Globalisation And International Trade Flashcards
Intro
Globalisation definition, macro econ performance definnition
Globalisation has largely been of benefit- ‘played its paprt in teh success of uk econ’- as one of most open econ in world
Yet does experience negative consequences of globalisation too- problems it may also have created’
Main three themes globalisation sucess essay
Impact onn exports, gdp growth, current account bop
Impact on structural econ change and equity
Impact on inflation
Globalisation definition
Greater international interdependence
More free movement of the factors of production
Macroeconomic performance
Can be assessed in terms of macroeconomic objectives
Bop balanced equilibrium, growth gdp, full employment, equity, low stable inflation
Impact of globalisation on exports, gdp growth, current account bop benefit
Globalisation decreases barriers to trade- remove tarrifs, exchange controls, deregulation of financial services sector-
Former membership of eu lead to inward investment from foreign multinationals, growth financial services sector, aeronautical products, pharmaceuticals
Fdi- nissan car batery plant- boost exports of ehiccles
Foreign investment invest exports financial servcs
All boost gdp growth, employment, positive impact of 63 wuaters of uninterupetd growth 1993-2008
Growth financial services huge increase in hot money flows in uk econ money markets, expanding bank lending and fuelling consumer credit bom
Increasinng consumer spending incentivising a rise in investment and property bom (increase constructuonq
Impact on exports gdp growth bop- cons
Growth in consumer credit and high mpm- persistent and increasing defifitc ion current account bop despite significant increase exports
Lathough since brexit and partial retreat from gobalisation, exporys fallen 14% yet imports have not reduced
Our dependence on financial services ssector and globailsation- ‘has made it likely that econ problems in one part ofthe world will spreadto other parts’
Overall- largely enefitcial, but more need for checks
Impact on sturctural econ change and equity- benefits
Gloablisation as previously stated has seen growth indsutry, financial services, retailing- due to availability of cheap imports such as clothing and manufactured consumer goods
‘Developed nations have benefitted from low cost manufatured imports’ ‘seek new comparative adv in high tech and service sector activities
Impact on structural econ change and equity- cons
Decline of laour intensive manufacturing sector- due to ower cost labour abroad-led to icreasing structural unemployment
Decreased wages of lower skilled workers- less unionised as servcie sector fragmented so cant bargain higher wages
Increased demand of skilled labour leading to greater inequality- financial services, law (mergers)
Overall- net increase jobs but increasing inequality and structural unemployment
Impact on inflation- globalisation benefits
Developed nations have benefitted from low cost manufactured imptrs
Clothing consumer manufactured goods, food- decrease pressure on cost push inflation- positive income effect
High growth, low inflation years since 1990s- signs of global8siation
Impact of globalisation on inflation - con
Occassional peaks cost push inflation due to increasing demand for oil and comities- as seen with ukraine, oil gas and food increased- interdependent market s marke more likely
Overall impact lower prices adv but more vulnerable
Globalisation conc
Overall largely beneficial- growth econ, lower inflation, icnrease jobs
Buut are more vulnerable to supply side shcooks- ukraine and credit crunch- check sneeded
And bop andequity worsen- due to structural econ change, move manufacturing overseas
Absolute adv
Comp adv
Uncontested superiority of a country or business to produce a particular good better
Exists were a country using a given resource input is able to produce mroe than other countries with the same input
Country with absolute adv is more technically efficient
Eg well educated workforce- uk legal financial seervcies
Adam smith on absolute adv
Used principle to promote the beneifts of international trade- arguing taht countries should specialise in the production of those gs technically more efficient, exports their supluses and imports thsoe gs in which other countries have an absolute advantage- world output increases
It is possibel for a country to have an absolute adv to be more technically efifcent in the production of most gs- eg between developed and less developed cuntries
Comparative adv
A country can produce a gs with a lower opp cost than other countries
Has to give up less to produce the gs
May still benefit the countries to specialise in the production of particular gs even i fdont have absolute adv and tehn trade internationally- exporst surplus of gs in which specialise and import dont
