Thursday, April 4, 2019
Economic Interdependence between European countries
economic Interdependence between European countriesWhy is frugal interdependence necessary?When we call on the carpet about economic interdependence between countries the first and foremost factor out that comes to mind is the metamorphose of legals and services then the flow of labour, capital, technology, and nettly the flow of funds. Helpman (2011) describes the economic fortunes of a awk contendd universe intertwined via barter, foreign direct investment, and financial capital flows. Helpman as well duologue about how the global crises of 2008 illustrated the brilliance of this interdependency between countries when it ca theatrical roled the volume of international trade to fall by almost a get out which then adversely influenced notwithstanding the countries with a sound financial system. Coming to the first aspect of the exchange for goods and services (trade) it is indeed, essential to trade in order to derive maximum benefit from the efficient use of scarce r esources available and as economic development and progression takes place resultantly because of globalisation, international trade is comely increasingly popular peculiarly when it comes to European countries. Piggott and Cook (2006) talk about the need for international trade quite comprehensively exports and imports can smooth demand fluctuations in the domestic economy, and growth via exports could increase competitor at home. Therefore basically trade allows firms to escape the confines of the domestic market, so reducing costs, meliorate quality and hopefully leading to higher sales and profits. Furthermore, this leads to the countries then helping even their businesses or organisations obtain a combative advantage through specialisation and giving them access to international markets which in turn helps boost the economy even more. Europes global economic positionmost of the countries in Europe have a significantly high GDP per capita and ar considered to have highly d eveloped economies when it comes to the Global market examples of which include Germany, France, Netherlands, and so on. In fact, the International monetary fund in its latest report in 2018 places most of the European countries in the advanced economies category whether it is in final domestic demand, stock building, or foreign balance. It is especially impressive that most of these countries progressed themselves post communism particularly with European countries the like Hungary and Latvia undergoing financial crises as Grzegorz Ekiert (2012) puts it these countries political and economic come acrossments have been in stark severalise to the failures seen in other post-communist states.The most important role in economic development however, has to be acknowledge as well which is the economic interdependence between these Europeancountries. Economic interdependence and its importanceEconomic interdependence is occurring due to specialization ofcountries, as they are dependen t on others in the purchase of products whichare not manufactured nationwide. (Surugiu, 2015)It should be of a common understanding that progress cannot be achievedby being alone or confining to a limited way of approaching desired economicobjectives and it proves to be true in the global economy as well. As morecountries pool in their region of different scarce resources and bring aboutextra demand as well from their economies they do in fact help in reducing thewastage of resources. Needless to say, this really does synchronise withefficiently allocating these available resources too. When we talk about globalisationand economic interdependence the most critical element to have are goodinternational traffichips between countries due to the aforementioned factthat it is not unless international trade that influences the countrieseconomies exclusively also other economic factors such as the flow of labour, easing oftrade regulations or even financial tie-ups. These relationships are usuallyquite diplomatical and do involve a collaboration from both(prenominal) sides, it could evenbe argued that this relationship in itself is an exchange in order to achievemutually booming growth thus, these can also be the difference betweenmaintaining peace and economic well-being. Paul Wilkinson(2007) talks about howparamount these can be in his book some of themajor problems and challenges of international relations reveals that we live ina very dangerous world, and that many of the most serious threats to our peace,security, and economic and kindly well-being are the result of human actions.How and why European countries are economically interdependent existence geographically close such as the countries within Europe givesthem an advantage to not only pay back trading easier and quicker barely it alsoprovides them with a strategic advantage of achieving their political missionsand their businesses with a competitive edge in the international markets. Whencountri es do intend to come together in order to achieve economic progressionthey usually end up forming an alliance/trading bloc or in Europes case mostprominently a regional trading bloc (European core) which extra time proved tobe of immense significance to their economicand political environment. This proved to be extremely pertinent in making surethat the countries involved not only maintained peace and excellent diplomaticties but also that they assisted each others economies with regards to growthand exchanging of resources allowing them to specialise more distinctively andget an even higher trade advantage. This enabled the member countries tocontribute to the union financially and in devote the union invested in itsmembers economies accordingly. As stated by European Commission (2018) the EUadopted work out aims to invest (in its member countries) about EUR 160, 113.52Min several areas including sustainable growth, competitiveness for growth andsecurity amongst others. The Eur opean Union could arguably be one of the mostpowerful economic integrations. Over the