Advantages and disadvantages of the EU

Advantages and disadvantages of the EU

1. Existing member states

   • Comparative advantages of new states
     • Central European location
     • Lower wage costs
     • Cheaper unit labour costs
     • Lower land prices
     • Attractive tax regime
     • Success of inward innovation
   • Concerns
     • Extra budgetary costs for the EU
     • Issues of new members meeting stricter regulatory standards
     • Social concerns from immigration
     • Objective 1 regions lose some of their funding
       • Spain
       • Greece
       • Portugal

2. Joining member states

   • Membership of the EU single market
     • Trade
       • Exploiting comparative advantage to increase trade
     • Investment
       • Free movement of capital - looking for the highest return
       • Inward investment to aid transformation of national infrastructure - impact on a country's LRAS / trend growth
     • Competition
       • More competition - boost to labour productivity
       • Dynamic efficiency gains from faster pace of innovation
   • Financial support
     • Net recipients of income
       • Common Agricultural Policy
       • EU structural funds
       • Much will help finance investments
   • Macroeconomic advantages
     • Reduced exchange rate volatility
       • Slovenia 2007
       • Cyprus and Malta 2008
       • Slovakia 2009

3. General

   • Benefits
     • Exploitation of economies of scale
     • More competitive outside the union
     • Lower labour costs and more productivity
     • Cleaner environment
     • Wider access to raw materials
   • Costs
     • Less flexibility
     • Higher interdependency
     • Regulation and beurocracy
     • Net contributions
     • Wage compression