Countries should specialise in the production of gs in which they have comparatie adv
Countries may partially specilaise (produce multiple gs at diff levels- more realistic ie uk ewith food- mostly export but import some too
R
Whose tyheory was comparative advantage
Ricardo
Benefits of comparative advantage
Global resources can be used more efficiciently when countries speiclise in producing these gs in which they have a comparative advantage- efficiencies obtained by imports from countriess where opp cost lower
Global specialisation international trade should increase both allocative and productive effciiency
Competition to dynamic efficiency- greater innovation, hiigher quality and technology transfer
Consumers benefit lower prices, greater cchoice
Withot trade some fines may not be able to fuly exploit econ of scale- minimsie av costs
No trade- countries self sufficient and benefits lost
Benefits of free trade
International specialisation leads to increasing output of gs- promoting econ growth and increasing living standards- comp adv
Greater variety gs- more choice for consumers- exotic fruits
Ecinomic growth0 exports to foriegn markets increase soutput more jobs and higher income- exports net inkection, positive multiplier
Home firms exposed to more comp- lower prices, greater market orientation , technical efficiency, innoation
Technology transfer- spread pf omporved technologyu
Home firms may find cheapoer input savings aborad- improt raw materials, compoet parts
Income effect of cheaper imports for consuemrs- eg cheaper food, clothing electrical goods- spend mroe entertainment or lsiere domestically
As countries trade more and become mro einterdependent to avoid war
Disadv free trade
Job losses- esp labour inntensive manufactures indisteis in developed countru- against biden semi conductor, trump steel and solar panels
Greater international interpdependence- countries can become dependent ie food fuel- make bvulberable in war or cnoflict- russian gas
Interntional specialisation can also make vulnerable should demand or price for priduct fall- if specicalise one thing- kenya tea and coffe, agricultural when crop failure
Free trade not always level playing field esp with exploitation or dumping (prodcue a lot excess sell at cheap price- eu accused japan dumping cheaper printers on euprean markey, china steel throgh not enviornmental way
High exchange rate may also disadv higher effcicent production
Increased co2 emissons from transportation
Exploitation of labour in countries where not monitored as closely
Diff ruglate wto- self interest ect
Consumer surplus
Lower price than willing to pay so demand is higheer
Producer surplus
Higehr price than wiling to pay for
In an open econ impact on consumer and producer suprlus
Welfare tranfer from producer to consumer- b welfare gain for consumers without domestic
Gain consumer grester producer
Sturctural econ change, ie mroe to work as deliery drivers
Fall in price- prdocuer surplus for domestic lower
Consumers win and domestic producer lose
Net welfare gain c
Main areas globalisation seen
Natural boundries of gs
Greater movement labour between countries- eu free movement, or via visas- barriers to entry legal barriers through visas
Greater movement of capital (finance to purchase cautal) betwene country- rmeoval exchange controls mean more finance can be spread- ie uk pension firm can buy shares chinese company
Greater sharing of technology and intellect- ie patents, although s asian dyson
Causes globalisation
More trade gs
Trade liberalisation and greadual removal of barriers to trade
Increased number multinationals companies
Increased foriegn ownership of firms
Eilimination of exchange controls
Innovation in info and communication technology
Causes of globalisation- more trade gs - examples
Tourism- eastern bloc
Financial services- derviatives, shares in domestic stock market
Entertainment services- online
Education international uni
Telecomms lots natural monopoluy now internat
Causes of globalisation- trade liberalisation and gradual removal of bariers to trade
Dismantaling tarrifs on iimports
Quotas-limits q of imports
Complex customs procedure- eu none- tmelyu
Comm technology systems- us diff catalytic convrtgor
Causes globalisation- increased no multinat
Vompanies with oepration in more than one coutry
Eg macdonalds, toyota, alphabet
Causes globalisation- increased foriegn ownership of firm
Firm expands by takeover or merger
Bmw mini,
Jl tartar over landrover
Mars over hotel chocolate
Causes of globalisation- elimination exchnage ocntrol
Increased fnancal capital spread
Fund investment- ie nissan battery plant in somerset
Causes of globalisation- innovation in information and comm tech
