European Union

European Union

business_square2

Key Learning Outcomes


  1. Identify the impact of the EU on Irish business.
  1. Outline the roles of the main EU institutions.
  1. Explain the decision-making (legislative) process in the EU
  1. Explain the purpose of the EU directives and regulations.
  1. Explain the purpose of the main EU policies and their impact on Irish business.
  1. Outline the role of the special interest groups in the EU decision-making process.

Introduction: The European Union


1. What is the size and scope of the European Union (EU)?eu-symbol

The European Union is an economic and political union between 28 European countries that together cover much of the continent. It began in 1957 with 6 members as the European Economic Community (EEC), a purely economic union but evolved into the European Union (EU) in 1993 an organisation spanning many other policy areas, climate change, environment, health, external relations, security, justice and migration. Britain has decided to leave the EU (Brexit), negotiations on a deal on its withdrawal are likely to begin in 2017 and are required to be concluded by 2019 under Article 50 of a EU Treaty (Lisbon). This will have major implications for Irish business as Britain’s share of Irish exports is 37%.

2. Discuss the impact of the European Union (EU) on Irish business?

(a) Trade: The EU eliminates trade barriers within the EU, allowing Irish business’ free movement of goods, services and capital with other member states. Irish businesses benefit from economies of scale as they have access to the very large EU market of over 510 million people (446 million people after Brexit).

(b) Free movement of people: European citizens are allowed to move freely between member states. This may lead to competition for local jobs by non-nationals and scarcity of skilled staff in Ireland as they may move to other countries.

(c) Common external tariffs: The EU has a common system of barriers on goods imported from outside the EU. This protects Irish industry.

(d) Market access: As a member of the EU with open access to the EU market and the Euro currency the Irish economy is a very attractive location for foreign direct investment (FDI), thereby creating employment and business opportunities.

(e) Support: The EU provides a range of supports across a number of different sectors including support for Irish agriculture under the EU Common Agriculture Policy, support for Irish roads and public transport infrastructure under the European Regional Development Fund and the European Cohesion Fund, support for renewable energy under EU’s environmental directives and Irish researchers have benefited significantly from funding available under EU framework programmes.

3. Explain the role of the main institutions within the European Union (EU)?

eu-institutions

  • The European Parliament is directly elected by EU voters every five years; it has 751 members (MEP). The number of MEPs for each country is roughly proportionate to its population; no country can have fewer than six or more than 96 MEPs. The European Parliament decides on EU laws and establishes the EU budget, together with the Council of the EU. It has co-decision powers (joint law making powers), that is, it is on an equal footing with the Council in the vast majority of areas. In a limited number of cases its role is advisory only (consultation), this special legislative procedure is now only used in areas such as internal market exemptions and competition law. It elects the Commission President and approves the Commission as a group.
  • The Council of the EU: There are 28 Council members. Government ministers from each EU country meet to discuss, amend and adopt laws, and coordinate policies. There is no fixed membership of the EU Council. Government ministers present depend on the policy area (topic) being discussed for example, when discussing agricultural policy the Council is formed by the twenty-eight national agricultural ministers. Together with the European Parliament, the Council is the main decision-making body of the EU. The Council coordinates EU countries’ policies, develops the EU’s foreign and security policy, concludes agreements between the EU and other countries or international organisations and adopts the annual EU budget – jointly with the European Parliament.
  • The European Commission is the EU’s politically independent executive (management) arm. It alone is responsible for drawing up proposals for new European legislation, and it implements the decisions of the European Parliament and the Council of the EU. There are 28 Commissioners (one from each EU country), led by the Commission President, who decides who is responsible for which policy area. The day-to-day running of Commission business is performed by its staff organised into departments, with each responsible for a specific policy area. The Commission has a duty to ensure the treaties and laws are upheld, potentially by taking member states or other institutions to the Court of Justice in a dispute. In this role it is known as the “guardian of the treaties”.

4. Describe the decision-making process in the European Union (EU)?

All three main institutions are involved in EU legislation. In principle, the Commission proposes new laws, and the Parliament and Council of the EU adopt them.

In most areas the ordinary legislative procedure applies meaning both the Council of EU and Parliament share legislative and budgetary powers equally; they have co-decision i.e. both have to agree for a proposal to pass. In a few limited areas the Council of the EU may decide having consulted with the Parliament for example, internal market exemptions and competition law (called special legislative procedure).

The Commission and the member countries then implement the laws, and the Commission ensures that the laws are properly applied and implemented.

The Court of Justice of the EU interprets European law.

