of eligibility of an exporting country by the importing country

 Determination of eligibility of an exporting establishment (firm, company) by the importing country.          Additional trade documents like Certificate of Origin, Certificate of Authenticity etc. Occupational safety and health regulation Employment law Import licenses State subsidies, procurement, trading, state ownership Export subsidies Fixation of a minimum import price Product classification Quota shares

these agreements include some provisions of the General Agreement on Tariffs and Trade and the Agreement on Import Licensing Procedures. but the effects of which often lead to this result. so-called voluntary export restraints. health and sanitary regulations and government procurement policies. countervailing duties. [edit]Licenses The most common instruments of direct regulation of imports (and sometimes export) are licenses and quotas. its country of origin (or destination). imposed on import and export of certain goods for a certain period of time. Almost all industrialized countries apply these non-tariff methods. concluded under the GATT (GATT). restrict trade. The use of licensing systems as an instrument for foreign trade regulation is based on a number of international level standards agreements. sanitary and veterinary standards. Product licensing can take many forms and procedures. We choose traditional classification of non-tariff barriers.on imports and exports of certain goods. Here are some example of the “popular” NTBs. according to which they are divided into 3 principal categories. and one-time license for a certain product importer (exporter) to import (or export).        Foreign exchange market controls and multiplicity Inadequate infrastructure "Buy national" policy Over-valued currency Intellectual property laws (patents. for example: customs procedures. [edit]Quotas Licensing of foreign trade is closely related to quantitative restrictions – quotas . bottling. In particular. standards. government participation in trade. customs and administrative entry procedures. The license system requires that a state (through specially authorized office) issues permits for foreign trade transactions of import and export commodities included in the lists of licensed merchandises. and other categories. import deposits. Under second category follow methods that are not directly aimed at restricting foreign trade and more related to the administrative bureaucracy. etc. The first category includes methods to directly import restrictions for protection of certain sectors of national industries: licensing and allocation of import quotas. etc. Some scholars divide between internal taxes. charges on import. technical standards and norms. copyrights) Restrictive licenses Seasonal import regimes Corrupt and/or lengthy customs procedures [edit]Types of Non-Tariff Barriers There are several different variants of division of non-tariff barriers. The non-tariff barriers can include wide variety of restrictions to trade. and in some cases also customs point through which import (or export) of goods should be carried out. however. This category includes global quotas in respect to . the system of minimum import prices. The main types of licenses are general license that permits unrestricted importation or exportation of goods included in the lists for a certain period of time. its cost. Others divide non-tariff barriers into more categories such as specific limitations on trade. The third category consists of methods that are not directly aimed at restricting the import or promoting the export. One-time license indicates a quantity of goods. whose actions. A quota is a limitation in value or in physical terms. administrative barriers. antidumping and countervailing duties. requirements for labeling and packaging.