Easier to communicate internationally
Zoom, emails ect
Effects of globalisation- prices
Decrease prices- specilisation, greater comp, move to low cost countries- clothes india andpakistan
But in some gs where supplu not perfectly elastic high anounts waste
Real econ growth in china and other econ has increased demand for commodities such as oil, ematlas ect
Effects of globalisation - consumer choice
Wider variety- exotic furit, hliday destinations
But homogenisation of many gs- macodnalds- reduces cultural diversity
Effects of globalisation- income
Raises world gdp and av income per capita esp higher skilled pwrkers-it finance law
Specialisationa nd trade more productive
Relatively closed econ, not embrace globalisation- cuba and nk seen growth rates fall
But
Low skilled workers may lose jobs- structural unemp
New firms in service sector often fraggmented less unionised and lower rpaid
Lower wages in agricuture due to ledcs
Effects of globalisation- employment and unemp
Increase world gdp and increase level s of emp
But accelerated shock may create structural econ loss- labour intensive makret may move where cheaper, less developed ecn larger transfer of worker from rural to urban areas- increase real income higher material living standardss
Income distribution - effects globalisatio n
Anti globablisation argue that increase inequality
Real income risen yet fallen in many other parts war (sudan), climate change, lack education (esp war
Uk rise income inequality- unklilled labour,s turctural econ change, higher paid in skilled
Technological innovation disproportionaly enefit skilled worker
Multinationals/transnationals
Firms with physical operations in more than one country ie macdonalds google
When set up in another country (fdi)- build plants/factory, open retail outlet, purchase majority shareholder- mondelex international/kraft over cadbury
Vertical integration
Diff stages of production process taking place in diff countries
Bp oil rig refinery petrol station
Horizontally initegrated
Perform the same basic oeprations in each of the country in whcih they operate
Ie tesco- stores uk ireland eyripe
May specialise in capital goods industry and may not be h ousehold name siemnas
Reasons for multinat status
Locations close to target markets- avoid transport costs, greater market orientation
Locate close to sources of raw materials /corperations- eg oil mining
Take advantage of low cost production facilities or geographical characteristics- flat land
Take advantage of cheap labour- dyson malaysia
Take advantage of skilled labour- pharma near uni cambridge, recruit from uni
Low corporation tax in host country- increase retained profit- ireland alogabet
Expanding markets/prodction may lead to econ of scale, decreasing ac, decrease unit cost, decrease prices, increase profit margins
Longer term survival of company due to spread of markets- spreading risk may maintain when recession in one country
By setting up prodcution in target market, transport costs, import tarffis and quotas may be avoided- nissan in uk avoid eu external tarrif
Benefits multinat
Many gov forom developed and less d wish multinat as provide employment
Expirts increase injection positive multiplier
Technology transfer- multinat introduce new ideas
Train and educate local worjers- nissan ne greater standard of life than fordm engineers trained up to meet requirements, boost overall rpductivity
Direct inward investment from multinat- nissan battery plant sunderland for new electric model gov contribute
Problems multinat
Regulatory capture
Lack social responsibility
Job displacement
Trojan horse effect
Tax avoidance
Regulatroy capture- multinsat
Multinat may pressure gov to legilsate in their favor
Mondeliex internat campaign against sugar tax and more labelling
Lack social responsibility- multinat
Double standards
May be indirectly subcontractorsor directly
Primark- exploitation of labour
Pollute enviroemnt- bp shell, oil spill in gulf of mexico
Tax avoidance via transfer polucy- anaxon
Job displacement- multinat
Some multinat have no loyalty to host country and may close operations very rapidly when econ climate changes
Hoover dijon fr to glasgow
Uk offer large grants and financial incentive to entice fdi yet some opp cost- not spent on domestic firm
trojan horse effect- multinat
Over reliance on multinat by a host country displace or crowd out domestic market
Leave host econ vulenerable if multinat switch countries- ie chepaer labour
Tax avoidance- multinat
Through transfer price agreenents
Buy and sell between nat office- ie london opp more profitable and dublin office sells it
Unethical as using country public goods yet not contributing
Min coroporation tax (2021) 15% g20
Capital flows- bop lt
When multinat bring finance from their country of origin and invest in greenfield sit ein host country ie nissan factory ne, net injections multiplier