years, it has not only helped its membersin areas like capital accumulation, and technical progress but it has alsomaintained common and assess policies for trade and as attested byEuropean commission(2018) itself the EU making one of its main aims to give outeconomically interdependent and avoid any future conflicts between its members.Consequently, countries such as Germany, Spain and France who were at war forcenturies have now ensured that they now work in harmony to attain mutualbenefit (Mankiw, 2016, p.528). many other examples of European economicintegrations include the European Economic Area (EEA) with around 32 members,European Union Customs Union (EUCU) with 28 of the EU and 3 non-EU members(Turkey, Andorra, and San Marino), and European idle Trade link (EFTA)with currently 4 members. The most compelling benefit however, is provided bythere being a unity currencies adoption by the E uropean Union members whichbrings with it the convenience of eliminating transaction costs, reduction inprice favouritism and the stability of the foreign exchange rate (Mankiw et al, 2016, pp.531).Threats economic interdependence presentsWhile recognising the pivotal aspects of European countries having to beeconomically reliant on each other we must also look at the limitations itbrings with it. about of these limitations include a 5% decrease in intra EUtrading during 2000-2014, Europes inherent crises in 2015 which was triggeredby the euro crises a few years prior, not giving the countries involved to make breakaway political decisions without undermining their relationships with amajority of their trading partners, and it taking just one opposing country toimperil a powerful alliance like EU as Greece tried to in 2015 against EUsanctions situated on Russia (The German Marshall Fund of the United States,2016).This can also cause a scanty rider problem as well which Mankiw, E t al (2016) explains by giving theexample of the Greek turning point where the government borrowed more than theycould pay back and eventually the EU had to bail them out. Most impactfulthough, are the difficulties that scratch because of there being a singlecurrency (Euro) adoption within the selected EU countries these are includingbut not limited to fiscal federalism (Mankiw et al, 2016) describes it as the fiscal policy in the currencyunion works like that of a single economy, they also give up their right tohave an individualistic monetary policy, and finally the macroeconomicadjustment generating from the external value of their currencies also known asautomatic stabilisers (Investopedia, 2018).In conclusion, it can be said as Monnet (1978) suggests the process of economic integration in Europe has of all time beenincremental in nature, and often forged in crises. The main aims of theseintegrations also keep changing with appreciate to the challenges the economicenvironment brings with it and that being said, as long as these aims are metand all countries feel like they are benefiting mutually they will alwaysunderstand that there are more pros than cons of economic interdependence forthem, if not then they can always choose to leave like the UK did with the EUin June 2016. It goes without expression that trading blocs are an integral part ofeconomic integration and political reasoning might also be a huge element inderiving its existence. However, as long as the collective European economiescontinue to prosper by depending on each other economically and theconsequences of abandoning this interdependence do not surpass the benefits ofremaining it would not make any sense for a country to be an independenteconomy.Reference ListEuropean Free TradeAssociation (2018) About EFTA TheEuropean Free Trade Association getable from http//www.efta.int/about-efta/european-free-trade-associationAccessed 21 April 2018European Commission (2018) BudgetAnnual work out. on tap(predicate) from http//ec.europa.eu/budget/annual/index_en.cfmAccessed 19 April 2018European Commission (2018) The EUin brief From Economic to Political Union Available from https//europa.eu/european-union/about-eu/eu-in-brief_enAccessed 21 April 2018European Commission (2018) Taxationand Customs Union Customs Union Available from https//ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/customs-unions_enAccessed 21 April 2018Helpman, Elhanan. (2011), UnderstandingGlobal Trade, Harvard University Press Available from ProQuest EBookCentral, http//ebookcentral.proquest.com/lib/lsbuuk/detail.action?docID=3300975.International Monetary Fund (2018) arenaEconomic Outlook cyclical Upswing, Structural change statistical appendixtable part A. Available fromhttps//www.imf.org/en/Publications/WEO/Issues/2018/03/20/world-economic-outlook-april-2018Statistical%20AppendixAccessed 20 April 2018Investopedia (2018) AutomaticStabilizer What is an economic stab ilizer? Available from https//www.investopedia.com/ foothold/a/automaticstabilizer.aspAccessed 21 April 2018Mankiw, G. Taylor, M. Ashwin, A.(2016), Business economics The Global Economy, 2ndedition, Cengage textbooks.Monnet, J (1978),Memoirs,London.Piggott, Judith. Mark, Cook. (2006), InternationalBusiness political economy A European Perspective, Palgrave Macmillan.Surugiu, M. and Surugiu, C.(2015) International Trade,Globalization and Economic Interdependence between European CountriesImplications for Businesses and Marketing Framework, Procedia Economics and Finance, 32 (1), pp. 133. Available from https//www.sciencedirect.com/science/article/pii/S221256711501374X Accessed 19 April 2018The German Marshall Fund of The United States (2016) polity Brief How Economic Dependence CouldUndermine Europes Foreign Policy Coherence. Available from http//www.gmfus.org/publications/how-economic-dependence-could-undermine-europes-foreign-policy-coherenceAccessed 21 April 2018The Icelandic Di rectorate of Immigration (2018), Home EEA Member Countries. Availablefrom https//utl.is/index.php/en/eea-member-countriesAccessed 21 April 2018Wilkinson, Paul. (2007), International transaction A Very Short Introduction, Oxford Oxford University Press.