The European Union is the largest trade bloc. Initial objectives of its formation were to eliminate barriers to trade and promote free trade among members by creating a single market for goods, services, labor, and capital. A lot can be discussed both in favor and against the European Union. This paper analyzes advantages and disadvantages of the European Union since its formation in 1992.
Advantages of the EU. The European Union has several advantages to its members. Companies and various enterprises are able to trade at the international market due to the formation of the single market through the free trade agreements. Companies can trade goods, services, and securities internationally. It has also enabled companies and investors to diversify their portfolios against loss due to currency fluctuations, political stability, and economic downturns (Fischer, Taylor & Cheng, 2012). The creation of the single market has also increased employment opportunities as a result of the exponentially expanding trade and investments.
The European Union has also resulted into the creation of the monetary union which makes trading much easier to members than it used to be. The currencies are harmonized in such a way that the member states of the European Union have the same prices. This has given companies from different member states the liberty to manufacture the same product in the entire European market of over 500 million people, and as a result, most companies enjoy economies of scale (Schaffer, Agusti & Earle, 2009).
Disadvantages of the EU. One of the EU’s disadvantages is a small scale of local firms as new large firms come into play in the economy. The European Union has also affected the operations of companies dealing with cross-border customers. For example, cross-border interchange fee has significantly affect operations of the Master Card Company. The company had to cut its transaction fee to be approved by the EU Antitrust laws (Kanter, 2009).
In conclusion, the European Union has social, economic, and political benefits to its members. This is the creation of wider market for companies in the form of monetary union. However, the Union has also some disadvantages to businesses.