Direct investment recorded in financial account of bop
Once operation starts make profit, post tax profits may be reptairated to country of origin/offshore and recorded as an outflow/invisable import in current account bop
Eu now rules of origin limits opp to evade tax and compenent parts sold to a tranfer company and sold tax free ie vw 1970 sbraxil
Current account largely benefit multinat direct investment
Uk net investment aborad with inward investment being higher outward investment- gnp via net property income from abroad- pisitive impact
But reversed in recent years
Hot money flows on bop
Removal of foreign exchange controls by most developed econ and improve in info tecnology means huge sums of money can be moved between firm centres
Multinat and foriegn may have large cashflow suplus at avrious times over the year
Money can vbe invested in moving moneymarkets around world within 24 hours
Move these cash suplus where can achieve highest rate of return in interest rates and excess rates- hot money flows seculation
Rapid extremely volatile, may destablis eindustyr
Britain exit erm in 1992 can be attributed to massive hot money flows out of uk as speculators sould pind sterling believing to be devalued
Organic growth
Icnrease operations and sale rev to increase net assets of business
Inorganic growth
Ie takeover and merger
May be cheaper to take over when share prices low and weak change rate
Quicker
Existing customer base
Vertical and horizontal already
Conglomerate integration
Take over unrelated business
Ie sony- emi music records but electrical equipment
Main objectives/benefit of ffirms expansing
If firms ethical in way operate and look after interests of all stakeholders positive immage, boost slaes, increasel likely survival
But free market friedman- main objective of private sector business should be to max profit of shareholders
If fiems seek to min costs and max sales more efficient allocation of resources, increase innovation, decrease prices- max welfare gain society in lt
Not the job of businesses to look after intersts of society and social responsiblities distract from primary role- could lead to waster of resources
Free makret role of gov to put laws in place to prevent market failure to avoid exploitation of factors of production
Uet even most effective regulatiures to do not protect stakeholders efforts - ie after thiadamide incident more rigerous testing
Environmental protection may not be major concern
Methods of protectionism
Tarrif
Qupta
Subsidies to domestic prdocuers that export
Complex admin procedures imports
Complex or non uniform systems
Trade embargo
Boluntary export agreement
Tariff
Tax on imported goods
Import duty,
Deliberate attempt to discriminate inmports and protect home industry
Can also increase gov revenue to fund public spending
Increase price so switch domestic producer
Yet domestic consumer lose out by paying higher price- as domestic producer also sell at higher price
Quotas
Physical limit on q oof good imported
Physical control
Limit of imports increase share of market available for domestic producers
Increase price of product domestic consumer lose out
But lead to gains to domestic importers as those who still import win reduced q allow higher price
As buy at world supplu, sell at higher, greater profit
Subsidies domestic producer
Money lagrley wasted due to oppcist
Although incnrease welfare producer, increase can benefit welfare gain
See diagram
complex admin proceedures imports
Unecessarlily lagre delays as customs posts
Esp posty brexit
Increases costs as seen us and canada border
Problem perishable goods ie fish
Complex/higher or non uniform standards
Cars in use diff catalytic converter
Uk 3 point plug
Nationalistic purchasing policies by gov
Ie nhs purchase drugs even though if cheaper abroad could be imported
Trade embargo
Econ sanctions
Ban on imports
Russian oil gas
Illegal drugs weapons
Voluntary exporting agreement
Uk with japan that they should not take uuyp more than 10% car manufacturing market in uk
Arguments for protectionism
All countries protect domestic industriesto some extent ie agricultire
Proetction of infant industries
Protection of sunset industries
Strategic trade theory
Proetction against dumping
Protection of empoyent against cheap labour
Protectionism for infant industries
Developing country
Poretct infant idnsurteis from established rivals in advanced econ to take adv of econ of scale ie technological managerial financial econ of scale
Japan did so post ww2 with infant car industies
Even devekiped econ such as uk subsidise infant indsurteis such as biotechnology idnsurty- tax breaks for science parks, rand d
Wto support this for developing countries- but when stop?