when it is imposed after negotiations and agreement with exporting country. Such restrictions (through agreements on various types of goods) allow producing countries to use quotas for such commodities as coffee and oil. This can be explained by the fact. maintains quotas on many agricultural products it does not produce. Export quotas can be set in order to provide domestic consumers with sufficient stocks of goods at low prices. in many cases turns out to be more flexible and effective than economic instruments of foreign trade regulation. Licenses and quotas limit the independence of enterprises with a regard to entering foreign markets. In some cases. “Voluntary" export agreements affect trade in textiles. [edit]Agreement on a "voluntary" export restraint In the past decade. the agreement on "voluntary" export restraints is imposed on the exporter under the threat of sanctions to limit the export of certain goods in the importing country. seasonal quotas. the system of licensing and quota imports and exports. and so-called "voluntary" export restraints. to prevent the depletion of natural resources. Import quotas are not necessarily designed to protect domestic producers. For example. a widespread practice of concluding agreements on the "voluntary" export restrictions and the establishment of import minimum prices imposed by leading Western nations upon weaker in economical or political sense exporters. increasing their costs. Japan. consumer electronics. regulate the number and range of goods permitted for import and export. as well as avoiding excessive dependence on any other country in respect of necessary food. An import quota can be unilateral. The specifics of these types of restrictions is the establishment of unconventional techniques when the trade barriers of importing country.specific countries. the establishment of minimum import prices should be strictly observed by the exporting firms in contracts with the importers of the country that has set such prices. cars. dairy products. manipulation of the prices on the international level. narrowing the range of countries. the importing country imposes anti-dumping duty which could lead to withdrawal from the market. Quantitative controls on foreign trade transactions carried out through one-time license. supplies of which may decrease in case of bad weather or political conditions. Thus. In the case of reduction of export prices below the minimum level. Problems arise when the quotas are distributed between countries. machine tools. The consequence of this trade barrier is normally reflected in the consumers’ loss because of higher prices and limited selection of goods as well as in the companies that employ the imported materials in the production process. There are different reasons for imposing of export quota by the country. which can be the guarantee of the supply of the products that are in shortage in the domestic market. and bilateral or multilateral. that licensing and quota systems are an important instrument of trade regulation of the vast majority of the world. are introduced at the border of the exporting and not importing country. levied by the country without negotiations with exporting country. An export quota is a restricted amount of goods that can leave the country. as the result. which may be entered into transaction for certain commodities. Quantitative restriction on imports and exports is a direct administrative form of government regulation of foreign trade. Quotas on imports is a leverage when negotiating the sales of Japanese exports. Similarly. . establishing firm control over foreign trade in certain goods. as well as to increase export prices by restricting supply to foreign markets. However. prices for these products increased in importing countries. and the control of goods strategically important for the country. etc. footwear. the importing countries request exporting countries to impose voluntary export restraints. because it is necessary to ensure that products from one country are not diverted in violation of quotas set out in second country.

the consequences. Historically. Developed countries can afford not to depend on tariffs. governments had to get funding. The second reason for the transition to NTBs is that these tariffs can be used to support weak industries or compensation of industries. Foreign exchange restrictions constitute the regulation of transactions of residents and nonresidents with currency and other currency values. the procedure for the admission of investments and investors. The third reason for the popularity of NTBs is the ability of interest groups to influence the process in the absence of opportunities to obtain government support for the tariffs. These standards are sometimes entered under the pretext of protecting the safety and health of local populations. transfer profits and capital repatriation and dispute resolution. . which the importer must pay the bank for a definite period of time (non-interest bearing deposit) in an amount equal to all or part of the cost of imported goods. in respect of certain goods supplied to specific countries. in essence. but also to block sales of products of foreign manufacture. regardless of destination. national. It is determined by mode (fair and equitable. They received it through the introduction of tariffs. which include a clear definition of the legal regime. This explains the fact that most developing countries still rely on tariffs as a way to finance their spending.[edit]Embargo Embargo is a specific type of quotas prohibiting the trade. Also an important part of the mechanism of control of foreign economic activity is the establishment of the national currency against foreign currencies. most-favored-nation). Import deposits is a form of deposit. or in respect of all goods shipped to certain countries. Countries usually impose standards on classification. could be economic. which have been affected negatively by the reduction of tariffs. [edit]Administrative and bureaucratic delays at the entrance Among the methods of non-tariff regulation should be mentioned administrative and bureaucratic delays at the entrance which increase uncertainty and the cost of maintaining inventory. [edit]Import deposits Another example of foreign trade regulations is import deposits. order of nationalization and compensation. As well as quotas. At the national level. labeling and testing of products in order to be able to sell domestic products. in the formation of nationstates. Although the embargo is usually introduced for political purposes. at the same time developing NTBs as a possible way of international trade regulation. administrative regulation of capital movements is carried out mainly within a framework of bilateral agreements. embargoes may be imposed on imports or exports of particular goods. [edit]Standards Standards take a special place among non-tariff barriers. [edit]The transition from tariffs to non-tariff barriers One of the reasons why industrialized countries have moved from tariffs to NTBs is the fact that developed countries have sources of income other than tariffs. [edit]Foreign exchange restrictions and foreign exchange controls Foreign exchange restrictions and foreign exchange controls occupy a special place among the nontariff regulatory instruments of foreign economic activity.

