UK International Competitiveness

• The increasing importance of trade to the UK economy means that the international competitiveness of the economy is very important. If British industry was to become uncompetitive it would have the following adverse effects on the economy

 

1. Lower Economic growth and living standards, (negative multiplier effect)

2. Increased Unemployment

3. Deterioration in the Balance of Payments (current account) as the UK imported more and exported less

4. Devaluation of the Exchange Rate

5. Higher levels of Inflation

 

Measuring International Competitiveness

 

1. Relative Export Prices

If UK exports become more expensive than other countries this is a decline in competitiveness

Terms of Trade measures          index of  Export Prices
                                                             Index of Import Prices

Productivity and Unit Costs of Production.

If there is an increase in productivity, meaning industry can produce more with lower costs then UK will become more competitive

3. Balance Of Payments.

This is a rough guide to international competitiveness. If the current account improves Exports have increased faster than imports, suggesting an improvement in competitiveness.

 

 

 

Revision Notes and Essays on International Trade

International Trade

Globalisation

Rise of Globalisation

Effects Globalisation on UK Economy

International Competitiveness

Govt policies to increase competitiveness

World Trade Organisation