Protectionism for sunset industries
Developed econ
Minimise impact of structural econ cange- buys time to adjust , as can lead to deinstrialisation mass unemp regional decline and econ imbalance
Argument for multifibre agreement protect eu from cheap textiles from asia- yet wto pressure to withdraw more quickly as most developed econ have welfare state and ecuation system to help structural unemp to accept sturctural econ change
Strategic trade theroyr
Krugmen
Gov can create comp adv by nurturing strategically selected industry or econ security- justify protecting industries while company developing
Skills gained in developing it sector or energy sector may spill over (positive externalities) to help ptehr sectors
Protectionism can prevent explloitation by fair business practises
Protect strategically improtant industrie-s shipbuilding defecne
Proetct culurally important industries=- fr film industry, idnependent book shops
Protectionism against dumping
When a country produces too much of a good for domestic consumption so sold below cost price on foriegn markets
Eu common agriculture policy pricing following overpricinbg of agricultural produing in eu 1980 and 70s- dumped on less developed econ
China dump cheap steel eu
Protection of employment against cheap labour
Mass strctural unemp in developed econ by exploitation cheap leab on less developed econ where human rights abused
Seen esp where minimal unions workers rights, sweat shops- yet better than subsistence farming
Against protectionism
Welfare losses
Retaliation
Props up inefficient and omnopoly prodcuers
Protection redistributes income in favour of producer
Counter to protection for employment against cheap labour
No protectionism- welfare losses
Occur due to econ ineff as countries are not specialising in porducing these gs- lowest op cost
Domestic consumer pay higher prices
Eu proetctionism for food process- ground coffe or cocoa powder face much higher tax than raw onese
Estimated that w trump av household lost 1300 dollar per yearr= ig protectionism
Retailiation from protectionism
Countries who feel that their domestic industries will be harmed by protectionism are likely to retaliate
Decrease world trade to detriment of all- country around world pay higher price- dynamic benefits of free trade and greater comp are lost
Ie current trade war china and us- increased 0.5% against us
Protectionism props up inefficient and monoply producers
Do not face efficient or effectove cpm[
Many italian and fr textile firms delayed trying to compete with cheaper textile imports- went as luxury
Less efficient allocation of resources
Protectionism redistrubutes income in favour of producer
If one country stops with free trade protectionism
Increasing prices
Sugger increased unemp
Counter to portectionism for employment against cheap labour
Structural unemp in developed econ helped by werlfare payments and acess to education and retraining
Poorer working in less developed econ still better off than subsistence farming
Yet also vital consumers put pressure on multinat to prevent exploitation
Gov can also put pressure on less developed econ to put laws in place to protect human rights in return for trade deals
Terms of trade
Measrying the rate of exchange of one product for another when two countries trade
Index= 100 x av index export prices/av import price index
Ricardo theory of comparative advantage explains that if country specilaise in production of gs in which have comparative adv- all countries mover own ppf and gain from trade
Signif of changes in terms of trade
Increase terms of trade- import cheaper food, increase standard of living
Weak exchange rate, icnrease imports, decrease terms of trade- makes imports more expensive
Explanation terms of trade
If a country can buy more imports with a given q of exports, terms of trade imporve
Consumer price boom, terms of trade increases increasing export further
Deterioration terms of trade- exports cheaper, imports more expansive
Factors affected- exchannge rate, elasticity for demand for export
What happens when pattern of trade changes
More internat trade- structural econ change, areas that lose comparative adv regional decline and market shifts where competition increased- but occupational, geographical imobility fo lab factors of prduction
Internat trade benefits consumers when can obtain more cheaper products and have highreal income
May benefit producer who can expanc into export market or take advantage of of cheaper imports
But may lose jobs structural econ change
Import penetration
Extent to which imports have met needs of market as % of total shares
How to surive internat comp
Price
