The Report on Economic 2.docx

The Report on Economic 2.docx

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TheReportonEconomic2

TheReportonEconomic2

ByZhouJiewen

115422294

Class5

Tableofcontests

1.Introduction

2.Outocome1

3.Outocome2

4.Outocome3

5.Conclusion

6.Reference

Introduction

Thisisareportabouttheworldeconomics,thereissomedetailanalysisabout15topicsoftheworldeconomics.

Outocome1

1.BenefitsofInternationalTrade

Thereare6kindsofbenefitofInternationalTrade:

1,Increasedworld-wideoutput2,Goodsandservicesproducedatlowercost3,Greaterrangeofcommoditiesforconsumers,morechoice4,Overallincreaseinstandardofliving5,Producerscanobtainbenefitsofeconomiesofscale（multi-nationals）6,Globaltrademayhelptoreducedifferences

Therearesomeexplainaboutthreepointsofthosebenefits.

（1）Goodsandservicesproducedatlowercost.Throughinternationaltrade,countriescansourcetheirrawmaterialsandcomponentpartsfromothercountrieswhichcanproducedmostcheaply.Consumersalsobeabletopurchasetheirgoodsandservicesatalowerprice.

（2）Greaterrangeofcommoditiesforconsumers,morechoice.Itallowscountriestoexchangetheirrangeofgoodswithothercountriesproducingadifferentrange.Thisgivecomsumersofeachcountryagreaterchoice.（3）Overallincreaseinstandardofliving.Becuasemorelabourisusedincountrieswhereitischeapertheywillgainfromthereward-wages-andtheywillbeabletoconsumemoreofthegoodsandservicesavailable.

Example:

Throughinternationaltrade,manyforeigncarbrandcompanyenterthedomesticmarket,wehavemorechoice.

2.FreeTrade

Definition:

Freetrade,nowsometimestermedinternationaltrade,hadtheoriginalintentionthatgoodsandservicescouldbeexchangedfreelybetweencountrieswithnobarrierstothisexchanges.Thismeanscountriescantradewithoneanotherwherevertheyareintheworlandwhilegoodsstillrequiretobetransported.Servicesarenowveryoftendeliveredelectronically.

Example:

Sincethepolicyoffreetrade,UnileverpurchasematerialfromothercountriesmoreeasyintheEuropeanUnion,andsellitsproductstoanyotherEuropeanUnioncountrieswithoutpayingtariff.GovernmentsoftheEuropeanUnioncountriesalsowon’tsetanybarriersagainstUnilever.Throughfreetrade,Unilevercanacquirematerialswhichitcannotorexpansivetoproduce,andnotariffletitsgoodbecomemorecheap,sinceitscostbeenreduceddown.SinceUnileverisamultinationalorganization,throughtheinternationaldivisionofworkandexertionofthecomparativeadvantage,theresourceswillbepositionedreasonably,alsothefreetradecountries’employmentwillberaised.

3.AbsoluteadvantageandComparativeadvantage

Absoluteadvantageissaidtooccurwhenonecountrycanproduceagoodorservicetoapre-determinedqualitymorecheaplythananothercountry.

ComparativeadvantagewasfirstdescribedbyDavidRicardo,aBritisheconomistin1817.effectivelyitstatesthat:

‘evenwhenacountryhasanabsoluteadvantageoveranothercountryintermsofcommoditiestheywishtotradeitwillstillbetotheirmutualadvantagetotradeprovidingeachcountryhasacomparativecostadvantage’.

Example:

CountryAandCountryBhavethefollowingproductionpossibilitiesfortwogoods-WineandOliveoil.Eachcountryhas10resourcesanddevoteshalfoftheseresourcestoeachgood.

Wine

Oliveoil

CountryA

100

1000

CountryB

50

800

WecanseethatCountryAhasanAbsoluteAdvantageoverCountryBinbothgoods.ButtheadvantageithasitmuchgreaterforWine.AusethesameresourcesasBcanmaketwiceasmuchwine.HoweverifwelookatOliveoilfortheresourcestheadvantageis1.25.

Thewecanlookatthedomesticopportunitycostratios:

ForAthecostof1bottleofwineis10bottlesofoliveoil（1000/100=10）.ForBitis16（800/50=16）.

ButifwelookatthecaseofoliveoilthenwewillfindthathereforAthecostofabottleofoilisone-tenthofabottleofwine.whileforBitisone-sixteenth.Intermsoftheoutputoftractorsforegone（opportunitycost）,oilischeaperinBthaninA.soCountryBhasacomparativeadvantageinoil.

Thecountriesmaydecidetotradebasedonthiscomparativeadvantage.Theymaycriticallydecidethateachcountrywill“sepecialise”andAwillproducewineandBproduceoliveoil.

ChangesinComparativeAdvantageoftheUK:

IntheUK,longnotedforitsexpertiseinmanufacturingithasnowbecomemouchmorecompetitiveinwhatareknownasthe“KnowledgeIndustries”.Thesearecomputersoftware,businessservicesandpharmaceuticals.Theseindustriesareseentobringthepossibilityoflongtermgrowth,whiletheindustriesbasedonheavycapitalinvestmentorrequiringrelativelycheaplabourwillnotbecompetitivewithdevelopingcountries.

4.protectionism

Definition:

Protectionismistheeconomicpolicyofrestrainingtradebetweenstatesthroughmethodssuchastariffsonimportedgoods,restrictivequotas,andavarietyofothergovernmentregulationsdesignedtoallow（accordingtoproponents）"faircompetition"betweenimportsandgoodsandservicesproduceddomestically.

