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Students Zone - Answers to End of Chapter Questions

CHAPTER 11: EU REGIONAL, TRANSPORT AND ENVIRONMENTAL POLICY

1. Choose a large organisation in a European country. To what extent can regional policy at the national and European level be seen to have influenced its location?

Answer

Having selected an appropriate organisation, the following points might be of interest:

What types of regional policy are operated by the government in the chosen country?

What is the mix between national and EU regional policy?

Are there any restrictions on the type of policy or region in which it can be used?

The broad issue about regional policy both nationally and at a European level is whether it does attract organisations. In other words would these organisations have come to a particular area without the incentive of regional policy? In the case of a domestic firm that receives regional incentives, has it simply moved from one area of the country where there were not incentives to another area of the country where incentives are available? In this case the net gain in jobs might be zero. Were the incentives capital incentives or labour incentives? What is the value of the jobs created in term of the total incentives given? In fact the objectives of regional policy at a national and regional level need to be discussed in detail.

2. To what extent is the United States’ stance toward environmental policy influenced by its energy-producing companies?

Answer

The role of lobbying by businesses on both sides of the Atlantic has become increasingly important. In fact in the United States some large businesses and organisations pay money into the election coffers for candidates standing for office and in particular running for the presidency. If we look at the list of the biggest firm (shown in Chapter 1) it is noticeable that a number of energy firms are fairly high up the list. Many of these provide support for elected representatives in the US. They may be influencing, both directly and indirectly, therefore, the government’s position on energy use and the environment. Environmental legislation may raise these companies’ costs and reduce their profits; hence they may lobby heavily for governments not to change their environmental legislation. In fact they may argue that such an action may be good for the country since they now become more cost competitive and their sales may rise leading the higher levels of employment.

Companies may also seek to influence the government by threatening to move their production abroad if too stringent environmental legislation is introduced in their country. Therefore the role of “big business” might have quite an important impact on a government’s perspective on the environment.

3. In the road haulage sector, how has EU transport policy increased the costs of road haulage firms? What have been the benefits experienced by hauliers from EU transport policy?

Answer

The EU has introduced a number of policies within the road haulage sector over the past twenty years. By limiting the numbers of hours that a driver can be at the wheel has resulted in changes in the work patterns for some drivers. The result may be more local journeys and the need to set up new distribution points. Alternatively, two people may be required to drive the lorries over longer distance routes. Other pieces of EU transport policy such as seeking to harmonise weekend bans and the introduction of a drivers certificate together with the development of vocational training for drivers may increase costs to the transport companies. The introduction of the tachograph will also have reduced the ability of the driver to exceed more that the regulatory hours for driving. This may have increased the costs to the hauliers. Increasing the ability of foreign hauliers to operate in a country’s domestic market will also have increased the competitive pressures faced by transport companies. Of course one of the main costs is outside EU control and that is the cost of fuel. Transport organisations have argued that the differential tax rates on fuel have put some countries’ transport organisations at a distinct cost disadvantage.

EU transport policy has also led to some benefits for hauliers. The introduction of cabotage means that lorries can now have full loads on their return journey. By permitting the use of large lorries on some roads means that one lorry can now replace two – this saves on driver costs, and transport companies suggests reduces road wear and tear and environmental pollution. Attempting to align road transport policy with rail transport policy may also have benefited transport companies.

4. Consider Table 11.1. What factors suggest that regional policy should take a much hi8gher profile in EU policy making since the admission of the new accession countries in May 2004?

Answer

Table 11.1 indicates what many people have argued, that is, the new member states are relatively poorer both at a national and regional level than many of the original EU15 (see GDP per head figures). Unemployment records also tend to be higher, though the growth performances, albeit from a lower base, are generally higher. EU regional policy has a number of aims and one is to reduce the discrepancy between the regions within a country and between countries. For the EU15 there have been a few notable success stories such as that of Ireland and Spain and in the period up to 2004 there was some evidence of regional catch-up. However, as Table 10.1 indicates the entry of the ten new member countries is notable in the fact that on many of the measures or poor regions they stand out when compared with the EU15. In fact the difference between the new 10 countries and the old EU15 is larger than the difference that once existed between Greece, Spain and Ireland and the rest. Therefore the argument goes that there is an even greater need for regional policy funding now than there was before.

5. Spain was a major beneficiary of regional funding throughout the 1990s. How might the development of those regions in receipt of funding influence transport and the environment issues there?

Answer

As noted in four above, two of the success stories of EU regional policy have been Spain and Ireland. Often regional policy has been developed to attract or encourage new industries to deprived areas. Although this has created jobs, one of the issues that has often needed to be addressed is the poor level of infrastructure in some of these regions. Therefore part of the regional funding has gone to develop new roads and improve the rail network. The net result of this has been to create jobs but at the expense of increasing the level of pollution in the region. In addition there can now be congestion. New roads also attract other levels of regional development that comes without regional funding so exacerbating the problems. As incomes rise and more people move into the area than this may have an impact on the indigenous way of life and have implications for schools and housing. Increases in income can also lead to a rise in demand for private transport and access to airports. Therefore on the measurement of job creation and local economic growth regional policy can be judged a success but the downside of this is increased road usage and environmental degradation.

6. The United States has so far refused to sign up to the Kyoto Agreement, while the European Union has done so. What impact will this have on the competitiveness of US and EU car makers?

Answer

The impact may be unclear. On one level EU car makers might be considered to be placed at a cost disadvantage compared with their US contemporaries, however, consumers may be willing to pay the extra for the EU’s car because they admire the green credentials of the EU makers. The question also is one of whether any increased in costs by EU car manufacturers will be passed onto consumers. Many US car producers are multinational companies producing both within the US and the EU. If US car manufacturers face higher costs in Europe, since they now must abide by the European signing up to the Kyoto Agreement, then they may use some form of transfer pricing to offset the higher price in Europe by charging slightly more for their cars in the US. An alternative scenario is that US car manufacturers look to produce in countries outside of the EU (where environmental costs are lower) and then import their cars into the EU. However, they will need to compare the lower costs of production against the increased costs of transportation. It is also possible that where companies face higher costs because of any environmental charges that they need to make that they hold the price of the finished car constant and alter the quality of the material that are used to make the car.

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