Product- design, durability, appearance, innovation, after sales service, reliability
Promotion- brand image, ads
Place- availbality distribution
Jlr-high value added
Bae innovative
Wto
Main objective is to reduce tariffs and other barriers to trade whilst also eliminating discrimination in trade
Forum for multinat trade negotiations between its 164 member countries to contribute incnreasing libing standards
Most favored nation pricniple applies when one country member that offers a reduction in tarrfis to another country must ofer the same reduction to all other members
Wto aims
Create a level playing field - firms compete on equal terms for bysiness
No firm will be protected by tarrifs quotas anti comp practtises cartels or tacit agreements
Problems with wto
Countries jpin wto must consider effect of decreasing quotas and tarifs on bop and domestic econ as lead to sturctural eocn change
Special circumstances- econ crisis, protection infant industry- may be exception
Anti comp pactises in diff countries may discourage importers- despite removal tarrifs and quotas
A country in wto may prefer not to offer a tarif reduction to another country as would have to offer the same reduction to all other measures
May have to apply dif measures to remove proetctionism- with uraguay tooik 4 years in 90s to negotiate
Doha rouind of negotiations to begin nine 2001
Uet to reach a satisfcatory conclusion
Iam to help develiping counrteis expandtheir trade through develiped countries ipen market to exports from developed countries
Developing countreis not expected to liberate their markets to same extent
Eu declared eliminating agricultural export subsidies
Who opposes wto
Some developing countries
Envrionmental groups
Antiglobalisation pg
Tu in developed econ
Why opp to wto
Developing countreis and environmentalists concerned about wto ruling failed to protect dolphins from fishing nets or envrionmental exploitation for develiping countries to multinat such as shell
Labour unions threat globalisation and structural econ change, exploitation of child and female labour
But why sholdnt oppose wto
Not trading with developing countries confides many poorest countries to remain poor
Countries ngo and media can out pressure on retailers and multinat to ensure good conditions along supply chain
Wealth- wto opposition
All countries can benefit from speiclaition and free trade
Inequlity on gini cooeficient drceasing as living standards increaein china and india
But tirckle down doenst happen increasing inequality in developed en
Esp not african countrieis sucha s congo
Judicial failure/corruption- contracts not upheld, no one rent land properly, intellectual rpoerty copied, exploiation of workers- rulee of law nt enforced
War- spnedt on weapons not pubilic goods, destorus productive capacity
Trade agreements
Can involve two ountries reducing tarrifs on each others goods or perhaps reducing bureacracy by simplifying import/export procedures
Trade liberalisation
Might inivolve creating free trade areas
Creates larger amrket, greater access to raw materials, more comp
Should lead to lower unit costs as firms are able to gain econ of sclae
Examples of regional trade agreements
Eu
Usmca- us mexico canada
Free trade area
Members eliminate trade barriers between themselves but each country cant operate their own barriers against non members
Customs union
Members eliminate trade barriers between themselves and establish uniform barriers against non members and common external tarrif
Common market
A customs union ytat also provides for rthe free movement of labour and capital across own borders
Eg european single market
Econ union
Free movement of goods, money and workers
Integrate monetary and fiscal policies (not necessarily shared currency- that is monetary union)
Trade creation
Shift in domestic econ spending from a higher cost domestic sourec to a lower cost partiner source within customs union
As a result no tarrifs in intra uiinon trade
Ie uk families get insurance from chepaer fr rather than uk sources
Impact of trade creation
Increase consumer suprlys
Income effect- frees up inocme for othe rg&s- esp if domestic
Firms may benefit cheaper raw amterials compenent parts within customs union- ie western european car manufacturer can get tcheaper galss or rubber tyres from within
Trade creation should stimilate an increased intra eu trade within cutsoms union and efficient utilisation of scare resources
Gains in producer and consuemr welfare
Diagram trade creation
Like qupota one with lower for eu than world suppluy
Abcd producer gain
B+d net welfare gain
Trade diversion
Shift in domestic consumer spending from low cost world source to eu partner source higher cost
