eu fortress b
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INTERNATIONAL BUSINESSThe Emergence of EuropeanUnion Fortress
Issues and Challenges fromMalaysia firms/industries/policymakers perspectives
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Trading Blocs
a preferential economicarrangement among a group of
countries
member countries of the European Union
member countries of the NorthAmerican Free Trade Agreement
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Levels of Economic Integration
The Free Trade Area
The Customs Union
The Common Market
The Economic Union
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Definition
Agreement between two or more (usuallyneighb
oring) countries to remove trade barriers,
and reduce or eliminatecustoms dutyonmutualtrade. A customsunion
(unlike a free trade area)generally imposes a common external-tariff (CTF)on imports
from non-member countries and (unlikea common market) generally does not allowfree
movement of capital and labor among membercountries.
http://www.businessdictionary.com/definition/agreement.htmlhttp://www.businessdictionary.com/definition/country.htmlhttp://www.businessdictionary.com/definition/trade-barrier.htmlhttp://www.investorwords.com/10842/reduce.htmlhttp://www.investorwords.com/10842/reduce.htmlhttp://www.businessdictionary.com/definition/country.htmlhttp://www.investorwords.com/9563/eliminate.htmlhttp://www.investorwords.com/9563/eliminate.htmlhttp://www.businessdictionary.com/definition/customs-duty.htmlhttp://www.businessdictionary.com/definition/customs-duty.htmlhttp://www.businessdictionary.com/definition/trade-barrier.htmlhttp://www.investorwords.com/9376/cut_down_on.htmlhttp://www.businessdictionary.com/definition/trade-barrier.htmlhttp://www.businessdictionary.com/definition/mutual.htmlhttp://www.businessdictionary.com/definition/trade-barrier.htmlhttp://www.businessdictionary.com/definition/trade.htmlhttp://www.businessdictionary.com/definition/trade.htmlhttp://www.investorwords.com/10842/reduce.htmlhttp://www.investorwords.com/1268/customs.htmlhttp://www.investorwords.com/1268/customs.htmlhttp://www.investorwords.com/1268/customs.htmlhttp://www.investorwords.com/9563/eliminate.htmlhttp://www.investorwords.com/5156/union.htmlhttp://www.investorwords.com/9563/eliminate.htmlhttp://www.businessdictionary.com/definition/customs-duty.htmlhttp://www.businessdictionary.com/definition/free-trade-area.htmlhttp://www.businessdictionary.com/definition/free-trade-area.htmlhttp://www.businessdictionary.com/definition/free-trade-area.htmlhttp://www.businessdictionary.com/definition/free-trade-area.htmlhttp://www.businessdictionary.com/definition/free-trade-area.htmlhttp://www.businessdictionary.com/definition/free-trade-area.htmlhttp://www.businessdictionary.com/definition/trade.htmlhttp://www.investorwords.com/1268/customs.htmlhttp://www.investorwords.com/2384/impose.htmlhttp://www.investorwords.com/2384/impose.htmlhttp://www.investorwords.com/5156/union.htmlhttp://www.businessdictionary.com/definition/common.htmlhttp://www.businessdictionary.com/definition/common.htmlhttp://www.businessdictionary.com/definition/common.htmlhttp://www.businessdictionary.com/definition/free-trade-area.htmlhttp://www.businessdictionary.com/definition/imports.htmlhttp://www.businessdictionary.com/definition/imports.htmlhttp://www.investorwords.com/2384/impose.htmlhttp://www.businessdictionary.com/definition/common.htmlhttp://www.businessdictionary.com/definition/common-market.htmlhttp://www.businessdictionary.com/definition/common-market.htmlhttp://www.businessdictionary.com/definition/common-market.htmlhttp://www.businessdictionary.com/definition/common-market.htmlhttp://www.investorwords.com/8807/allow.htmlhttp://www.businessdictionary.com/definition/free.htmlhttp://www.investorwords.com/3149/movement.htmlhttp://www.investorwords.com/3149/movement.htmlhttp://www.businessdictionary.com/definition/common-market.htmlhttp://www.businessdictionary.com/definition/capital.htmlhttp://www.businessdictionary.com/definition/capital.htmlhttp://www.businessdictionary.com/definition/labor.htmlhttp://www.investorwords.com/8807/allow.htmlhttp://www.businessdictionary.com/definition/free.htmlhttp://www.investorwords.com/3149/movement.htmlhttp://www.businessdictionary.com/definition/capital.htmlhttp://www.businessdictionary.com/definition/labor.htmlhttp://www.businessdictionary.com/definition/labor.htmlhttp://www.businessdictionary.com/definition/capital.htmlhttp://www.investorwords.com/3149/movement.htmlhttp://www.businessdictionary.com/definition/free.htmlhttp://www.investorwords.com/8807/allow.htmlhttp://www.businessdictionary.com/definition/common-market.htmlhttp://www.businessdictionary.com/definition/imports.htmlhttp://www.businessdictionary.com/definition/common.htmlhttp://www.investorwords.com/2384/impose.htmlhttp://www.businessdictionary.com/definition/free-trade-area.htmlhttp://www.investorwords.com/5156/union.htmlhttp://www.investorwords.com/1268/customs.htmlhttp://www.businessdictionary.com/definition/trade.htmlhttp://www.businessdictionary.com/definition/mutual.htmlhttp://www.investorwords.com/9376/cut_down_on.htmlhttp://www.businessdictionary.com/definition/customs-duty.htmlhttp://www.investorwords.com/9563/eliminate.htmlhttp://www.investorwords.com/10842/reduce.htmlhttp://www.businessdictionary.com/definition/trade-barrier.htmlhttp://www.businessdictionary.com/definition/country.htmlhttp://www.businessdictionary.com/definition/agreement.html -
