trade

The effect of a current account surplus

The effect of a current account surplus

Readers Question: how does a current account surplus affect domestic employment? A current account surplus means an economy is exporting a greater value of goods and services than it is importing. A country with a current account surplus will have a deficit on the financial/capital account. i.e. a country with a current account surplus will have surplus foreign exchange it can use to invest in other countries. There is no hard and fast rule about what will happen if a country has a current account surplus. It depends on the…

Importance of Current Account Deficit

Importance of Current Account Deficit

Readers Question What does the size of a current account deficit / surplus say about the state of the economy? A current account deficit means that the value of goods and services imported is greater than the value of exports. A current account deficit requires capital / financial flows to finance this deficit. Despite the double dip recession of 2012, the UK has experienced a widening of its current account deficit. In particular, the UK has a large deficit in the trade in goods. Some economists argue that a large…

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Advantages of outsourcing by Multinationals

Readers Question: Is outsourcing beneficial for multinationals and their home countries? Outsourcing occurs when a firm delegates an aspect of a business to another firm. This may be to a firm in another country. For example, a large multinational may outsource cleaning to an outside cleaning firm. It may also ‘outsource’ its customer support call centre to another country where wages are cheaper. The Benefits of Outsourcing for Multinationals includeLower wages for labour intensive stages of production. A good example is the outsourcing of call centres from the UK to…

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…

The Effects of Protectionism on UK Economy

The Effects of Protectionism on UK Economy

Readers Question: what are the possible consequences/effects of protectionism with regard to the UK and the rest of the world? Protectionism involves placing tariffs and other barriers to trade. If there is a rise in protectionism we will experience a reduction in trade between the UK and the rest of the world. It is argued that if trade falls the UK will lose out on many benefits such as:Exporters will see a fall in demand, causing less output and possibly unemployment Consumers will have to pay higher prices for…

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 isEncouraging 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…

An end to globalisation?

An end to globalisation?

Readers Question: Why doesn’t WTO make into law that all manufactured goods should either be assembled or made in the continent where its been sold? There is so many reason why this should be put in place in our globalised world I don’t agree. The benefits of a globalised world are that we can benefit from goods and services produced in many different continents. If Japan is…