Tarrifs mean importing expensive to
Maning more expensive, high cost producer and consumer
Welfare loss
Trade diversino likely with agirculture and processed foods
Diagram trade diversion
Tarrifs
A+b welfare loss
C= rev tarrif to eu
Objectives of eu
Promote free trade- consumers and frirms should purchase from most efficient supplier within eu
Specialisation increases output to higher incomes and rising living standards
Firms expand by selling to larger markets taking advantage of of econ of scale
Greater comp between firms within eu- low prices ect
Free trade should enhance allocative and productive efficiency
European single market
Common market
Free movement of factors of production- largely capital and labour
As wel as eliminating barriers to trade such as tariffs and quoteas
Removal all border controls
Goods produced witin have same technical standards- min health and safety environmental standards but less standardisation with services market
Structure of eu
Bodies inc creating european policy
Council of ministors- made yp of heads of states or their reps- unanimous decision makiing
European parliament composed elected members like hol- rubber stamp and ammend
Eu commisoners are appt bu the gov of member countires- propose policy and are responsible with carrying out once ratified by council of ministers and eu parliament
Eu competition commissoner
Rresponsible for creating a level plaing field on which the effiicent workings of single market depends
Objective to encourage competition- make buisness behavoir as close to perfect comp as possibel
What does eu comp commissioner look into
Collusive aggeements between suposedly independent competition organisations
Power exeryted by firms with degree monopoly power
Distortions of market resulting from gov subsisies legal restrictionas and purchasing policies
Powers of eu competition commissioner
Investigate compliants
Initiate complaints
Search and size documents and records
Produce a reaosned decision on its findings which can be carried out by nat gov or commisisoner itself
Impose a fine of up to 10% annual business turnover
Examples of powers eu comp comisoner
Coca cola premises in ger austria and denamrj- ability to demoniat position by making retailers stock full range of coca cola- full line forcing and offers loyalty ddiscounsts that rwuire distributers to seell less competitor products
Interbrew/inbev- producer stella artois- dominant belgian beer brew raided of allegations of practises that excluded competing beers from bars
Ba fined 6.8 million euros for operating loyalty shceme that discourage travle agents from rival airlines ickets
Fr gov chalenged over subsidies to bank credit lyonnaise
Apple fined $14bn nfor sweetheart tax deal with irish gov which eu comcluded resulted in state subsidy
Limitations or problems with eu comp commisoer
V slow investigating and coming to conclusions
V diff comm to enforce deciisons on nat gov- serveral countries have notorious record for ignoring eu rulings
Eu comp comm tries to control retrains on trade by businesses while many gov want to lok after some rtad indisutries to proetct jobs and promote nat pride and own political dutrie
Trade off- country emp and efffective comp
In theory eu single market and single currency should lead to smae price of goods across eu yet vat fidd- challenging price harmonisation
If firms are operating business agreements or joint ventures dont consider harm to consumer can notify eu comp comm- asking exemption from ruling but problem idf later challenge
Benefits brexit
Free to negotiate trade delas
No longer transfer funds to eu to subsidise farmers
Gained fishing righst
No longer eu emp legislatin
Fiinancial services sector
Own targets green poer generatiuon
Free movement lab
Free subsisdies
Benefit brexit- free to negotiate trade deals
Since leaving eu singed trade deals 71 countries and 1 eu
But majority simply rollover deals copying terms of when in eu
Despite free trade deal eu, signif more barrierst o trade than when uk memebr of eu and single market- complex customes forms, uk financial firms lost their ‘passport’ to trade acorss eu without restirctions
Benefit brexit - no longer transfer funss to eu tyo sibsidise farmers
Treaty savung up 8bn - uk recived 3.5bn for farmers
Food oculd become cheaper in uk but famrers lose subsideis
Under wto rules cuountries may reduce import barriers as long as dont beneift some over others-
Yet stilll aas eu does too highe comon external tarrif on agriculture- leading to trade diversion
Brexit benefits gained fishing rights
May be better able to protect fishinhg sites as icelnend did so outside ey
