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1、编号：时间：2021年x月x日书山有路勤为径，学海无涯苦作舟页码：第11页 共11页The World EconomyTutor: Qiang LuoStudent: Sibei Lu1 Introduction. 32 Gains from international trade.33 The free trade/.34 Absolute and comparative advantage.35 Reason of trade barriers46 Trade barriers.47 Uses of The World Trade Organisation (WTO).58 The rol
2、e of European Union in promoting trade.59 Composition of the balance of payments510 General trends in UK trade611 The balance of payments affected by exchange rates712 Advantages and disadvantages of the single currency of the UK.713 Two effects on individuals and businesses of single currency.714 C
3、haracteristics of Less Developed Countries (LDCs).815 The two current issues that face LDCs.8 16 Impacts of multinationals on Newly Industrialized Countries and LDCs.917 Conclusion.918 Reference.9IntroductionIn this report, I will introduce free trade relevant organizations with example, such as wha
4、t is free trade, what are its benefits and so on. The resources of this report will be based on knowledge got in the lessons and the information on different website. Gains from international tradeNow, many countries strive to develop international trades, which because it bring many benefits to peo
5、ple. Firstly, the resources around the world are used efficiently because of international trades, and to support more chances of development to many countries, for example, the cost of rice is lower in China than other developed countries, and China can export rice to change some products that prod
6、uce in China with high cost. Secondly, international trade can make enhance the competition, creativity and spirit of innovation of enterprises and countries, for example, China took part in WOT, automobile industry got strong impact of imported car with low taxation, but then there appear some Chin
7、ese automobile business such as BYD and GEELY. Thirdly, some developing countries can raise capital by international trade to reduce the gap between developed countries. For example, in the last 30 years, exporting is the main method to push economic growth in China, and it had obvious effect.The fr
8、ee tradeFree trade is a system of trade policy that allows traders to trade across national boundaries without interference from the respective governments. Under a free trade policy, prices are reflection of true supply and demand, and are the sole determinant of resource allocation. For example, m
9、any fruits that are produced in Taiwan are treated by zero tariff, and from 12th September 2010, there are another five kinds of fruit got this treatment, this is a kind of free trade.Absolute and comparative advantageAbsolute advantage is said to occur when one county can produce a good or service
10、to a pre-determined quality more cheaply than another country. Comparative advantage is the original basis for International Trade, although there are now some qualifications the original concept. For example:TableT-shirtCountry A2402160Country B601800We will clearly see that Country A has an absolu
11、te advantage over Country B in both commodities. But the advantage it has is much greater for Table. For Country A the cost of 1 Table is 9 bales of T-shirt, which is 2160/240For Country B it is 30, which is 1800/60But if we look at the case of T-shirt then we will find that here for Country A the c
12、ost of a bale of T-shirt is 1/9 of a tractor, and Country B it is 1/30. In terms of the output of table foregone, T-shirt is cheaper in Country B than in Country A, so Country B has a comparative advantage in T-shirt.Reason of trade barriersFirstly, trade barrier is a measure to protect some industr
13、ies that are infant or sunrise and without competition that are compared with foreign business. For example, Barack Obama, the American president, decide to impose punitive tax of tire that is imported by China for 3 years, and the firs is 35% of tax. Secondly, as the improvement of peoples living s
14、tandards, people increasingly care about the impacts of products on health and safety, thus there are many trade barriers about health, safety and hygiene, for example, the Europe has high health, safety and hygiene standards of Chinese exporting foods, there many Chinese business can not meet the s
15、tandards and then give up to export foods to Europe. Trade barriersTrade barriers are government-induced restrictions on international trade. Such as embargoes that are an extreme form of barrier and usually relate with politic. A resolution was passed by the United Nations, which is implementing oi
16、l and weapon embargoes. It is well known, oil industry is the mainstay industry of Libya. It will bring strong impact to Libya. Subsidies are payment by government to producers, very often agricultural to reduce the costs of supplying products. For example, European government offers subsidies to fa
17、rmers to protect agriculture. Uses of The World Trade Organisation (WTO)The World Trade Organisation (WTO) is an organisation that intends to supervise and liberalize international trade. The nature of WTO is through negotiations of multi-lateral to phase down trade barriers and then achieve interna
18、tional trade of liberalization, and resolve conflicts of trading between countries. For example, America litigated Chinese enterprises dumping of goods (Warmwater Shrimp and diamond saw blade), and take the measure that zeroing, the Chinese side thinks it is unfair and break the rule of WTO and appl
19、ying for WTO to set expert group. This example show clear that WTO is very important platform to resolve trade disputes.The role of European Union in promoting tradeThe European Union (EU) is an economic and political union of 27 independent member states which are located primarily in Europe. The f
20、ree movement of goods, people, services and capital is the fundamental principle of the EU. The EU is organizer, plotter and manager in promoting trade. EU has once currency, which resolves many trade problems that about exchange rate, it has positive impact on promoting trade. Beside, EU promote fr
21、ee trade between member countries, but set trade barrier to other non-member countries to protect businesses that in member countries, such as flat tax. Composition of the balance of paymentsBalance payment is the record of all financial transactions between a country (in this case the UK) and the I
22、nternational economy. It is split into two areas. Firstly the Current Account measuring Trade in Goods and Services and the Capital Account which tracks Capital flows into and out of the UK.The main compositions of the balance payment are:l The Current Account this section concerns income and expend