the Agreement on Textiles and Clothing). the principle of protectionism demanded the introduction of new NTBs such as technical barriers to trade (TBT). forcing them to resort to use the NTB. as well as GATT articles. According to statements made at United Nations Conference on Trade and Development (UNCTAD. based on the amount and control of price levels has decreased significantly from 45% in 1994 to 15% in 2004. Thus. NTBs can be referred as a “new” of protection which has replaced tariffs as an “old” form of protection. Many NTBs are governed by WTO agreements. Increasing consumer demand for safe and environment friendly products also have had their impact on increasing popularity of TBT. The need to protect sensitive to import industries. Tariffs for goods production were reduced during the eight rounds of negotiations in the WTO and the General Agreement on Tariffs and Trade (GATT). NTBs in the field of services have become as important as in the field of usual trade. SPS Measures Agreement.[edit]Non-tariff barriers today With the exception of export subsidies and quotas. An example of this is safety standards and labeling requirements. . which originated in the Uruguay Round (the TBT Agreement. NTBs are most similar to the tariffs. After lowering of tariffs. and putting serious obstacles to international trade and world economic growth. 2005). while use of other NTBs increased from 55% in 1994 to 85% in 2004. available to the governments of industrialized countries. such as externalities and information asymmetries information asymmetries between consumers and producers of goods. as well as a wide range of trade restrictions. the use of NTBs. unless they are related to difficulties in the market. Most of the NTB can be defined as protectionist measures.

such as agriculture and steel. [edit]Examples  of free trade areas North American Free Trade Agreement (NAFTA) . Trade barriers such as taxes on food imports or subsidies for farmers in developed economies lead to overproduction and dumping on world markets. free trade involves the removal of all such barriers. Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency. this can be explained by the theory of comparative advantage. with low rates for raw commodities and high rates for labor-intensive processed goods. In practice.[1] The barriers can take many forms.Trade barrier From Wikipedia. the free encyclopedia Trade barriers are government-induced restrictions on international trade. The Commitment to Development Index measures the effect that rich country trade policies actually have on the developing world. In theory. thus lowering prices and hurting poor-country farmers. If two or more nations repeatedly use trade barriers against each other. then a trade war results. goods such as crops that developing countries are best at producing still face high barriers. except perhaps those considered necessary for health or national security. Trade barriers are often criticized for the effect they have on the developing world. even those countries promoting free trade heavily subsidize certain industries. including the following:   Tariffs Non-tariff barriers to trade         Import licenses Export licenses Import quotas Subsidies Voluntary Export Restraints Local content requirements Embargo Currency devaluation[2] Most trade barriers work on the same principle: the imposition of some sort of cost on trade that raises the price of the traded products. Tariffs also tend to be anti-poor. however. Because rich-country players call most of the shots and set trade policies.