5. Distinguish between an EU regulation and directive?

  • A regulation is a binding legislative act. It must be applied in its entirety across the EU. It takes precedence over national law. It is self-executing and does not require any implementing measures. For example, when the EU wanted to make sure that there were common safeguards on goods imported from outside the EU, they used a regulation.
  • A directive is a legislative act that sets out a goal that all EU countries must achieve within a certain time limit. However, it is up to the individual countries to devise their own laws on how to reach this goal. It is binding only as to the results to be achieved, leaving member states to choose the means by which the rules and targets are to be attained. Examples of directives include the Product Safety Standards Directive, WEEE (Waste, electrical, electronic equipment Directive) and the Health and Safety at Work Directive.

6. Discuss the impact of the main European Union (EU) Policies?

eu-common

Policies set out a common approach that has been agreed by all member states. The following are the main policies that impact on Irish business.

(a) Common Agricultural Policy (CAP) – The EU farm policy:

– Ensures that farmers produce sufficient quantities of food for Europe and that this food is safe (for example through traceability).

– Provides farmers with income supports, protects them from excessive price volatility and market crises and helps them invest in modernising their farms.

– Sustains viable rural communities, with diverse economies and creates and maintains jobs in the food industry.

EU farm policy has evolved considerably in recent decades to help farmers face new challenges, and in response to changing public attitudes. Successive reforms mean that farmers now base their production decisions on market demand, rather than on decisions taken in Brussels.

(b)  Common Fisheries Policy (CFP). The CFP secures fishermen’s livelihoods, while stopping overfishing and the consequent depletion of stocks. The EU fishing industry is the world’s fourth largest, supplying some 6.4 million tonnes of fish each year. Fishing and fish processing provide jobs for over 350,000 people. The EU makes every effort to ensure fishing is sustainable – both economically and environmentally – while protecting consumers’ interests and taking fishermen’s needs into account. The policy is underpinned by a European Maritime and Fisheries Fund. This finances projects designed to introduce innovative fishing techniques, create new outlets for seafood and improve the quality of life in coastal areas.

(c) Competition Policy. The EU Competition Policy ensures the best chance for the Irish consumer of getting quality goods and services through suppliers competing for the business, i.e. the existence of competition among suppliers. The EU’s rules on competition are designed to ensure fair and equal conditions for businesses, while leaving space for innovation, unified standards, and the development of small businesses. Under EU rules, businesses cannot fix prices or carve up markets amongst themselves or abuse a dominant position in a particular market to squeeze out smaller competitors and merge –if doing so would put them in a position to control the market. The Commission also monitors how much assistance EU governments give to businesses (‘state aid’), for example: loans and grants, tax breaks. The risk with such assistance is that it may favour well-connected vested interests, at the expense of those who compete on their own merits.

(d) Social Policy/Charter: The EU Social Charter sets out fundamental social rights of workers. These include the following:                                  

  • Free movement of Labour. Workers have the right to migrate freely which benefits employers in terms of recruitment and selection.
  • Employees have the right to a fair wage. The establishment of the minimum wage level has increased costs for business.
  • A commitment to vocational training through grant aid directly to trainees has greatly up-skilled the labour force and made it easier to have qualifications formally recognised across the EU benefiting Irish businesses.
  • Health protection and safety at work elements to the charter have forced employers to improve health and safety conditions in the work place.
  • There are EU laws to limit working hours, tackle workplace discrimination, make working conditions safer and ensure employees receive compensation for work injuries.

(e) Economic and Monetary Union (EMU): All EU member countries (whether inside or outside the euro) are part of the economic and monetary union (EMU), a framework for economic cooperation designed to promote job creation and sustainable growth. The two main elements are the single currency (Euro) and the Stability and Growth Pack (SGP).

  • The Euro: Used by 19 countries, almost 340 million EU citizens, the single currency benefits everybody. People no longer need to change money when travelling or doing business within the euro area, thereby saving time and transaction costs.
  • Stability and Growth Pact (SGP): This places greater emphasis on reducing high levels of government debt. SGP enforces fiscal (tax and spending) rules and includes penalties for euro-zone area countries that breach fiscal rules.

7. Explain the role of Special Interest Groups in the decision making process of the European Union (EU)?

The EU institutions interact with a wide range of groups and organisations representing specific interests. This is a legitimate and necessary part of the decision-making process to make sure that EU policies reflect citizens’ real needs.When the EU Commission starts working on a new policy initiative or revises existing legislation, it usually opens a public consultation. Individuals, businesses and other organisations with an interest in or expert knowledge on a given topic can help shape the Commission’s draft proposal before it goes to the Council and European Parliament for discussion and adoption. EU citizens and residents, as well as companies and other organisations in the EU may petition Parliament on issues related to EU policy that affect them.

Methods employed by special interest groups include lobbying, information campaigns and public protests in an attempt to influence EU decision making. Some special interest groups have permanent offices in Brussels, Strasburg and Frankfurt. For example:

The Irish Business Employer Confederation (IBEC), Irish Congress of Trade Unions (ICTU) try to influence EU decision making and policy in relation to employment, the minimum wage and the EU social charter.

