Importance Of Trade In Uk Economics Essay
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Countries are interdependent, which means they rely on each other to support their economies. They need other countries to buy their exports to have money to buy resources that are not produced in their country. Also it is so that countries can specialize in producing a good or service and know that the goods that they do not have can be imported from other countries that specialize in that good.
Countries have a lot of expenses (health services, military, wages etc) and taxes rarely cover all of these, so they need to borrow to offset the deficit.
Also if a country wants to prosper, they need money to improve life conditions of their inhabitants. When the life conditions improve, the citizen will be able to pay the money back in a virtuous circle. (Anon. (n.d))
Importance of trade in UK
International trade is an essential feature of the UK economy, it is vital for the UK so that it can sustain its economics strengths and progress in an increasingly competitive global economy.
In this essay I shall examine the significance of international trade. First I shall identify how the UK economy operates on an international level. Second, I shall consider the costs and benefits of international trade, and how the UK economy has been influenced by international trade and the consequences of an increasingly globalised economy.
As we shall see, international trade has been vital for the UK economy to develop throughout the colonial period, and the post war period. The issue of globalization has created clear economic uncertainty and the evident understanding that the UK economy is susceptible to effects that are clearly outside its realm of influence. (Anon. (2007))
There are many things that are important about international trade, economic integration and global markets. Without international trade, businesses wouldn't be as profitable and economies would suffer.
Below are some reasons as to why such things as international trade are so important to UK businesses.
Broadens Horizons and Markets
If a company based in the UK was to only sell and trade their products domestically, never marketing or pushing their product to consumers in other countries, the country would completely limit its potential. They may always gain a steady trade from UK consumers, but they wouldn't be able to grow as much as if the company traded with eight other countries, for example.
This is why international trade is so important for companies and the economy - it increases traffic, customer figures and sales.
By trading in other countries, the company also opens itself up to lower production costs. For example, a TV manufacturer in Australia may discover that its product could be created for substantially less in a factory in Greece.
This not only saves the company money, but it helps the consumer as the TV can be sold for less. Furthermore, Greece's economy is helped thanks to the TV company paying the factory to create its product.
If it wasn't for other countries, we wouldn't be able to get our hands on many of the materials we need to make products we use every day - especially in the food industry. Colder countries, such as the UK, rely on hotter countries for fruits such as bananas and mangoes, and those hotter countries rely on places such as the UK for such items as potatoes.
Without international trade or economic integration of food trade, all countries would have a very scarce choice. ( Anon. (n.d).)
A) Explain recent changes in UK trade pattern with reference to:
Trading blocs throughout the world
UK membership of EU
Enlargement of EU
Importance of global market
1. Trading blocs throughout the world: A trading bloc is an intergovernmental agreement or a trade pact in which the countries who have agreed to participate either minimize the trade barriers or completely eliminate them to have a smooth trade. UK is a member of the European Union (EU) which is called a free-trade association where countries who are a part of it, discuss the agreement with the EU.
2. UK membership of EU: UK joined the European Union in 1992, and became one of the 12 founding members, after previously joining the European Economic Community (EEC) in 1976. It has become the most powerful trading bloc in the world and has a GDP exceeding that of the United States. It is also the largest explorer and the second largest importer. In 2008, it is estimated that the GDP of the EU was accounted for over 22 % in terms of the world's economic output.
3. Enlargement of EU: Enlargement of EU is also known as the process of expanding the European Union by welcoming new states. EU started with just six states and more famously known as the "Inner Six" in 1952. Since then, it has grown in stature and expanded to over 27 members with most recently being Bulgaria and Romania. For 2013, Croatia is scheduled to be appointed.
4. Importance of Global Market: Importance of global market and to maintain is very significant to UK because for over decades, UK has been trading with USA, Germany, the Netherlands, France and the Republic of Ireland. Across most of the sectors analyzed, the 11 key markets accounted for at least a third of total UK exports. Within this group of markets and sectors, between 2002 and 2007, the UK had diversified its exports away from its historically more important trading partners such as the USA, Germany and Japan towards the eight emerging markets.
5. Emerging Markets: Among the high growth markets there are those that are at a more advanced stage in their development, such as Korea, Singapore, Taiwan and Turkey, and those that are growing faster from a lower level of GDP per capita, such as China, India, Indonesia and Vietnam. Middle Eastern high growth markets (Qatar, Saudi Arabia and the UAE) already have relatively high levels of GDP per capita. There are also several countries emerging as a new wave of high growth markets; Bangladesh, Egypt, Nigeria and the Philippines are expected to record average growth rates above 7 per cent per annum between now and 2050, creating more long-term opportunities.
Q Analyze the impact of two policies of European Union on UK business organization
Here are the two policies of European Union which have impacted on UK business organizations:
1. Employment Policy: Government plays a major part in trying to stimulate employment. For example, the present government is keen to encourage business efficiency so that the UK businesses are competitive in international markets and therefore create jobs. For those who have difficulty finding work, the government has created what is termed as "The New Deal", offering people the opportunity of developing training and experience on government funded and sponsored employment programmers.
2. Inflation Policy: The government seeks to make sure that there are no sudden general rises in prices. They do this through the Monetary Policy Committee (MPC) of the Bank of England which sets interest rates. Interest rates are put up if there is a danger of people borrowing and spending too much, thus pushing prices up. Raising interest rates makes it more expensive for businesses to borrow money. It also makes it more expensive for consumers to borrow money. They then have to spend less, which helps to force down the prices.
What we have come to learn from this assignment is that what is the significance of trade in this world. The significance of the global factors that shape national business activities. Also the impact of European Union on the world and how much importance it holds in maintaining order among these nations. Overall, this assignment has helped me understand how important the role of stakeholders are and has improved my writing and research skills.
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