Week 9 Assignment

Isabella da faro Bailey

Southern States University

BU532: International Economics

September 16, 2024

 Table of Contents
Overview.of Selected region......................................................................................................................3
Effects of 2007/2008 fiscal.crisis...............................................................................................................4
Country of the selected.region..................................................................................................................5
a) Impact on Wages and Jobs...................................................................................................6
b) Regional.Issues and their impacts........................................................................................6
c) Internal Economies of scale of that country.........................................................................7
d) External Scale economy benefits of that country.................................................................7
e) Policy....................................................................................................................................7
Predictions. about selected region............................................................................................................8
References:...............................................................................................................................................11
Overview. of Selected region

The European Union is a political and economic union consisting of 27 member nations,

the majority of which are located in Europe. Established in 1993 as a consequence of the

Maastricht Treaty, it now boasts a combined GDP of over $18 trillion and has grown to become

one of the world's greatest economies.

The European Union (EU) is composed of supranational institutions and an

intergovernmental decision-making framework. The European Commission is the legislative

branch and the European Parliament is the executive branch. Members of the European Union

can coordinate their policies and negotiate agreements inside the European Council and the

Council of the European Union.

The EU operates based on supranational governance and intergovernmental decision-

making, with the European Commission fulfilling the executive power and the European

Parliament acting as the legislature. The European Council and the Council of the European

Union are forums where EU members states meet to harmonise their policies and reach

agreements on the Common European Union policies.

The other significant challenge in the EU is to encourage economic cooperation and to

ensure the free movement of goods, services, capitals and people. It is done through a series of

institutions that are operating under similar policies and rules, for instance, the single market,

common currency – the euro.

EU is also a human rights defender, fighter for social and environmental justice, peace

and stability keeper both within and beyond its borders. Some of the global initiatives that it has

engaged in are the Paris Climate accord, the Joint Committee Plan of Action on the Iranian

nuclear issue and the sustainable development goals.

 However, the EU also has several problems, for instance, nationalism and anti-EU

attitudes, economic disparities, and immigration. COVID-19 has also changed this sector and the

necessity to cooperate and be more united within the member countries of the EU (Homburg &

Kühn, 2019). Still, the EU continues to be a major actor on the international scene, and its

activities and decisions shape its member countries and international community as a whole.

Effects of 2007/2008 fiscal.crisis

The fiscal crisis that occurred during the 2007/2008 financial year affected the European

Union (EU) and its countries. The crisis began in America at the instance of the Credit crunch in

the subprime Mortgage industry and the bursting of the housing bubble but soon it over spread to

the Europe and other parts of the world.

The EU was affected significantly by the crisis, as many of its member states reeled

under sharp economic downturns and high unemployment rates. The crisis revealed that several

EU members have structural problems with their Economics and Financial systems for instance

high debts, low economic growth and weak financial sector reforms.

But to contain the threat posed by the crisis, the EU introduced several measures that

sought to address its financial problems and bolster the member nations. The European Central

Bank lent money to banks and the EU created a series of rescue packages for troubled countries

like Greece, Ireland and Portugal.

However, these measures were not without controversy, and the crisis has led to political

unrest and splitting of the EU. Some of the EU member countries like Germany and Netherlands

were initially against the bailouts for the troubled countries while some considered the austerity

measures set by the EU and the IMF as part of the bailout agreements. The crisis also produced
long-term consequences such as nationalism and anti-EU sentiments, skepticism regarding the

EU’s economic policies and institutions. This has also triggered measures in enhancing the

stability of the EU’s economic and finance structures including forming a banking union and

synchronizing economic policies (Federal Statistical Office of Germany, 2021).

Altogether, the 2007/2008 fiscal crisis affected the European Union and its member states

greatly, revealing the EU and members’ economic and financial vulnerabilities and offline

political battles in the EU. It also paved way for reforms in order to develop the EU’s economic

and Financial Institutions and policies.

Country of the selected.region

Germany

I have chosen Germany as the country within the European Union and explain the

comparative advantage of the country in automobile industry.

The Germany has been among the top most automobile manufacturing countries globally

with big players like Volkswagen, BMW and Mercedes-Benz originating from this country. The

automobile industry has remained an important sector in the economy of Germany with

employing approximately 830,000 people and contributes to 5% of the GDP (Statista, 2021).

Germany has a comparative advantage in the production of automobiles for the following

reasons: Also, the country has quality human capital given that it has a competent human

resource particularly in engineering and manufacturing. This has enabled the German car

manufacturers to come up with efficient and excellent car models that are of high demand across

the Globe.
 Secondly, Germany offers a solid base for R&D in the automobile industry since the

country is home to many reputable universities and research centers dedicated to automotive

science. This has enabled the German automobile companies to remain ahead of other companies

as far as new innovations in the industry are concerned like the electrically powered cars or the

self-driving cars.

