Introduction
Regional integration is to a large extent a function of inherent interdependence among economies, as well as, the need to promote harmonious coexistence. For various economic, social, and political reasons, countries appreciate the need and value of cooperating with their neighbors in their development processes. Economically, countries located in various regions of the world’s six continents have sought to establish free regional markets and common currency zones by abolishing trade barriers and unnecessary tariffs to encourage trade and free movement of labor and capital. This task is a brief discussion on whether United Kingdom should join the Economic and Monetary Union (EMU).
Should United Kingdom join the EMU, or remain outside the euro-zone?
The EMU refers to policies adopted by European countries aimed at bringing member economies of the European Union together to allow them to embrace a common currency, the euro. As a result, EMU is commonly known as the eurozone (Roney & Budd, 1998). Currently, majority of the European Union member states have already adopted the euro as their currency. However, the United Kingdom, together with Sweden and Denmark, has remained outside the eurozone since its official inauguration on 1st January 1999 (Roney, & Budd, 1998).
The question of whether the UK should join the EMU or not is a multifaceted decision making issue. The UK should swallow its perpetual imperialistic pride and see the benefits, and a likely inevitability, of joining the eurozone. Even though the UK has the right to choose to join or not to join the eurozone, the time to join this zone has finally come (Wargitsch, 2007; Grauwe, 2007; Watts & Pilkington, 2005). After all, from an academic point of view, there are numerous benefits that the UK can derive from joining the EMU, a fact that is corroborated by views of leading British academic economists, as an interview, conducted by The Economist Magazine in 2006, demonstrate (Mankiw, & Taylor,2006).
First, within the eurozone, Britain will benefit from a stable exchange rate. Economists argue that, even though British corporate bodies will continue to be subjects of adverse fluctuations of the euro against other currencies like dollar, yen, and others, their currency will remain fixed permanently against the euro (Mankiw, & Taylor, 2006). This benefit cannot be underrated given that approximately 60% of the European Union members are consumers of British exports (Mankiw, & Taylor, 2006). Economists assert that, there is no other better alternative through which Britain can achieve this stability. Moreover, if Britain chooses to retain its sterling pound, it will continue to receive speculative attacks (Mankiw, & Taylor, 2006). Second, academic research has shown that joining the eurozone would have a stabilizing effect on the UK stock market prices (Mankiw, & Taylor, 2006). Third, economic experts argue that by opting to stay outside the eurozone, Britain risks losing its remarkable record in attracting foreign direct investment (FDI) (Mankiw, & Taylor, 2006; Schadler & IMF, 2005). This factor cannot be underestimated considering that recently; about 40% of the FDI entering the EU has gone to Britain (Schadler, & IMF, 2005). With respect to the UK’s desire to continue attracting FDI, failure to scrap the pound will make companies that are willing to invest in Britain feel burdened by transaction costs and exchange risks, which are non-existent elsewhere (Mankiw, & Taylor, 2006). For instance, investors would be paying their employees and some suppliers in sterling pounds and selling in Euros (Johnson, & Turner, 2000). In turn, risking loss of the FDI would have an adverse effect on British GDP, yet it has remarkably positioned itself as an attractive business hub for multinational enterprises wishing to serve the Europe’s single market.
Conclusion
In a recap, given the benefits that Britain can gain and safeguard by joining the eurozone as briefly demonstrated above, time for it to join has come. Arguably, majority of those who were hitherto opposed to the UK’s euro membership, are mere conformists of unfounded popular opinion and at best poor victims of the British superiority complex. After all, available academic and empirical evidence shows that, joining the eurozone would be a wise and beneficial decision for the UK.
References
Grauwe, P. (2007). Economics of monetary union. New York, NY: Oxford University Press.
Johnson, D., & Turner, C. (2000). European business: policy challenges for the new commercial environment. New York, NY: Routledge.
Mankiw. G., & Taylor, M. P. (2006). Economics. New York, NY: Cengage Learning EMEA.
Roney, A., & Budd, S. A. (1998). The European Union: a guide through the EC/EU maze. London: Kogan Page Publishers.
Schadler, S., & International Monetary Fund. (2005). Adopting the euro in central Europe: challenges of the next step in European integration. Washington, D.C: International Monetary Fund.
Wargitsch, R. (2007). Should the UK Become a Member of EMU? Critically Evaluate the Pros and Cons of this Decision for the UK’s Economic and Business Environment. New York, NY: GRIN Verlag.
Watts, D., & Pilkington, C. (2005). Britain in the European Union today. Manchester: Manchester University Press.