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