The Irish Farmers Association (IFA) engaged in intense lobbying in Brussels to obtain greater flexibility on milk quotas in advance of their 2015 abolition.

Banking and Payment Federation Ireland (BPFI) through their Brussels and Frankfurt based offices are well placed to represent Ireland’s banking and payments industry at EU level.

Exam Q&A


Question 1

Read the information supplied and answer the questions which follow.
The Chief Executive of Enterprise Ireland, Julie Sinnamon, stated that the best response to Brexit (Britain’s exit from the EU) was for exporters to continue diversifying into other markets. Britain’s share of Irish exports has fallen from 43% to 37% in the last ten years.

Irish Times Brexit Summit November 2016

(A)

Discuss the benefits for the Irish Economy of on-going membership of the European Union (EU) after Brexit.

Sample Answer (A)

  • The continued existence of the Single Market eliminates trade barriers within the EU, thereby allowing for the free movement of Irish goods, services, labour and capital with other member states (27 countries after Brexit).
  • Economies of scale will still be possible for Irish business as a result of the size of the EU market. The 27 countries of the EU, after Brexit, would have a population of 446 million.
  • Irish Farmers, under the Common Agricultural Policy (CAP), will continue to have access to income support measures. Between1973 and 2008, Irish farmers received €44 billion from the CAP. The Common Agricultural Policy (CAP) will sustain viable rural communities, with diverse economies and create and maintain jobs in the food industry.
  • Structural funds of over €17 billion have been made available to Ireland from the European Regional Development Fund and the European Cohesion Fund helping improve roads and public transport infrastructure. This type of EU funding will continue to be available to Ireland.
  • As a member of the EU with open access to the 27 markets of 27 EU countries after Brexit the Irish economy will still be an attractive prospect for foreign direct investment (FDI), thereby creating employment opportunities. The value of FDI in Ireland stands at over €30 billion today.
  • The single currency will continue to bring incentives for foreign investors to locate in Ireland, along with relative price stability unlike sterling. The euro has made life easier for Irish businesses and travellers trading or visiting in the euro zone.

(B)

Explain how legislation is formulated and implemented within the European Union (EU).

Sample Answer (B)

  • The European Commission is the executive body of the EU. It is the body responsible for proposing legislation/drafting legislation.
  • In most areas the ordinary legislative procedure applies meaning both the Council of the EU and Parliament share legislative equally, co-decision, both have to agree for a proposal to pass.
  • In a few limited areas the Council of the EU is the main decision making body of the EU having consulted with the Parliament. This procedure is now applicable in a limited number of legislative areas, such as internal market exemptions and competition law.
  • Once legislation is passed by the Council of the EU and Parliament it is the Commission’s responsibility to ensure it is implemented through a series of directives and regulations.
  • EU Directive: It obliges member states to change their national laws to allow for EU rules, within a certain time limit.  It is binding only as to the results to be achieved, leaving member states to choose, within prescribed limits, the means by which the rules and targets are to be attained.
  • EU Regulation: This is a legislative act of the EU which becomes enforceable immediately as law in its entirety in all member states simultaneously.  It takes precedence over national law. It is self-executing and does not require any implementing measures.


Student Activity


Question 

Q1 List three benefits of EU membership to Irish Business.

(i)

(ii)

(iii)

Q2 In the context of EU, what do the following letters stand for? Write your answers in the spaces provided.

CAP
MEP
EMU
SGP
CFP
Q3 Distinguish between a ‘Directive’ and a ‘Regulation’ as legislative instruments within the EU

Directive
Regulation
Q4 Explain the role of the following EU Institutions.

European Commission
Council of the EU
European Parliament
Q5 (a)Name two examples of EU Interest Groups.

(i)

(ii)

(b) Interest Groups influence EU decisions by:

(i)

(ii)

Q6 Column 1 is a list of EU terms. Column 2 is a list of possible explanations of these terms.

Column 1: Terms Column 2: Explanations
1. European Parliament A. Draws up proposals for new EU law.
2. European Commission B. Made up of government ministers from each EU member state.
3. Euro-Zone C. Ensures the EU budget is spent efficiently
4. A Trading Bloc D. EU countries that have replaced their national currencies with the Euro.
5. Council of the European Union E. A group of countries that agree to have free trade between themselves and common external tariffs.
F. Directly elected by EU citizens.

Match the two lists by placing the letter of the correct explanation under the relevant number below:

1 2 3 4 5
Q7 (a) What is Brexit?

 

(b) Outline two challenges facing Irish Business as a result of Brexit

 

 

Q8 Outline the main points of the following EU policies:

Common Agricultural Policy
Economic and Monetary Union
Competition Policy