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The Common Market
no trade barriers among member nations
no restriction on the movement of labor,
capital, or technology across borders
member countries establish common tariff
and trade barriers against nonmembercountries
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The Economic Union
has all the characteristics of a common market,and,
harmonizes monetary policies
harmonizes taxation
harmonizes government spending
establishes a common currency - the Euro
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Austria Belgium
Bulgaria
Cyprus
Czech Republic
Denmark Estonia
Finland
France
Germany
Greece Hungary
Ireland
Italy
Latvia
Lithuania
Members of European Union 27 countries
LuxemburgMaltaNetherlandsPolandPortugalRomaniaSlovakiaSloveniaSpanSwedenUnited Kingdom
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500 million citizens Generated nominal world gross product about
30% or equivalent to USD 18.4 trillion in 2008.
European Union 27 countries
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Purpose of EU:
two strategic economic goals for the years
to 2010
creating the most competitive and dynamic
knowledge-based economy and
Rapidly raising living standards in the 10
new EU countries.
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Implications of the Integrated
European Market:
Expected economic growth from:
Eliminating transaction costs
Economies of scale will be attained asproduction becomes concentrated
More intense competition from EUcompanies
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Implications of European
Integration:
Operations from one country can befreely expanded to other countries.
Products can be freely sold acrossborders to potentially 320 millionconsumers.
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Exports and imports of goods within the euroarea increased from about 26% of GDP in1998, the year before the adoption of thesingle currency, to around 32% in 2006.
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Fortress Europe May Develop!
Suspicion raised by trading partners of Europeclaims that the integration of the EU may result inincreased restrictions on trade and investment by
outsiders.
Protectionism -any policy that is intended to shield domestic industries from
import competition (Dolan and Lindsey, 1994, p. 826).
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Fortress Europe May Develop!
Internally the EU would have created a free andunified market; externally extensive tradebarriers would continue to discriminate against
non-membersIf such a Union were to emerge, it would be moreinward looking and, because of its size andpotential for increasing intra-regional trade,
relatively isolated from the world trading system.
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the EU has lowered tariffs on a wide range of
manufactured goods in accordance with the
General Agreement on Tariffs and Trade (GATT)-
negotiated reductions.
Both GATT and the World Bank confirm theincreasing use of non tariff barriers (NTBs) by the
EU as part of a global trend known as the new
protectionism
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According to the World Bank, non-tariff
protection has been increasing much faster in the
EU than in other developed areas and by 1986
over half of EU imports were affected by NTBs.
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The GATT review of EC trade policy reveals the
nature and extent of EU protectionism.
The review confirms that while tariff barriers have
come down, a more extensive although less
conspicuous web of protection has been created bythe increasing use of NTBs.
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Non Tariff Barriers (NTBs).
Antidumping Laws.
Voluntary Export Restraints (VERs)
Buy European
User Protection Environmental Protection
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Anti-dumping laws
These enactments punish foreign producers for selling
their goods in the EU (or other countries) for less than the
cost of production,or for less than they sell in other
markets.
antidumping duties are allowed under WTO ruleswhen there is material injury or threatened injury to acompeting domestic industry from sales by anexporter made at unfairly low prices.
EU is among the top five heavy user of antidumpingduties.
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Antidumping
WTOs statistic shown from 1980 to 1988 EU
initiated 303 antidumping investigationagainst other countries.
Imposed 193 definitive antidumpingmeasures
Over 30% of total number of EU antidumping
cases are initiated against East Asiancountries.
EU antidumping investigations against EastAsian countries decreased substantially from
60% in 1991 to 11 % in 2001.
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The share of EU antidumping investigation
targeting East Asian Countries (1991-2003)
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Quotas,
sometimes take the form of voluntary restraint
agreements. The problem with voluntary
restraint agreements is that they are not voluntary.
Kept Japanese car sales in Western Europecapped at 10 to 15 percent of themarket.(from 1993 to 1999)
Various quota restrictions limit the amount of
foreign textiles, ice cream, cheese and numerous
other products that can enter the EU (Bovard,
1991).
