Free Trade

European Union Scenarios of Free Trade

By Alicia Timmons

Scenario #1 Portugal

Rodrigo Hernandez owns a successful fishing company in Portugal, called Hernandez Pez, Inc.  Rodrigo has done so well in his business that he has been able to open five companies along the coast of Portugal, from Porto to Lisbon, and he now employs over 3,000 people at Hernandez Pez. He is very glad that he has been able to supply so many jobs in his country. However, last year when Portugal joined the European Union, things changed.  Portugal started using the Euro, instead of their original currency, which was not a big deal.  However, free trade then opened up. 

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Because of free trade, it does not cost extra taxes for another country to sell fish in Portugal.   Before the European Union, another country would have to pay 25% of their profit in taxes to Portugal to make the competition fair.  Because of free trade, now any company can sell their products across Europe.

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Spain has a coast line that is 4 times larger than Portugal’s, which means they can catch more fish.  The more fish a company catches, the cheaper they can sell the fish.  Therefore, a company from Spain, called Spanish Fishing, Inc. has completely taken over the fish market.  They have more fish, cheaper prices, and in 6 months they put Hernandez Pez, Inc. out of business. Rodrigo would never be able to catch as many fish off the small coast of Portugal as the Spanish Fish Company can catch off the large coast of Spain.  Now, fish in Portugal is cheap because everyone buys their fish from Spanish Fishing Inc. However, the economy in Portugal is hurting and the 3,000 employees at Hernandez Pez are now unemployed.

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Open Ended

Why did Hernandez Pez go out of business?

Multiple Choice

Before the EU and free trade, how much tax would a company from another country have to pay to sell their product?

• 15%

• 20%

• 25%

• 5%

Open Ended

In this scenario, is free trade a good thing or bad thing? Why?

Scenario #2 Poland

Otto is a farmer living in Poland.  His grandfather fought in World War 2, when Germany invaded his country.  In his family, there is a long standing dislike of Germans because they started both World Wars and damaged Europe so badly.  Otto’s grandfather died in the war, but he did teach his son (Otto’s dad) how to be a successful farmer and live off the land.  As Otto’s farming business is getting successful, he wants to branch out start raising cattle to sell at the market.   Unfortunately, Poland does not have good land for raising livestock; that is found primarily in Germany. 

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Otto placed an ad online asking if anyone had any land nearby him he could buy in order to raise his cattle.  The only response to his ad came from a man in Germany.  Now that the European Union had formed, there was no need for a passport or paying extra taxes to do business in another European country.  The German farmer willing to sell his land was only 15 miles from Otto’s home along the Neisse River.  If Otto did business with the German, he would be able to expand his business, make more money for his family, and hire more Polish people to work on his farm.

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Open Ended

What should Otto do? Should he do business with the German? Why or why not?

Open Ended

In this scenario, is the European Union a good or bad thing? Explain your answer.

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The EU countries are: Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden

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Draw

Color in the countries that are in the EU: