trade

The importance of international trade

The importance of international trade

International trade between different countries is an important factor in raising living standards, providing employment and enabling consumers to enjoy a greater variety of goods. International trade has occurred since the earliest civilisations began trading, but in recent years international trade has become increasingly important with a larger share of GDP devoted to exports and imports. World Bank stats show how world exports as a % of GDP have increased from 12% in 1960 to around 30% in 2015. With an increased…

Importance of exports to the economy

Importance of exports to the economy

Exports play an important role in the UK economy, influencing the level of economic growth, employment and the balance of payments. In the post-war period, lower transport costs, globalisation, economies of scale and reduced tariff barriers have all helped exports become a bigger share of national income. In 2011, exports of goods and services accounted for 19% of GDP (up from 14% in 1990). Imports accounted for 24% of GDP – indicating that we have a current account deficit. Importance of exports Employment. Growth in exports…

placeholder

Costs and benefits of globalisation

Globalisation is a complex and controversial issue. This is a look at some of the main benefits and costs associated with the greater globalisation of the world economy. Definition of Globalisation – the process of increased integration and co-operation of different national economies. It involves national economies becoming increasingly inter-related and integrated. Globalisation has involved: Greater free trade. Greater movement of labour. Increased capital flows. The growth of multi-national companies. Increased integration of global trade cycle. Increased communication and improved transport, effectively reducing barriers between countries. Benefits of globalisation 1. Free trade Free…

The impact of falling exchange rate

The impact of falling exchange rate

A look at the economic impact of a fall in the exchange rate (termed depreciation or devaluation in the exchange rate) Readers Question: When exchange rate goes down, what positive thing can happen? A fall in the exchange rate is known as a depreciation in the exchange rate (or devaluation in a fixed exchange rate system). It means the currency is worth less compared to other countries. When there is a depreciation, and the exchange rate goes down, the exports of a country will be cheaper, and imports will become more…

Mercantilism theory and examples

Mercantilism theory and examples

Mercantilism is an economic theory and practise where the government seeks to regulate the economy and trade in order to promote domestic industry – often at the expense of other countries. Mercantilism is associated with policies which restrict imports and foster domestic industries. Mercantilism stands in contrast to the theory of free trade – which argues countries economic well-being can be best improved through the reduction of tariffs and fair free trade. Mercantilism involves Restrictions on imports – tariff barriers, quotas…

Impact of US tariffs

Impact of US tariffs

Readers Question: I’m an American, and I have a question on tariffs. Donald Trump has said he will place a tariff on all Chinese steel, and on Mexican cars. My question is, “Are tariffs still useful, and if so, why not put tariffs on all cars from Japan, Korea, Mexico, and Germany?” A tariff on Chinese Steel is designed to help the US steel industry. At the moment, American producers may find it cheaper to import steel from China so US steel producers lose out. This has led to job…

UK Balance of Payments

UK Balance of Payments

The balance of payments is the record of a country’s transactions / trade with the rest of the world. The balance of payments consists of: Current Account (trade in goods, services + investment incomes + transfers) Capital Account / Financial Account (capital and financial flows, net investment, portfolio investment) Errors and omissions. It is hard to collect all data so some is missed out. In theory there should be a balancing between capital and current / financial account. If there is a current account deficit, there should be a surplus on…

TIPP – UK / US trade deal

TIPP – UK / US trade deal

TIPP (Transatlantic Trade and Investment Partnership) is a potential trade deal between the EU and US. It is currently being negotiated by the European Commission and the US. The aim of the agreement is Encouraging trade and investment between the EU and the US. Extend principles of European Single Market to include the US, enabling lower prices for consumers, greater trade and prosperity. However, critics of the agreement fear that the proposal will lead to lower environmental standards, job losses, privatisation of public services, and overall…