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Buy European
clauses which give preference to Europeanbids, so long as they are not more than 3 per
cent more expensive than the bids from thirdcountries
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Data Protection Legislation Directive (DPL) -1995
The effect of this Directive on the business ofMNCs is still unknown but a few authors foresee
major problems for MNCs doing business inEurope.
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User Protection
EU has a very strict regulation in importingthe foods, electrical home appliance, toys andothers to protect the users in EU
Example:
Toy must have safety feature to protect thechild and does not consist of toxic element on
the surface of the toy. All the electrical home appliance must obtain
EC licenses
(Product Safety requirement)
http://product%20safety.ppt/http://product%20safety.ppt/ -
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Environmental Protection
No PVC in the packaging
Encouraging the recyclable material
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Carbon Border Taxes
A looming issue is the potential imposition ofcarbon border taxes on some imports. These
would compensate for the disadvantage ofdomestic producers that are subject to taxeson their carbon emissions when their foreigncompetitors are not.
France favors such action.
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Group 1 Investment Protectionism
Traditional old fashioned protectionism
preventing, in particular, the acquisition of
land by foreigners. Austria, Poland, Romania.
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Group 2 - Investment Protectionism
Security protectionism preventing acquisitionsof defense related companies
The Czech Republic (military weapons),France (military weapons, nuclear energy,private security services, encryptiontechnology), Germany (military weapons,encryption technology, operation of certainsatellites),
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Group 3 - Investment Protectionism
Legislation preventing acquisition in otherstrategic industries.
This group includes industries which are notdirectly relevant for security purposes butwhich are regarded in the respectivecountries as being of specific nationalimportance.
Energy (Italy, Ukraine, Spain),pharmaceuticals industry,(Romania, France)
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Group 4 - Investment Protectionism
Legislation preventing acquisition in industries to protect thepublic interest.
Industries are protected due to fear of foreign political influence
or to protect citizens against the dangers of gambling.
The broadcasting industry is protected in certain countries(Austria, Poland, Slovak Republic, Ukraine)
foreign investment in the lottery and gambling industry requirespublic consent in several countries (Czech Republic,France,
Poland, Romania, Slovak Republic).
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Group 5 - Investment Protectionism
No discrimination by law. The UnitedKingdom and the Netherlands do not havespecific rules preventing the acquisition of
shares or assets by foreigners. Nevertheless, those( and other) countries
have regulations in certain sectors thatrequire the consent of the regulator if there is
any change of control or, sometimes, asubstantial investment by a third party.
In the UK, the government could generally
intervene in cases of national security.
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Economic Links between EU & ASEAN
Relatively weak as compare to US andJapan.
Is getting more important due to economydiversification of ASEAN countries
-- by Dent. Christopher M
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EU Stake in ASEAN
ASEAN has become an increasingimportant economic partner for EU
ASEANs share of extra-EU imports risingfrom 2.4% in 1983 to 6.5% by 1996.
Share of extra-EU exports rose from 3.1%
to 6.4%
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EU Stake in ASEAN
As the techno-industrial capabilities ofcertain Southeast Asian producers have
increasingly approached their Europeancounterparts, EU deploy defensivemeasure to prevent the competition in EU.
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Market Access and Competition
Due to strict regulation, the Asian exporterfound difficult to access the EU market.
The strict safety regulation also cause theproduct cost increase and consequently lowerthe competitiveness of Asian products
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Seafood Malaysia to EU
European Union (EU) worked in closecollaboration with Malaysia's HealthMinistry, Agriculture and Agro-Based
Industries Ministry and MalaysianFisheries Development Board toimplement measures to address thefood safety management and hygiene
issues to comply with the EU'srequirements.
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Challenges and Issues to do business with EU
Marketing strategy
Firms need to active in publishing promotional
literature (catalogues, price lists, product information,etc.) in European business journals and in Europeanlanguages.
They need also to be more inclined to exhibit at
international trade fairs and receive visits fromEuropean customers
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Challenges and Issues to do business with EU
Product development strategy
Firms were modifying their products to take account
of European standards and technical regulations
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Challenges and Issues to do business with EU
Market position strengthening and staffrecruitment and development strategy
This was a combination of the two previous strategieswith additional emphasis on the recruitment anddevelopment of staff to deal effectively in theEuropean trading environment
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Challenges and Issues to do business with EU
Short-term structural investment and stafftraining strategy
Training of staff regarding European standards andtechnical regulations together with the internalreorganization or rationalizations of its activity
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Challenges and Issues to do business with EU
Collaborative distribution strategy
The establishment of a joint collaborative/
partnership/co-operative agreement with anotherorganization in order to distribute each others output
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Challenges and Issues to do business with EU
Long-term structural investment strategy
Internal rationalization and reorganization with the
emphasis on investment in new plant and machinery
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Challenges and Issues to do business with EU
Knowledge acquisition strategy
Pay for advice on a consultancy basis or take advice
from a trade association or professional body on atleast some aspects of the Single Market
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TheEnd