Competition Policy and a Single European Market - Research Paper Example

European business Grade: (15, 05, 2009) Topic Competition inside EU Introduction Competition policy is used in reference to steps whose intention is the protection and promotion of competition. Competition policy is achieved when firms are prevented from colluding, as well as by ensuring that firms do not also obtain too much market power (Pestieau 2006). Competition policy is necessary especially when competition could be seen as being feasible or undesirable (for instance when we have a natural monopoly). Competition policy could be seen as a balancing as it seeks to ensure a level playing field in the market. Competition inside EU Within the EU, competition policy is important, as it helps avert competition at the level of the EU. In addition, it also helps the member countries to be integrationists, with the result that a level playing field for the establishment of a Single European Market (SEM). Moreover, it also avoids power concentration to specific member countries. Competition policy has also been seen to help the industries in the EU to become more efficient, in their quest to offer products that competes effectively in the global market (Motta 2004). Besides, there is also the issue of overcoming practices of price fixing through formation of cartels, like was the case between Virgin Atlantic and British Airways. Cases of businesses collusion are also common, while other tend to misuse the dominant position. A case in point would be Microsoft restricting competition in the software market for PCs. On the one hand, competition policy may be seen as a balancing act, in the sense that the EU feels obliged to provide equal trade opportunities to a free market. This way, each and every player get a fair chance, with the result that mergers and monopolies gets broken, thus paving way for fair competition (Pestieau 2006). On the other hand, the competition policy may not be touted as a balancing act. This is because the EU is duty bound to ensure that there is an economies of scale within the industry. What this means is that industries ought to be efficient enough so as to compete globally. Topic 2: CEECs and EMU Introduction Being a member of the European EMU (Economic and Monetary Union) may be defined on the basis of four aspects. First, the members are defined by a single currency. Secondly, they not only enjoy a common monetary policy, they also share similar interest rates. Then there is the issue of budget deficit limits, which in this case has been set at 3 percent of a member country's GDP. Finally, members enjoy a capital; market integration. CEECs and EMU Talk has been rife that CEECs (Central and Eastern European Countries) may enlist for membership of EMU. However, there are a few elements that hinder such a move. These countries are poor, with low wage and income earner. They have low populations, and their economy may at best be said to be transitory. In addition, they are also industrially different, relative to the EMU countries. In the event that the CEECs become EMU members, Chances are that price, wage and cost transpparence of industrial products may be experienced (Oudenaren 2005). In addition, there will no longer be market barrier that exist between EMU members and non-EMU members (Ackerman 2006). This in effect will lead to an expanded market to East and Central Europe. Moreover, more competition, especially in terms of price may be expected. This is because the CEECs have readily available cheap labour. Without doubt, the idea of CEECs joining EMU shall have far reaching repercussions. For starters, we might very well witness a rise in migration to west EU, because of the availability of better paying jobs and living conditions. On the other hand ,the risk of doing business could as well increase, because of the industrial differences in doing business between on the one hand, the CEECs and on the other hand, the countries in west EU (Oudenaren 2005). An asymmetric shock might also occur, owing to the huge difference between the economies in who are EMU members and the CEECs. This could prove to be a problem for policy makers when setting a common currency, in addition to interest rate setting. Topic 3: EU labour Introduction Labour market refers to that market that allows workers and employees to compete for employers and jibs respectively, while social policy has to do with rules for maintenance, changing or creation of condition of living that are in line with the welfare of mankind. With regard to the issue of flexibility in the labour market two views may be said to be in contrast. The Anglo-Saxon approach assists in maintenance of flexibility within the labour market, effectively reducing unskilled labour price by way of limiting social support cost (Ackerman 2000). The flexible specialization approach on the other hand helps bring skill and flexibility into the labour market by dividing it into a time-flexible portion, and one that is skill-flexible. EU labor For the last 30 years three principle stylized facts may be said to have impacted on the issue of unemployment. The US labor market may be said to have undergone cycle reversion from unemployment to employment, while the UK may be said to have experienced a steady reversion. On the other hand, the situation in the EU could be said to be that of an upward ratchet. This is often characterized by slowed economic activities, a drop in prices of real estate, and an eventual low labor demand. Economists have been quick to heap the blame of bad unemployment performance cost of hiring and firing, high minimum wages and elevated benefits for the unemployed. According to the EU policy responsibility on the issue of unemployment, there is a need to liberalize hiring and firing. In addition, payments of high wages to the employed workforce assist in facing a crisis that may occur within the EU (Pranikar 2006). The aim of the policy therefore is to stop poverty-level wages from spreading, which is why the high unemployment benefits are justified. Conclusion The issue of competition policy is bound to have an impact on the EU, since it seeks to help in the establishment of a Single European Market (SEM) (Motta 2004). In addition, the incorporation of CEECs into the EMU membership also has its negative impacts on the rest of the EU countries from west Europe, because of the industrial differences between the two regions. With regard to the issue of labor differences, the main stylized facts that have been identified as being responsible for unemployment for the last thirty years includes a cycle reversion as witnessed in the US, a steady reversion in the UK, and an upward hatchet situation in the EU. Bibliography Ackerman, F, 2000, The political economy of inequality Washington, D. C.: Island press Motta, M, 2004, Competition policy: theory and practice. Cambridge: Cambridge University Press Oudenaren, J. V, 2005, Uniting Europe: an introduction to the European Union. Lanham, MD: Rowman & Littlefield Pestieau, P, 2006, The welfare state in the European Union: economic and social perspectives. Oxford: Oxford University Press. Pranikar, J, 2006, Competitiveness, social responsibility and economic growth New York: NOVA Publishers Read More