Exluding eu fisherman from waters protects fishing righst
Brexit benefits- no longer emp legislation
Uk could scrap working time directive (no more 48h per week unless volunteer
Abandon agency workers directive which gives temp workers swme rights enjoyed by permenant staff
Free to remove rules on health ssafety maternity and paternity levae
Benefits brexit financial services sector
Free from obligation to abide by ever changing eu rules
2022 gov pans of edinburgh reforms further deregulation- scrap cap abankers nss, lure back more hedge funds
Benefits brexit= own targets green power generated
Could mean cheaper power but could undermine eu and global initiatives to reduce co2 emissions
Benefits brexit- no free movement labour
fewer migrants form eu
Reduce pressure on public services esp se
But led to labour shortage and minimal labour displacement at time
Costs brexit
Single market
Customes
Decrease exports
Financial services
Decrease gdp
Research projects science
Single market- costs brexit
Not frictionless trade and freedom of movement of factors of production
Costs brexit- customs
Uk exports customes frmms- red tape- increase cost
Delays discourage some su costoms buy british goods- uk farmers producing shellfish and salmon perishable goods
Whilst nissan and toyota agree remain- honda closed operations in eu, bmw no loonger pfouce electric mini in uk
Costs brexit- exports
Down 14% in 2021
Financial services cost of brexit
Lost direct access eu and passport rights which allowed major global banks to serve acorss eu from britain
Around 7,000 financial service staffa nd apporx 1.3trn on assets lost to eu
Cost brexit- gdp
4% fall
40bn lossu k gov tax rev
Cost brexit- exclusive research projects
Ie science
Ie horizzon european innovation programme and galieo project
Lead to brain drain and potentially damage uk econ in lt due to lack innobveation
But uk gov announce extra 15bj of dunss for uk based science projects
Discuss econ arguments for and against trade protection
Intro- define protectionsism, example tarrif quota
Benefits free trade- loss of tarrif
Krugman strategic trade theory
Retaliation
Exploitation of lab
Loa- limited protection with strategic tade thoery
Discuss econ arguments for and against trade protectionsim- benefits free trade
Net welfare gain free trade- diagram- choice market, gainning export marets ect
Net welfare loss result import tarrif or quota
Discuss econ arguments for and against trade protectionsim- krugman strategic trade theory
Protectionsim justified as gov create comparative advantage than nurturoing strategicc selected industry
Proetct infant and sunset industries
Protect against dumping, strategic or culturally impoportant industry
Discuss econ arguments for and against trade protectionsim- krugman strategic trade theory- con
Wto temporary protection of infant (china) and sunset (multifibre agreement) provided gradually lifetd as industry more comp or econ developed more comp industry to replace those in structural decline
Proetct against dumping justfied providing can be proved- but diff
Portect strategic or culturallyy important eval case by case
Discuss econ arguments for and against trade protectionsim- retaliation
Trade war-china and us, us and eu
1930s proetct deppen depression
Supply side policies target welfare policies may he;p to develop and econ adapt more effectively to structural eocn change rtahe rthan resorting to proetctionism
Eductaiona nd training by encourage occupational mobility and regiuonal policu with geographic immobility
Flexibility programme denmark v effective and copied
Discuss econ arguments for and against trade protectionsim retaliation no
Many ledcs cannot affort welfare and limited education provision infrastructure not position to compete with mroe comp econ
Protection measures with strategic trade theory may be jsutrifed
Discuss econ arguments for and against trade protectionsim- exploitation
Ie multinat sweatshops in developed countries
Yet cont freee trade but ngos and media highlight human and property rights- thus consumers do not have assymetircis info
Put pressure on retailiers and multiat to ensure integrity of suppyl change
Important to reach and enforce international agreements on proetction of property rights and human rights
International greements on tax avoidance reduce increasing global ineuality associated free trade
Nike accuseed exploitation but improved
Factors to imporve internat comp
Supply side policies
Well educated, higly skiled workforce
Infrasturcture
Investment r and d
Comp markets
Low tax
Deregulate
Low stable inflation
Stale exhcnage rates
Mneumonic for benefits free trade
Svectciie
