1、Section 1: International TradeThree gains from trading internationally-3Free Trade-3Absolute and Comparative Advantage-3Protectionism-4Barriers to trade-4WTO and EU-5Section 2: International FinanceBalance of Payments and General trends in UK Trade-6Relationship between the exchange rate and the bal
2、ance of payments14Single Currency-15Effects on individuals and business of the Euro-15Section 3: Less Developed Countries (LDCs)Characteristics of a LDC-16Current issues that face LDCs-16The impacts of multinationals on LDCs and NICs-16Conclusion-16References-17Introduction:As a member of the govern
3、ment of nation on the periphery of Europe, it is my obligation to illustrate the benefits of joining the EU to the Premier. In this report, I will analyze 15elements in next three parts to make a clear explanation of benefits of joining the EU.Three gains from trading internationally:To begin with,
4、the international trade could increase world out-put. The tendency of globalization brings the firms more opportunities to gain the labor, resources, contracts and new technology. The supply and demand will be improved with the improvement of companys productivity.Once the supply has been improved,
5、the goods and services were produced at lower cost and there are more and more competitions, the price of the product might fall which means consumers could get more choices and cheaper goods.In addition, the most important gaining of international trade is it can generate economic growth. Free trad
6、e could increase sales, profit margins, and market shares and the both demand and supply level has updated. Meanwhile, the producer needs more resources, labor and capital to produce more to satisfy the global market. It direct result in improving the material market, finance market, and may decline
7、 the unemployment rate.Free tradeFree trade is a concept that there is no barrier to goods and services exchanged between countries. Since different countries have different terrain, weather, resources and technology, the international trade would bring the goods which are more valuable than the loc
8、al people produce it by themselves. A good example for free trade is in Nov.18, 2004, Chinese President and Chilean President declared the start of the FTA negotiations. According to the agreement, the two countries would start tariff reduction of goods trade from July 1, 2006. Tariff of products ac
9、counting for 97% of the total of the two countries would be zero in ten years. China and Chile would carry out free trade in education, science & technology, environment protection, labor, social security, IPR, investment and promotion, mineral and industry. This agreement has promoted the free trad
10、e between China and Chile successfully.Absolute and comparative advantageAbsolute advantage refers to the ability of a particular person or a country to produce a particular good with fewer resources than another person or country. Absolute advantage is said to occur when one country can produce a g
11、ood or service to pre-determined quality more cheaply than anther country. It stands contrasted with the concept of comparative advantage which refers to the ability to produce a particular good at a lower opportunity cost. Opportunity cost is defined as the cost of choosing a good or service measur
12、ed in terms of the next best alternative given up. A country has a comparative advantage in producing a good if the opportunity cost of producing that good in term of other goods is lower in that country than it is in other countries.Example: Korea and Japan have following production possibilities f
13、or two commodities, mobile phones and computers; assume that all the resources owned by each country are same.Mobile phoneComputerJapan200020000Korea100015000It is clear that Japan has an Absolute advantage over Korea in both commodities. But the advantage it has is much greater for mobiles. Using t
14、he same resources as Korea it can make twice as many mobile phones.For Japan the cost of 1 Mobile phone is 10 bales of Computers, i.e. 20000/2000For Korea it is 15, i.e. 15000/1000But if we look at the case of computers we will find that here for Japan the cost of a bale of computers is one-tenth of
15、 a Mobile phone while for Korea it is one fifteenth. In terms of the output of Mobile phone foregone (opportunity cost), computer is cheaper in Korea than Japan. Korea has a Comparative advantage in computer while Japan has comparative advantage in mobile phone.ProtectionismProtectionism is the econ
16、omic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports and anti-dumping laws in an attempt to protect domestic industries in a particular nation from
17、foreign take-over or competition.Here are two examples of protectionism:1: Britain imports bananas from its ex-colonies in South America while USA owns huge banana plantations in South America. In 1999 Britain refused to import bananas from South America, so the US government slapped tariffs on some
18、 British-made goods. The most serious one was a punitive tariff of 100% on Scottish wool products in order to limit the import from Britain.2: Another example of protectionism is in January, 2009, American government settled a policy that only the American steel can be used in America. The American
19、government tended to use this policy to reduce the loss in financial crisis and it helps the steel workers to keep their jobs. In this example, protectionism protects the domestic lower-skilled labor and domestic industries. Barriers to tradeTo protect a countrys own industries, the country which in
20、 adverse side need to find some ways to be barriers to limit the import products, usually, the two methods aretariff and non tariffs.Tariff is taxes or customs duties placed on foreign products to artificially raise their prices and this hopefully, suppresses domestic demand for them. This tax may b
21、e ad value, that is, a percentage of the price of the goods or specific, that is, a tax per unit of weight or physical quantity.For example, in January 12, 2009 the Russian government raised the expropriation tariff (up to 30 percent) for the cars import in the next nine months. The import cars pric
22、e will be increased to be WP (price for the whole world) adds the tariff, since the price is increasing, the sales of the import cars must fall down. The customers might choose the Russian car instead of import cars since it is cheaper.Non-tariff barriers traditionally have been actions such Quotas,
23、 embargoes, exchange control and import deposits. Probably the best known of these is the quota. This is a physical limitation on the quantity of import. Quota is a physical limitation on the quantity of imports which had been acknowledged by local laws. Usually the importers need to apply to pay fo
24、r a license to sell goods.For instance, Russia uses another method to limit foreign car import since 2008to limit the quantity of import; only a few companies which have the import license could import cars and have a selling upper limit. Russia uses these methods to restrict the import quantity, an
25、d during the government limited foreign goods import, it can promote the domestic industries.WTO and EUIn 1948, the General Agreement on Tariffs and Trade (GATT) was established by the developed countries. In 1 Jan 1995, the GATT was supplanted by a new institution, the World Trade Organization (WTO
26、) and aims to improve trade and investment flows around the world. It is an international body seeking to promote free trade by opening markets through the elimination of import tariffs. The organization administers trade agreements, monitors international trade policy and acts as a forum for trade
27、negotiations. The four main goals of WTO are: freeing global trade through universally lowered tariffs, imposing the same rules on all members in order to homogenize the trade process, spurring competition through lowered subsidies, and ensuring the same trade concessions for all member nations. The
28、 WTO also provides technical assistance and training for developing countries. WTO aims for equal representation among members by granting each member country most-favored nation status; when a member country bestows a trade privilege on another nation, the privilege must be extended to all other me
29、mber countries. Another tenet is national treatment, which behooves countries to treat foreign imports equally with those produced domestically.The best example for joining the WTO is the join of China in 2007, after that, China achieves lots of benefits from the decrease of tariff, limitations and the simplification of trading procedures.EU stands for European Union and is an economic union, which aims to abolish tariffs and quotas among members, common tariff and quota system, restrictions on factor movements and harmonization and
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