     South Asia Free Trade Agreement (SAFTA) European Free Trade Association European Union (EU) Union of South American Nations New West Partnership (An internal free-trade zone in Canada between Alberta. however. decreases the cost of those goods through increased competition. While all of these seem beneficial. trading barriers include farming produce industry The Basics Of Tariffs And Trade Barriers International trade increases the number of goods that domestic consumers can choose from. customs. This article will examine why this is the case. traditions. The unemployment argument often shifts to domestic industries complaining about cheap foreign labor. British Columbia. language and currency. a tariff is a tax. What Is a Tariff? In simplest terms. . which means higher unemployment and a less happy electorate. It adds to the cost of imported goods and is one of several trade policies that a country can enact. and Saskatchewan)  Gulf Cooperation Council common market Other trade barriers include differences in culture. Here are five of the top reasons tariffs are used: Protecting Domestic Employment The levying of tariffs is often highly politicized. In economics. free trade isn't widely accepted as completely beneficial to all parties. countries will continue to produce goods until they no longer have a comparative advantage (not to be confused with an absolute advantage). and how poor working conditions and lack of regulation allow foreign companies to produce goods more cheaply. These domestic companies may fire workers or shift production abroad to cut costs. laws. and look at how countries react to the variety of factors that attempt to influence trade. The possibility of increased competition from imported goods can threaten domestic industries. Why Are Tariffs and Trade Barriers Used? Tariffs are often created to protect infant industries and developing economies. and allows domestic industries to ship their products abroad. but are also used by more advanced economies with developed industries.

For example. The government of a developing economy will levy tariffs on imported goods in industries in which it wants to foster growth. Defense industries are often viewed as vital to state interests. both are very protective of defenseoriented companies. National Security Barriers are also employed by developed countries to protect certain industries that are deemed strategically important. if France believes that the United States has allowed its wine producers to call its domestically . For example. Infant Industries The use of tariffs to protect infant industries can be seen by the Import Substitution Industrialization (ISI) strategy employed by many developing nations. This increases the prices of imported goods and creates a domestic market for domestically produced goods. It decreases unemployment and allows developing countries to shift from agricultural products to finished goods. South Korea may place a tariff on imported beef from the United States if it thinks that the goods could be tainted with disease. and often enjoy significant levels of protection. while protecting those industries from being forced out by more competitive pricing. while both Western Europe and the United States are industrialized. such as those supporting national security.Protecting Consumers A government may levy a tariff on products that it feels could endanger its population. For example. Retaliation Countries may also set tariffs as a retaliation technique if they think that a trading partner has not played by the rules. Criticisms of this sort of protectionist strategy revolve around the cost of subsidizing the development of infant industries. and the subsidies required to keep the state-backed industry afloat could sap economic growth. If an industry develops without competition. it could wind up producing lower quality goods.

Non-tariff barriers to trade include: .000 vehicle now costs $11. This tariff can vary according to the type of good imported. it may levy a tariff on imported meat from the United States. For example. and this type of tariff is levied on a good based on a percentage of that good's value. but levy a $300 tariff on each computer imported.S. If the U.500 to Japanese consumers.S. The 15% is a price increase on the value of the automobile. Ad Valorem Tariffs The phrase ad valorem is Latin for "according to value".produced sparkling wines "Champagne" (a name specific to the Champagne region of France) for too long. so a $10. An example of an ad valorem tariff would be a 15% tariff levied by Japan on U. Retaliation can also be employed if a trading partner goes against the government's foreign policy objectives. agrees to crack down on the improper labeling. France is likely to stop its retaliation. Types of Tariffs and Trade Barriers There are several types of tariffs and barriers that a government can employ: Specific tariffs Ad valorem tariffs Licenses Import quotas Voluntary export restraints Local content requirements Specific Tariffs A fixed fee levied on one unit of an imported good is referred to as a specific tariff. automobiles. This price increase protects domestic producers from being undercut. a country could levy a $15 tariff on each pair of shoes imported. but also keeps prices artificially high for Japanese car shoppers.

