Economics Essay

4532 words - 19 pages

Economics

The UK Economy and Globalisation

WHY COUNTRIES TRADE

GLOBALISATION

Globalisation | Expansion of world trade in goods and services leading to greater international interdependence |

Globalisation usually leads to:
* An increase in outsourcing
* Large sums of money being transferred from country to country for financing

When did Globalisation First Start?

There are three major stages of globalisation:

Stage | When? | What? |
1 | 1870Increase in international trade | * New technology helped improve transport * Reduced cost of moving goods between countriesEnded in 1920s as countries tried to protect home industries against foreign competition ...view middle of the document...

INTERNATIONAL SPECIALISATION AND TRADE

Specialisation | When a country is better than another at providing a good or service in terms of quantity of output and lower cost |
Absolute Advantage | When a country is able to provide a good or service using fewer resources and at a lower cost than another |

International Trade

International Trade | The exchange of goods and services across international boundaries |

Benefits of International Trade | Negative Externalities of International Trade |
Allows individuals and firms to obtain goods that are not available in their country | Pollution from ‘dirty’ industries – some foreign countries have lower environmental standards than other countries, making them an attractive cheaper alternative to firms |
Increases choice for consumers | |
Goods and services can be obtained cheaper | |
Increases competition, preventing monopolies | |
Allows firms to gain economies of scale, increasing sales and profits, and potentially reducing the price for the consumer | Air miles – many items are flown into countries from abroad contributing to global warming. |
Reduces firms’ reliance on domestic markets | Transport of the finished good or parts of the good releases pollution |
Increases world output | |

International trade leads to global interdependence, which is when countries rely on each other. When economies are doing well this leads to greater economic growth and employment but recessions can spread to many countries.

EG: A fall in demand for a product in one country will lead to unemployment in the country which exports it.

THE WORLD TRADE ORGANISATION

Free Trade | An absence of tariffs, quotas and regulations designed to reduce or prevent trade among nations. The original producer can gain a larger proportion of the value of the products making it a fair trade. |

Benefits of Free Trade

* More choice of goods at lowest possible price – goods made where efficient to do so making them cheaper meaning that you can buy more
* Increased competition encourages firms to innovate wider variety of products
* Exports of goods and services increase economic growth and employment
* Encourages efficiency
* Increases world output and wealth (eg: Qatar is rich in oil but without trade this would be of little benefit to them)

World Trade Organisation (WTO)

* Responsible for increasing free trade
* Provides set of rules about trading between member countries
* Settles disputes over trade between member countries
* It has 153 members
* Negotiations to come up with rules take many years
* The current round is the Doha Round and began in 2001

* The previous round was the Uruguay round which took seven years and ended in 1994, leading to:
* Cuts in tariffs of around 40%
* Cuts in agricultural subsidies allowing developing countries to compete
* An agreement allowing full access for textiles and...

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