Question

Section 1 European Policy

1. EU Competition policy is out to ensure no organisation has unfair advantage over another. Cite the economic rationale behind this and discuss the benefits of free trade competition.

2. Increased tension in the Middle East is resulting in military aggression. What role, if any, should the EU play? Critically discuss both positive and negative aspects of an EU response.

3. How has the advent of the Single European Market affected the process of European Integration?

Answer 1

The EU Competition policy is designed to ensure fair and equal conditions for businesses. The main areas it focuses on are anti-trust regulation, mergers, cartels, and state aid. Business with a dominant market position must not abuse their position in such a way which adversely effects trade between member states. In cases of mergers, if the combined turnover of the firms exceed a threshold value, the merger might be reviewed by the European Commission.

The European Competition policy has made cartels illegal in the EU. It also prohibits its member states from giving unfair advantage to its industries, like subsidies for various sectors. The rationale behind these rules are to make sure that all firms, private and government have a level playing field when it comes to trade. Since EU is a Free Trade Zone, it becomes imperative to have these rules in place so as to let it remain fair and equal for all.

Free Trade Competition, as opposed to monolopies or cartels, increases access to higher quality, low priced goods. A monopoly or a cartel are free to price their goods as they want, but in a competitive framework, the price is decided by the demand and supply forces at work. It promotes fairness and improves efficiency and innovation. Free Trade competition also means more growth for competing firms, thus increased overall growth.