trade

Criticisms of WTO

Criticisms of WTO

The World Trade Organisation (WTO) is committed to improving free trade amongst its member countries. However, its role has been controversial –  creating polarised views. These are some of the criticisms of the WTOFree Trade benefits developed countries more than developing countries. It is argued, developing countries need some trade protection to be able to develop new industries; this is important to be able to diversify the economy. It is known as the infant industry argument. Many developed economies used a degree of tariff protection in their development…

Devaluation and Depreciation Definition

Devaluation and Depreciation Definition

Definition of devaluation and depreciationA devaluation occurs when a country makes a conscious decision to lower its exchange rate in a fixed or semi-fixed exchange rate. A depreciation is when there is a fall in the value of a currency in a floating exchange rate.In general, everyday use, devaluation and depreciation are often used interchangeably. They both have the same effect. – A fall in the value of the currency which makes imports more expensive, and exports more competitive.In…

The impact of a falling exchange rate

The impact of a falling exchange rate

A look at the economic impact of a fall in the exchange rate (termed depreciation or devaluation)  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,Exports will be cheaper Imports will become more expensivee.g. a depreciation of the dollar makes US exports…

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 exportsEmployment. Growth in exports…

Costs and benefits of globalisation

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.

New Trade Theory

New Trade Theory

New trade theory (NTT) suggests that a critical factor in determining international patterns of trade are the very substantial economies of scale and network effects that can occur in key industries. These economies of scale and network effects can be so significant that they outweigh the more traditional theory of comparative advantage. In some industries, two countries may have no discernible differences in opportunity cost at a particular point in time. But, if one country specialises in a particular industry then it may gain economies of scale and…

What caused globalisation?

What caused globalisation?

Readers Question: Evaluate the significance of the factors which have contributed to globalisation.Globalisation is not a new phenomenon. The world economy has become increasingly interdependent for a long time. However, in recent decades the process of globalisation has accelerated; this is due to a variety of factors, but important ones include improved trade, increased labour and capital mobility and improved technology. Main reasons that have caused globalisationImproved transport, making global travel easier. For example, there has been a rapid growth in air-travel, enabling greater movement of people and goods…

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, increase stocks of gold and protects 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 involvesRestrictions on imports…