• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Assess the importance of international trade to the UK economy

Extracts from this document...

Introduction

Assess the importance of international trade to the UK economy Introduction 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 globalisation 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. Introduction to International Trade International Trade can be phrased as "the exchange of goods and services across international borders (Wikipeda.com). In most countries, it represents a significant share of GDP. The significance of international trade varies within each economy. Some nations export essentially to expand their domestic market or to aid economically depressed sectors within the home economy. Many other nations rely on trade for a significant part of their national income and for the of supply goods for domestic consumption. ...read more.

Middle

The US remains the country with which the UK does the most trade, accounting for 15% of our exports and nearly 10% of our imports Importance of International Trade to UK Many of the goods and services produced in the UK will not be consumed by domestic households. They will be exported to satisfy the wants of consumers in foreign economies, this is an essential factor in UK international trade. International trade is an essential feature of the UK economy, In terms of import and export of goods and services, the UK has a strong service sector which is exported to the world, and in the balance of payments it surplus compared to goods balance, the UK has seen a rapid decline in domestic industry from the heydays of the empire. The British Empire was a significant factor in the UK's previous economic strengths, as the empire declined so did the economy of the UK, as well as a result of the First and Second World Wars. Nowadays the UK does not possess the political and economical influence that it had with the British Empire; it is still a major industrial country. The UK economy is dependent on the import of essential raw materials. Today the service sector is an increasingly important element of the UK economy as a result of the decline of the manufacturing sector. ...read more.

Conclusion

The surplus in services does not counterbalance the deficit in goods, however, so the balance of trade in goods and services has been deficit for some years now and is worsening. The other worrying thing regarding trade in goods and services is that the UK has a high degree of import penetration compared to its major competitors. The UK has a high Marginal Propensity to Import, which indicates that high economic relation in relation to other developed countries means that economic growth is driven by consumption which is also "sucking" in imports. The importance of international trade to economic performance has been strongly highlighted in new or endogenous growth theory. While neoclassical theory regards technical progress as an exogenous process, endogenous growth theory views commercially oriented innovation efforts that respond to economic incentives as a major engine of technological progress and productivity growth (Romer, 1990; Grossman and Helpman, 1991). Endogenous growth theory disputes that international trade allows a country to use a large variety of technologically advanced physical capital, which may enhance the productivity of its own resources. International trade promotes across-the-board learning in product design, facilitates the diffusion and imitation of foreign technologies and helps the creation of innovations. Conclusion We have seen the importance and influence of international trade on the UK economy. The level of importance varies in comparison to some other developed economies; in relation to the proportion of the UK's GDP that trade possesses. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level UK, European & Global Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Here's what a teacher thought of this essay

4 star(s)

**** A well structured essay that covers many of the advantages of international trade. The writer seems less than confident with comparative advantage which is the most important point however. The title uses the trigger word 'assess' and the essay introduces some evaluative points by for instance pointing out about the trade deficits.

Marked by teacher Dennis Salter 04/04/2013

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level UK, European & Global Economics essays

  1. Marked by a teacher

    Analyse and Evaluate the significance of Fiscal Policy rules and Fiscal Policy targets and ...

    4 star(s)

    in AD, ?production, ?international competitiveness, ?employment, ? economic stability and ?economic growth L4. HOWEVER whether the Monetary policy is affective depends on many factors, for example it depends on how big the increase or decrease in interest rate is, a small change could make little or no difference for example if income interest is reduced by 0.00000000000000000000001%

  2. Robert Keohane and Joseph Nye have described international relations as exhibiting 'complex interdependence'. What ...

    Power in interdependence can be separated into two areas, sensitivity dependence and vulnerability dependence. Sensitivity interdependence can be social, political or economic. It refers to the way that a change in the policy of one state effect the policies of other states and to what effect.

  1. The positive and negative effects of Globalization

    The countries which lack this political power and stability are those which do not reap the benefits or on the contrary are exploited by the MNC's. Institutions such as the World Bank, World Trade Organization (WTO) and International Monetary Fund (IMF)

  2. 'Critically assess the role of the World Trade Organisation (WTO) as a means of ...

    was 14 times the level of 1950...GATT and WTO have helped to create a strong and prosperous trading system contributing to unprecedented growth'.5 The key clause of that statement relates to growth. More than 75% of the WTO membership is made of developing or least developed countries.

  1. Many examples of Companies working globally are: Nike, Adidas and other companies which may ...

    All these are the advantages of globalisation, and many of these essential, although there are disadvantages. Disadvantages > Increased flow of skilled and non-skilled jobs from developed to developing nations as corporations seek out the cheapest labour. > Increased likelihood of economic disruptions in one nation affecting all nations.

  2. Why was Britain the First Industrial Nation?

    As the demand for food and goods increased, entrepreneurs saw their chance to increase their income and businesses, and this also allowed social mobility for keen business stakeholders. Population growth inspired Britain's speculation in industry and agriculture, as there were growing demands for both.

  1. After Charles V's abdication of his rule, the Hapsburg Empire was split into two ...

    England had become a bulwark of Protestantism and a center for anti-Spanish feelings. The English rallied, readily, around their Queen Elizabeth I. The English and the Dutch held similar views on religion as well as against Spain, and there proximity to each other was very helpful. The alliance seemed natural.

  2. Advantages and Disadvantages of International Trade

    Next, international trade could increase the standard of living because when more production meets demand worldwide, the higher the production, the higher the income and the higher the standard of living and with that it could provide more employment opportunity.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work