and allows the business to import a certain type of good into the country. This creates a restriction on competition. the government can require that a certain percentage of a good be made domestically. For example. Voluntary Export Restraints (VER) This type of trade barrier is "voluntary" in that it is created by the exporting country rather than the importing one. A voluntary export restraint is usually levied at the behest of the importing country.Licenses A license is granted to a business by the government. For example. or can say that 15% of the value of the good must come from domestically produced components. a restriction on the import of computers might say that 25% of the pieces used to make the computer are made domestically. a country may place a quota on the volume of imported citrus fruit that is allowed. and could be accompanied by a reciprocal VER. Import Quotas An import quota is a restriction placed on the amount of a particular good that can be imported. Local Content Requirement Instead of placing a quota on the number of goods that can be imported. This increases the price of both coal and sugar. For example. there could be a restriction on imported cheese. Canada could then place a VER on the exportation of coal to Brazil. and licenses would be granted to certain companies allowing them to act as importers. but protects the domestic industries. and increases prices faced by consumers. based on a request by Canada. The restriction can be a percentage of the good itself. Who Benefits? . For example. Brazil could place a VER on the exportation of sugar to Canada. In the final section we'll examine who benefits from tariffs and how they affect the price of goods. or a percentage of the value of the good. This sort of barrier is often associated with the issuance of licenses.

The price of goods at home is found at price P. tariffs and trade barriers tend to be pro-producer and anti-consumer. Domestic industries also benefit from a reduction in competition. domestic consumers will consume Qw worth of goods. Figure 1. and domestic consumers are left paying higher prices as a result. the long-term effect of subsidies is an increase in the demand for public services. it must import Qw-Qd worth of goods. At a lower price. The price of goods at home is found at price P. In the long term. Because of this. DS means domestic supply and DD means domestic demand. while the world price is found at P*. since import prices are artificially inflated. since increased prices. Because a tariff is a tax. If the price of steel is inflated due to tariffs.higher import prices mean higher prices for goods. while the world price is found at P*. Price without the influence of a tariff Figure 1 illustrates the effects of world trade without the presence of a tariff.The benefits of tariffs are uneven. In short. and businesses pay more for steel that they use to make goods. but because . and may also see a reduction in profits due to the emergence of substitutes for their products. Figure 1 illustrates the effects of world trade without the presence of a tariff. businesses will profit and the government will see an increase in revenue from duties. domestic producers are not forced to reduce their prices from increased competition. businesses may see a decline in efficiency due to a lack of competition. For the government. At a lower price. consumers and the government shifts over time. Tariffs also reduce efficiencies by allowing companies that would not exist in a more competitive market to remain open. DS means domestic supply and DD means domestic demand. How Do Tariffs Affect Prices? Tariffs increase the prices of imported goods. The effect of tariffs and trade barriers on businesses. but because the home country can only produce up to Qd. higher prices for goods can reduce consumption by individual consumers and by businesses. the government will see increased revenue as imports enter the domestic market. especially in foodstuffs. During this time period. leave less disposable income. In the graph. Unfortunately for consumers .both individual consumers and businesses . In the short run. In the graph. domestic consumers will consume Qw worth of goods. individual consumers pay more for products using steel.

such as quotas and export restraints. while enforcement on binding agreements reduces uncertainty.the home country can only produce up to Qd. Such organizations make it more difficult for a country to levy tariffs and taxes on imported goods. Figure 2. Organizations like the WTO attempt to reduce production and consumption distortions created by tariffs. and consumers purchasing fewer goods because prices have increased. Since the 1930s. but because the global economy brings with it uncertainty. many governments impose tariffs and other trade barriers to protect industry. many developed countries have reduced tariffs and trade barriers. which has improved global integration and brought about globalization. countries have shifted to non-tariff barriers. . and can reduce the likelihood of retaliatory taxes. Because of this. There is a delicate balance between the pursuit of efficiencies and the government's need to ensure low unemployment. Price under the effects of a tariff Tariffs and Modern Trade The role tariffs play in international trade has declined in modern times. These distortions are the result of domestic producers making goods due to inflated prices. it must import Qw-Qd worth of goods. such as the World Trade Organization (WTO). Multilateral agreements between governments increase the likelihood of tariff reduction. The Bottom Line Free trade benefits consumers through increased choice and reduced prices. One of the primary reasons for the decline is the introduction of international organizations designed to improve free trade.

Sign up to vote on this title
UsefulNot useful