Thereasonsofgovernmentscarryoutprotectionism:

1.ProtectingEmployment2.ProtectingIndustries3.Dumping4.StrategicIndustries5.OverSpecialisation6.BalanceofPaymentsDeficit

Exampleofprotectingemployment:

Inthelate1990s,wheneconomiessuchasJapan,FranceandGermanywereeitherstandingstillorevenshrinkingslightly.theUnitedStatestookactiontoprotecttwoofitsindustries,SteelandFarming.atthattime.

ExampleofBalanceofPaymentsDeficit：

In1966,theUKwasinthispositionandusedapackageofmeasurestotryandrecoverthesituation.ThesewereExchangeControlmeasures,importsurcharges（tariffs）,andanimportdepositscheme.

5.TradeBarriers

TherearetwokindsofBarrierstoTrade-TariffsandNonTariffs

Tariffs:

Thesearetaxesorcustomsdutiesplacedonforeignproductstoartificiallyraisetheirpricesandthishopefullysuppressesdomesticdemandforthem.Thesetaxesmaybeadvalorem,thatis,apercentageofthepriceofthegoodsorspecific,thatis,ataxperunitofweightorphysicalquantity,e.g.perhapsonrawmaterials.

Example:

InJan12,2009.theRussiangovernmentraisedexpropriationtariffforthecarsimportinthenextninemonths.Theimportcar’spricewillbeincreasedtobeWP（priceforthewholeworld）addsthetariff.sincethepriceisincreasing,thesalesoftheimportcarsmustfalldown.

NonTariffsBrriers:

Quota.Embargoes.Exchangecontrol.ImportDeposits.VoluntaryExportRestraints.ProductStandardProcedures.ComplexCustomsProcedures.GovernmentControlPolicy.Subsides.Campaigns.Dumping.

Example:

since2008,Russialimitedthequantityofimport.duringthetimes,itpromotethedomesticindustries.

6.WTO

TheWorldTradingOrganisationthatisbasedinGenevacameintobeingon1stJanuary1995.ItreplacedtheGeneralAgreementonTariffsandTrade（GATT）whichhadbeenestablishedin1948.TheWTOwasestablishedasaMultilateralTradeOrganisationcoveringgoods,servicesandintellectualpropertyrights.TheWTOhas156membersnow.

Thereare3rolesoftheWTO:

1.Promoter2.Supervisor3.Policymaker

FunctionsoftheWTO:

1.Tradenegotiation2.buildingupatradecapacity3.disputesettlements4.implementationandmonitoring5.Non-discrimination6.moreopen7.morecompetitive8.morebeneficialforLDCS9.protectenvironment

Example:

WTOissuedfinalrulingsonalong-termBrazil-U.S.cottondispute,recently,authorizingBraziltoimposeannualsanctionsworthsome294.7millionU.S.dollarsagainstillegalU.S.subsidies.Bythesetwoways,WTOsuccessfullysettledmanytradedisputes.

7.EuropeanUnion

TheintroductionofEU:

EuropeanUnionwasestablishedformallyin1993,itsheadquartersisinBrussels（thecapitalofBelgium）.EUwasdevelopedfromEC（EuropeanCommunity）.Thereare17membersinEU,now.TheEU’sinstitutionsinclude:

CouncilofMinisters,Commission,CourtofJusticeandEuropeanParliament.

TherearesomeroleofEU:

1.Thefreemovementofgoods,people,servicesandcapitalisthefundamentalprincipleoftheEU.2.Particularprioritiesincludeimplementingthefreemovementofservices,removingtheremainingobstaclestotradeingoods,andimprovingtheregulatoryframework.3.EUinitiativesforsimplifyingnationalandcommunityrulesincludeSLIM（simplerlegislationfortheinternalmarket）andtheEuropeaanBusinessTestPanel,whichallowsforconsultationwithbusinessthedraftingstageofnewlegislation.4.Aframeworkforensuringtheeven-handedandeffectiveenforcementofsinglemarketruleshasbeenestablished.

Data:

thetotalimportingofEUfromJantoSep2011hadreached＄33551billionwhichhasincreased22.6%comparingwiththelastyear,Inaddition,theexportsare＄17701.5billionandincreased22.2%.

Outocome2

8.Balanceofpayment（BOP）

ThestructureofBOP:

TheCurrentAccount,TheCapitalAccount,TheFinancialAccountandNetErrorsandOmissions.

TheCurrentAccount:

Thissectionconcernsincomeandexpenditureandisdividedintofourcategories.TheseareTradeinGoods（coverstheexportsandimportsofgoods）,TradeinServices（thiswillbetheresultofexportingservicesagainsttheimportofservices.）,Income（thiscomestoaverysmallextentfromcompensationforemployeesincludesdirectandportfolioinvestmentincomeandreserveassets.）andCurrentTransfers（consistsofpaymentsandreceiptswherethereisnocorrespondingexchangeofagoodorservice.）.

TheCapitalAccountconsistsofCapitalTransfersandacquisitionanddisposalofNon-producedGoods.Theinvestmentgrantsbythegovernmentanddebtswhichthegovernmenthasagreedwiththecreditordonotneedtobemet

TheFinancialAccountwhichistheflowofdirectportfolioandotherinvestmentandreserveassets