Leaving Cert Business 2001 (higher level) Section 3, Question 3

General Comments

Each year, the question on international environment tends to cause problems for exam candidates, with many avoiding it and those that attempt it attaining a low average mark. Usually this is because candidates are not well versed on the EU institutions and policies and are wary of an open-ended question on international trade. It is also harder to score maximum marks on a two-part question than one with multi-part specific questions.

What differentiates the higher level from the ordinary level is the ability to analyse and evaluate. Chief Examiner's reports have indicated that the two principal causes of lost marks at this level are (a) a lack of evaluation where this is required and (b) merely stating a point without giving any explanation.

To score well on a question such as this, you need to have some specific knowledge of the EU (no room for waffle on institutions or policies!) plus some good general points on international trade that can be adapted to a variety of possible questions. You must then organise these points into a structured answer that meets the demands of the marking scheme.

Question

"In a modern society very few countries can survive by entirely depending on their own domestic (home) trade. Nearly all countries are interdependent on each other and therefore on international trade."

(a) Analyse the significance or otherwise of international trade for Ireland. Refer to the development of trading blocks and transnational companies in your answer. (35 marks)

To "analyse" means to sudy a problem in detail by breaking it down into various parts and to examine relationships.

Ireland is a small, very open economy that is greatly affected by the international trading environment. With a small home market and labour force, limited resources and an annual turnover (GNP) less than many large corporations, our economic prospects will always be largely determined by outside forces. The slowdown in the US economy, exacerbated by the events of September 11th, which led to many job losses here, is a very graphic example of our dependence on other markets. International trade benefits business, consumers, and the national economy and is essential for the following reasons:

Exports (In this case the examiner is looking for a total of five points at 7 marks each - 3 marks for stating and 3 marks for explaining the point).

Irish firms must sell their goods and services on international markets in order to expand sales and profits. The Irish market is approximately 3.5 million while the EU market is one hundred times the size! By selling to larger markets, Irish firms can expand their production facilities and manufacture goods on a much larger scale, thus benefiting from considerable savings in unit cost (economies of scale).

Imports (Keep to a simple structure of headings to improve clarity and avoid repetition, i.e. trade involves exports, imports, economic benefits etc).

Many essential raw materials must be imported as we cannot produce them here. These include machinery, equipment and components that are subsequently built into products for export. Importing goods and services offers a greater variety to consumers and promotes competition in terms of price and quality.

Economic growth

Irish exports equal about two-thirds of the country's national income and support a huge range of jobs, investment and government revenue. The economy has enjoyed unprecedented growth over the past eight years and this has been largely due to a strong trade performance based on buoyant export markets.

Transnational companies (One of these points must relate to the development of tradiing blocks - 7 marks - and one to the development of transnational companies - 7 marks).

These are huge corporations which have emerged, exerting considerable economic power and whose brands transcend international borders. They operate on a global basis, producing components in one country, assembling them in another, and selling the finished products all over the world. They have played a very major role in the development of the Irish economy.

Since the mid-1960s, about 1,100 such companies have set up here. They produce more than half the gross output of the country, are big employers and account for much of Ireland's strong export performance. They are mainly American, German, and Japanese corporations in high-tech industries and they are attracted to Ireland by tax incentives, the availability of a young, skilled workforce, and access to the Single European market.

Trading Blocks (By structureing points in this way, one can see the relationship between exports, transnational companies, trading blocks etc).

These are groups of countries that organise a free trade area or common market in order to promote free trade as a means of achieving economic growth. The EU is now one of the largest trading blocks in the world, being responsible for nearly one-quarter of world trade. Ireland benefits greatly from having free access to the largest developed market in the world as it helps Irish firms expand and it promotes the attractiveness of Ireland as a manufacturing location for many of the transnational companies which are based in other trading areas such as North America or the Pacific rim.

(b) Explain the decision-making process of the European Union. Include the relevant institutions in your answer. (25 marks)

(In this case, five points are required - if in doubt always give more rather than less).

The defeat of the recent Irish referendum on the Nice Treaty highlighted the degree of confusion and ignorance regarding the workings of the European Union. The EU is an economic and political union of 15 member states which increasingly attempts to operate as one huge country composed of federal states. Like any country, it requires many institutions to run its affairs, oversee spending and enact laws. It is aiming to have certain core decisions on economic and political matters made centrally (by agreement amongst the member governments) with other matters left for decision within each member state. The Nice Treaty was an attempt to reform the decision-making process in anticipation of the enlargement of the EU to 20 or more countries within the next few years.

The European Commission ("Explain" implies that you must give some brief description of the process and the relevant institutions - 3 marks for naming and 2 more for explaining).

The Commission is the main law-enacting body of the EU, with powers to initiate new policies, admit new members and ensure all laws are implemented by member states. It is similar to the "civil service" of a country. The larger member states can appoint two members of the Commission, while Ireland's population size allows us to appoint one. Each commissioner is responsible for administrating one particular aspect of European affairs, known as a portfolio. Ireland's present commissioner is David Byrne, who is responsible for consumer protection and food safety.

The Council of Ministers (The question doesn't specify the number of institutions, so you are best to structure your answer around the three central institutions)

Sets all the political objectives of the EU and makes all final decisions on new or proposed legislation. When agriculture is on the agenda, the Council is made up of the agriculture ministers of the member states. When the EU budget is being discussed, then the finance ministers constitute the Council and so on.The heads of government meet twice a year in the Council of Europe.

The European Parliament (Show how the institutions relate to each other withing the decision making process).

The parliament is the only directly elected body at this level in the EU. Its functions include debating new legislation and approving the EU budget, and it serves as a watchdog on the workings of the Commission and the Council. Irishman Pat Cox is the newly-elected President of the parliament.

The Commission proposes all new laws and the Parliament and Council of Ministers share responsibility for enacting them through the co-decision procedure. This allows the Parliament, on behalf of EU citizens, and the Council, on behalf of the member states, to enact legislation as equal partners on such matters as labour mobility, consumer protection, economic and social cohesion etc.

The EU operates through common policies to ensure laws and policies are enacted uniformly throughout the member states. In this way, economic development is achieved in a co-ordinated manner and the same conditions apply to all members.