41. Government policies affecting business

Government initiatives to pass laws affecting business operations and government foreign policy towards international trade.
The European Union
1. Community of countries that form a single market as a result of laws centred on the free movement of people, goods, services and capital.
2. Consists of 28 member states, combined population = 500 million. 23% of global nominal GDP.
3. EU Expansion
  1. British govs in recent years supported expansion.
  2. Increased size of market for UK exporters: don't have to pay import taxes or customs duties. > USA (300 million) 'Home market'
  3. Source of labour for British firms: cheap, skilled labour (Poland, Romania). Downward pressure on wage rates -> helps to prevent wage inflation. Helps economy grow faster.
A single European currency
1. Benefit: ability to carry out international transactions without the need to worry about exchange rate fluctuations.
2. UK economy not suited to Euro.
3. European Central Bank sets one interest rate for all economies that use the Euro.
Free Trade
1. WTO promotes free trade. Ultimate goal = end to all import tariffs and physical limits on goods.
2. Free trade in best interests of LEDC's?
  1. China + India protected infant industries -> help long-term
3. Govs may protect jobs in home country by using trade barriers. -> cost advantage.
  1. Can encourage development of a new industry.
Legislation
1. Laws passed by UK and European parliament.
2. Conservative -> laissez-faire approach.
3. Labour -> regulate business activity.
4. Employment legislation: aims to protect rights of employees i.e right to fair pay, sick leave, maternity. Min. wage -> inc. labour costs or more motivated? Right to contract of employment -> meets security needs or reduces employers' flexibility.
5. Consumer protection legislation: designed to ensure consumers are treated fairly i.e does what it says, correctly labelled, safety, refunds/exchanges. -> min legal standard means companies can't cut corners to gain a competitive edge.
6. Environmental protection legislation: materials, processes, the extent of how recyclable the product is. Additional cost with not much upside. Many feel a sense of injustice as other firms have less stringent laws -> unfair advantages
7. Health and Safety legislation: ensure safety of employees and customers. H&S at Work Act 1974 -> major burden on employers -> safe working environ. (physical conditions, precautions, the way hazardous substances must be treated. 200,000 injuries + 192 deaths (09 to 10)

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41. Government policies affecting business

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