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International

Experience:
The European
Union
Presented by:
History of the EU

Pre-1945: Pre-WWII Europe


Concept of an unified European State developed

1923: Pan-Europa Movement

1951: Treaty of Paris


Created the European Coal and Steel Community

1957: Treaty of Rome


Established the EEC and Euratom
History of the EU

July 1967: Merger Treaty


Created the European Communities
Jan 1973: Enlargement of the
European Union

Jan 1981: Greece becomes a Member


State

Jan 1986: Spain and Portugal join


History of the EU

1987: Turkey formally applies for


accession

1992: Maastricht Treaty


Established the European Union

May 1992: Switzerland accession


halted

Mar 1994: Accession negotiations


Adds Austria, Sweden, Finland and Norway
History of the EU

1994: European elections


1990s: The Euro
Further development of currency
2000: Treaty of Lisbon
May 2004: 25 total Member States
Czech Republic, Hungary, Poland, Slovakia, Estonia,
Latvia, Lithuania, Slovenia, Cyprus and Malta
Jan 2007: Bulgaria and Romania join EU
EU Entry Requirements
• Treaty of Maastricht
– Set geographic criteria
• Copenhagen Criteria
– Political
– Economic
– Legislative
• Framework for
candidate
negotiations
– Specific conditions
– EU “absorption
capacity”
The EU Mission
• Not in the Constitution
• Outlines where European
level action is needed
• 9 Points
Mission Statement
1. Guarantees peace, freedom &
security in and around Europe
2. Promotes & protects democracy
and universal rights in Europe
and around the world
3. Strengthens Europe's economy,
promoting solidarity by working
with national, regional and local
government
Mission Statement (cont’d)
4. Makes it easy for
Europe's citizens to
live and work
throughout the Union
5. Promotes equality and
tolerance of diversity
6. Promotes and
facilitates cooperation
between Europeans
Mission Statement (cont’d)

7. Protects Europe's environment

8. Ensures that Europe's voice is


heard in the world
9. Listen to citizens, becoming
accountable and working for
them in a transparent and
decentralized way
EU Political System
• The EU decision making process and co-
decision procedure involves:
– European Parliament
– Council of the European Union
– European Commission
EU Political System (cont’d)

• EU President
• EU Commission
• EU Parliament
• European Court of
Justice
• EU Directives
Advantages of the EU
• Vary country to country
• Prevent war
• Trade growth and reduced
transaction costs
• Greater employment
opportunities
• Structural funds
– Regional ERDF
– Single National Program
Disadvantages of The EU
• Expansion threatens
internal strength
• Farming subsidies
• Language Barriers
Economy of the European
Union
• General Background
– GDP: 14.96 trillion*
– Labor Force: 224.6 million*
– Largest exporter of goods
– Second largest importer of goods
• Main goals:
– Strengthen trade position
– Bolster political and economic power
• Operates under a competition policy

*2008 statistics
Currency: Euro
• Goals of single currency:
– Build a single financial market
– Represent a political symbol of integration
– Bring more jobs and prosperity to Europeans
• The euro area
– Member States using the euro
– Criteria for adoption
– Who is already in the euro area?
– European Central Bank
• All cash transactions in euros by January
2002
Economic and Monetary Union
(EMU)
• Founded in 1957
• Purposes
– Better functioning economy
– Improving prosperity and job market
• Framework for cooperation on monetary
and economic policy
• All EU countries are members of the EMU
– Responsibilities divided between Member
States and Institutions
Economic and Monetary Union
(cont’d)
• 3 stages coordinating economic policy
– Stage 1: Abolished capital movement
restrictions between Member States
(1990-1994)
– Stage 2: EMI and ECB established (1994-
1999)
– Stage 3: Exchange rates fixed (1999-
)
Benefits of the Euro
• Business
– Increased competition for consumers, no
exchange rate transaction costs
• Citizens
– Price transparency, low interest rates
encouraging investment
• Macroeconomy
– Price stability, low inflation
• Political
– Prominent position in the global economy,
milestone step in European integration
• Global
– Greater ease of international trade, enhanced
stability
EU Budget
2009

Source: European Commission Online


Current State of EU Economy

Source: Bloomberg News, Feb 2009


International Relations:
Globalization
• New members coming from less
developed economies
– Healthy State finances
– Expected to provide above average growth
• Reduced transportation and
communication costs
– Facilitating global trade
• Population growth and opening of
economies
– Supply of cheap labor
International Relations:
Service Centers
• Growing importance of shared
service centers
– Especially for US firms
• Tend to be located in EU
member states with
particularly favorable taxation
Relationship with the United
States
• Mature economic relationship
– Massive two-way trade
– Extensive investment relationship
• Beneficial developments in EU:
– Increase in the Euro Zone in January 2008
• Addition of Cyprus and Malta
• 15 countries currently using the Euro
– Framework for Advancing Transatlantic
Economic Integration
• Signed at 2007 US-EU Summit
Selling Products in the EU
• Franchising
– Franchise market is quite
robust
– Friendly to franchise
systems in general
– Laws governing the
operation of
franchises
• Fairly broad
• Generally do not constrain
non-member businesses

Export presentation by country


Selling Products in the EU
(cont’d)
• Direct Marketing
– Affected by wide range of EU legislation
– Focus on clarity and completeness of consumer
information and customer data
• Direct Marketing Over the Internet
– The E-commerce Directive imposes
requirements
• E-commerce Directive
– Promotional offers must not mislead customers
in easily accessible and clear terms
– Marketing e-mails must be identified as such to
the recipient
– Companies targeting customers online must
regularly consult national opt-out registers list
Selling Products in the EU
(cont’d)
• Distance Selling
– EU’s Directive on distance selling
– Number of obligations for companies doing
business at a distance
• Direct marketers
– Must provide clear information before a
contract is concluded
• Their identity
• Identity of suppliers
• Prices including delivery costs
• Period for which an offer remains
Leading Sectors for US Exports
• Agricultural Sector
– Fourth largest US export market
– Trade balance favors EU
– Main US products imported
• Tree nuts
• Soybeans
• Seafood
• Tobacco
– High value consumer-oriented food product
Leading Sectors for US Exports
(cont’d)
• FY2007 agriculture stats
– US/EU bilateral trade: $27.1 billion
– Agricultural trade balance
• EU: $16.7 billion
• US: $10.4 billion
– US exports: Up 11%
• US soybean exports: up 87%
Leading Sectors for US Export
(cont’d)
• Trends in EU Agriculture
– Demand for greater convenience
– More openness to non traditional foods
– Growing interest in health foods
• Organics
• Water
• Niche markets
Leading Sectors for US Export
(cont’d)
• Commercial Sector
– US high end technology
• Demand for quality &
performance
• Less focus on price
– EU market is differentiated
by Member States
• Supply
• Distribution
• Demand
• Culture
• Legal characteristics
Differentiated EU Market
• Each Member State merits individual
attention
• US Embassy Country Commercial Guide
– Provides “Best Practices” by Country
• Showcase Europe
– Gives perspective on European market
– Organized around leading commercial sectors
EU Openness to Foreign
Investment
• One of the most hospitable climates for US
business
• EU Treaty Article 43
– Member States must provide “national
treatment” to other Member States
– Creates “four freedoms” for movement
• Capital
• Labor
• Goods
• persons
Conclusions
• Unification promoted global business
– Common currency facilitates trade
– Market environment aids US foreign
investment
• Current economic situation harder to
manage