ECONOMICS - disadvantages of single market???????? Watch

Bertybassett
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I'm currently revising economics and i'm not sure what my book means my most of the disadvantages. For example, what does this mean:

Increased specialisation of areas can mean job losses as well as more employment in those industries. in the uk, dairy farmers have had to compete with much cheaper milk from countries such as Romania and in many cases find other ways of using the milk they produce.

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The creation of the single market tends to attract jobs and capital away from the countries that are poorest and further from the population centres of the eu to countries such as france.

I don't understand what it means by this. can someone explain the disadvantages of the single market?
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Bertybassett
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harryleavey
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(Original post by Bertybassett)
I'm currently revising economics and i'm not sure what my book means my most of the disadvantages. For example, what does this mean:

Increased specialisation of areas can mean job losses as well as more employment in those industries. in the uk, dairy farmers have had to compete with much cheaper milk from countries such as Romania and in many cases find other ways of using the milk they produce.

and

The creation of the single market tends to attract jobs and capital away from the countries that are poorest and further from the population centres of the eu to countries such as france.

I don't understand what it means by this. can someone explain the disadvantages of the single market?
Increased specialisation can mean job losses from sectors which the economy does not specialise.
For instance, if the UK specialised in financial services, and Germany specialised in the manufacturing of cars - the car manufacturing industry from the UK would be 'lost' to Germany (theory of comparative advantage). As a result there would be job losses in the UK manufacturing industry. However in the LR, these unemployed workers may seek employment in the UK's financial services sector for which it has comparative advantage (production at the lowest opportunity cost).

I think your second point refers to 'trade diversion' whereby 'poorer' nations who are not members of the trade bloc face reduced demand for their exports - even though they produced the goods at the lowest cost/greatest efficiency. As they are not in the single market/trade bloc, they are exposed to common external tariffs which reduce their export demand. Hence the demand would now be diverted to higher cost producers within the bloc e.g France who are not necessarily the most efficient producers. As a result, there would be reduced export demands, and lower AD in the 'poorer' country who is not a member of the bloc - and therefore reduced labour demands, and hence unemployment. It would therefore seem as if the single market resulted in 'jobs being attracted away from the poorest countries' - as you put it.

Other disadvantages of trade blocs include:

- Loss of sovereignty and control over laws

- Loss of control over free movement and immigration (single markets only)

[Although these are somewhat 'political' points with not as much economic scope as the points you alluded to]I hope this helps, if it did - please feel free to 'rep'.
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