Last but not least, Germany enjoys the support of suppliers and sub-contractors, sourced

from within the region to enhance the production process and lower the expenses. This due

largely to the internal economies of scale whereby the scale of firms and specialists in the

industry is focused in the country (The Federal Ministry for Economic Affairs and Energy,

2021).

a) Impact on Wages and Jobs

Germany has accorded a lot of importance to making industrial goods that are of high

quality, and thus the skilled workforce earns relatively higher wages as compared to workers in

other industries. The manufacturing industry contributes to about twenty percent of the total

employment in Germany and most of the employment within this sector is associated with good

wages and remunerations as well as exercising work conditions. Some positions in the

manufacturing sector have been replaced with automation and digitalization, and people doubt

that the market for jobs all over the world will remain competitive in the future..

b) Regional.Issues and their impacts

One of the consequences of the exports of industrial goods has been the emergence of

regional disparities within the country in question, in this context; Germany. The manufacturing

sector is heavily dominated by the southern states like Bavaria, Baden-Württemberg and the

North Rhine Westphalia while other regions of Germany including the east are considered slow
movers in terms of investment and employment generation. This has attributed to development

of brain drain in these regions making the division between east and west of the country even

wider.

c) Internal Economies of scale of that country

Germany has internal economies of scale where the country has a well-developed supply

chain and support structures that cater for the manufacturing of industrial goods. This includes

having a reliable supplier and Subcontractor base; maybe also good transportation channels for

the circulation of goods in the country (Author, Year).

d) External Scale economy benefits of that country

Germany also has external economies of scale due to its reputation for manufacturing high-

quality industrial products. The country’s products are in high demand globally, especially in

developing nations where sales of high-tech machinery and precision-engineered products are

rapidly increasing. This has enhanced the German firms to use the concept of economies of scale

since they produce in large quantities and in turn, since they are specialized they are able to

produce at a cheaper price and efficiently (The Federal Ministry for Economic Affairs and

Energy, 2021).

e) Policy

The government of Germany has pursued an active policy of promoting the manufacturing

sector through policies aimed at encouraging investments in research and development as well as

offering incentives for firms to establish operations in Germany. Education and vocational

training have also been undertaken by the government so that the country can be provided with a

qualified workforce for manufacturing requirement.

Predictions. about selected region

The European Union (EU) is a political and economic integration of 27 member countries

mostly across the European region. EU is the second largest economy globally in nominal GDP

terms and is a major trading power with exports of goods and services standing at 16 percent of

global exports in 2020.

Economic Development:

From the economic perspective, it is forecasted that the EU will have reasonable growth

rates in the following ten years. In the European Commission Autumn 2021 Economic Forecast

the GDP of the EU is expected to rise by 4. The highest growth rates were registered in 2021 and

reached 8%, and the lowest one was 4%. That 5% in 2022 based on the slow progress than

anticipated due to the COVID-19 pandemic. The Commission also anticipates that GDP will

grow in the years to come with an average annual growth rate of 1%. 4% of its total GDP by the

year 2026, from a projection of 2.3% for the years 2023 to 2026.

Digital Transformation:

Digitalization is expected to be one of the key strategic priorities for the EU in the years

to come. Due to the COVID-19 outbreak, the potential of digital technology is illuminated, and

the European Union has set high priorities for the digital transformation of the sector. The

‘Digital Single Market’ idea was initiated by the European Commission in the year 2020 with the

aim of creating a single market for digital products and services in the European Union. EU has

also set objectives that by the year 2030, 80% of the EU population should be using digital

services, and 75% of EU enterprises should be using cloud computing services.

Green Transition:

One of the key areas of interest for the EU is shifting the economy to a green economy.

Today, the EU has certain goals for cutting down greenhouse gas releases and the promotion of

new and renewable energy sources. Furthermore, the EU has proposed in its Green Deal

launched in 2019 to achieve climate neutrality by 2050. Towards this, the EU intends to spend a

large amount on renewable energy, energy-efficient buildings, and sustainable transport. The

EU’s goal is to decrease the emission of greenhouse gases at least by 55% by the year 2030 out

of the year 1990.

Demographic Change:

The regional population demographics in the EU are forecasted to change dramatically

over the next few years. It is estimated that the EU’s population will increase from 447 million in

2020 to 449 million by 2030 and most of the increase will be through immigration, this

projection was derived by Eurostat. According to demographic projections, the working-age

population within the EU (15-64 years) will decrease, and the elderly population (> 65 years)

will rise. It can be expected that this demographic change will affect the economic environment

of the EU members and also their systems of labor and social security.

Trade and Investment:

The EU is vital in international trade and FDI and its standing is not expected to decrease

shortly. The EU has established the FTA with Japan, Canada and South Korea among other

countries and is in the process of negotiating the FTA with countries like Australia, New Zealand

and the United Kingdom. EU also remains an important target for FDI where FDI inward stocks
received amounted to €305 billion in 2020. Based on the above data and analysis, the EU is

expected to maintain its ability to attract FDI in the next years, especially in the hi-tech and

environmental sectors..
 References:

Gerber, J. (2018). International Economics (7h ed.). Pearson Education.

Federal Statistical Office of Germany. (2021). Gross domestic product by industry, 2020.

Retrieved from https://www.destatis.de/EN/Themes/Economic-Indicators/Gross-

Domestic-Product-GDP/Tables/gdp-by-industry.html.

European Automobile Manufacturers Association. (2020). Automobile industry pocket guide.

Retrieved from https://www.acea.be/publications/article/automobile-industry-pocket-

guide.

Homburg, C., & Kühn, K. U. (2019). Marketingmanagement: Strategie - Instrumente -

Umsetzung - Unternehmensführung. Springer.

Statista. (2021). Number of employees in the automobile industry in Germany from 2005 to

2020. Retrieved from https://www.statista.com/statistics/451072/number-of-employees-

in-the-automobile-industry-in-germany/.

The Federal Ministry for Economic Affairs and Energy. (2021). German automobile industry.

Retrieved from https://www.bmwi.de/Redaktion/EN/Dossier/automotive-industry.html.