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Enlargement Of The European Union (Eu): The Implications For Business

1840 words - 7 pages

There has been much debate surrounding the subject of Enlargement with regards to the European Union (EU) due to the political, institutional, cultural and economic factors that are involved. This essay looks at the way in which businesses from EU-15 countries have been able to exploit the increased number of consumers, the possibility of relocation for lower production and labour costs and the cross-border supply chains. There will also be focus on how the liberalisation, migration of labour and integration of markets for goods, services and capital has affected business.

In recent years the enlargement of the European Union has become a highly discussed subject. Much of the discussion was centred around the possible new business opportunities that would arise in the new EU Member States for businesses in the ‘old’ EU Member States. It was believed that a consequence of the enlargement would be that the economic environment for Businesses would improve. This is due to the fact that by removing the barriers to the flow of goods, capital, services and labour, new market opportunities for business could arise.

In 1999, mergers and acquisitions involving international groups totalled $16.86bn, almost twice the figure of 1998 (Wagstyl 2000). It is no wonder that it is now much more difficult to distinguish CEE and EU countries by their regional trade structure. The change in the geographic composition of trade toward the EU was fast and sizable (EBRD 1999). Estonia’s share of exports to the EU is not as high as that of Hungary and Greece and the Czech Republic source a share equivalent to France’s of their imports from the EU (Fidrmuc, Wörgötter, and Wörz 1999). In terms of the depth of economic integration, through the 1990’s the share of candidate intra-industry trade with the EU has risen. There is also much evidence for production disintegration, which has become a standard feature of the world economy.

Recent research at the World Bank into East-West trade in parts and components -- the fastest growing share of world trade -- shows that the EU has become a hub for most CEE countries, especially in automotive supplies, office machinery and equipment, and telecommunications (Kaminski and Ng, 1999). In these and most other sectors, the exports of parts from and the imports of parts to, CEE countries grow faster than trade in manufactures in general. It appears then, that eastern firms are being used by western firms as both component suppliers and as final assemblers. As a result, CEE countries now have an emerging IT industry and a highly competitive automotive (supply) industry (in the, Slovakia, Slovenia, Czech Republic, Hungary and Poland) and an emerging IT industry (in Estonia and Hungary). It would seem then that business integration has proceeded relatively fast and far. It also means that academics have been proven wrong by businesses. The former worried about the wholly protectionist nature of the association...

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