23、iture and is divided into four categories. These are Trade in Goods, Trade in Services, Income and Current Transfers.l The Capital Account this is the account which was first established in 1998, it has two categories that is Capital Transfers and Acquisition/Disposal of non produced/non financial A
24、ssets, purchase or sales of e.g. land by foreign embassy or patents, copyrights, trademarks, franchises and leases. l The financial Account this has the same four categories as the income account that are Direct Investment, Portfolio Investment, Oil Investment and Reserve Assets.l The International
25、Investment Position the stock of External Financial Assets and Liabilities.General trends in UK tradeIn the last 30 years, the UK has traditionally had a fairly large deficit in the trade of goods balance, particularly in 1989, the deficit in trade of goods reached the higher point. Except for early
26、 1980s, the main reason is export of North Sea Oil. On the contrary, the trade in services that has surplus, from 1995, there it rose dramatically. But no enough to counter the very large deficit of trade in goods, therefore the Current Account Balance has also usually been in deficit. The balance o
27、f payments affected by exchange ratesAs we know, balance of payments and exchange rates both are related to export and import, so balance of payment is affected by exchange rates, which can be proved by a simple example:A UK firm manufactures software that named A for a USA company, the UK firm sale
28、 A as 50, the exchange rate between dollar and sterling is $1.5 = 1, which means the USA company has to spend $75 to buy A. If the exchange rate changes to $2 = 1, which means the USA company has to spend $200 to buy the a same product. As the increasing of cost, the USA company might change the sup
29、plier who provides a cheaper price. For the same reason, the strength of the UK pound could affect many UK businesses particularly in manufacturing sector, because their products are more difficult to sale to oversea with the original price. The export decreases for effect of exchange rate, therefor
30、e, the balance of payment will be affected as well.Advantages and disadvantages of the single currency of the UKDisadvantages:l Firstly, the government of the UK will lose power to control the currency, which means the UK will not have the independent monetary policy for example, the UK government c
31、an decide how many currency to supply in the year, and the government can according to the own economic circumstance of the UK to decide the interest rate.l Secondly, misalignment of Exchange rates an exchange and interest rate which benefits most members may not benefit all.Advantages:l Firstly, th
32、e oversea investment will be increased, because the single currency avoids the risk of exchange rate fluctuation.l Secondly, the single currency eliminates the price discriminations and will help create pressure to keep prices low.Two effects on individuals and businesses of single currency Effects
33、on individuals:l Firstly, the single currency will eliminate the price discrimination, which can benefit individual consumers.l Secondly, the single currency will save the cost of exchanging, for example, if English travel to other Europe country, and people do not need pay money to bank for exchang
34、ing currency.Effects on businesses:l Firstly, businesses do not need to consider the risk of exchange rate of fluctuation.l Secondly, businesses can save the cost of exchanging currency, for example, a European business want to invest in the UK, this business do not need to exchange euro to sterling
35、, which means it do not need pay to the banks.Characteristics of Less Developed Countries (LDCs)Less developed countries are nations with a low level of material well-being. The major characteristics of less developed countries are subsistence agriculture, little capital equipment employed and low p
36、roductivity. The birth rate and infant mortality is high, people with low life expectancy. For example, The Federal Democratic Republic of Ethiopia is a typical less developed country, the average GDP is 121 dollars. Agriculture is the majority of economic system (coffee beans, flowers, Catha edulis
37、 Forssk), lack of foundation of industries. The weak defense force is the feature of less developed country as well. As of 2004, the enrollment of university in Ethiopia is 2.5%, which reflect the feature of less developed country.The two current issues that face LDCs LDC s have to face the issue th
38、at how to achieve sustainable development. In LDCs, people have less money and material to meet their needs, thus they do something for short-term interests, for example, in Ethiopia, there are many farmers grow Catha edulis rather than crops, because the price of Catha edulis is very high, but crop
39、s can not have harvest if the field was grew Catha edulis, which means if farmers grow Catha edulis, they have to always grow it. Secondly, many children can not accept formal education, because these LDCs have not enough resources and facilities, on the other side, the parents dont have the sense o
40、f importance of education, which causes the younger generation is same with the last generation, and then the development of the country would be stopped. The suggested solution could be looking for help from international aid agencies, such a World Bank, to get money to develop industries and educa
41、tion.Impacts of multinationals on Newly Industrialized Countries and LDCsMultinationals could increase income, bring more jobs, and economic growth and so on. For example, Inter invests 0.375 billion dollar to build a factory in Chengdu of China, which can offer around 3000 jobs. Inter can attract r
42、elevant enterprises come to Chengdu to develop the IT industry of Chengdu. Besides, Inter Company operate internationally with large volume of importing and exporting, which can promote the development of delivery industry. The World Bank set up a project with 5 billion dollars to invest the local c
43、urrency denominated bounds of less developed countries, which can help less developed country to develop industries, education and health care industry and son. Besides, the money to feed and save more people, which can help the society is stable, ConclusionFree trade and sustainable development are
44、 vital elements of world economy, international trade could promote the development of economy, but for the large range, more issues have to be considered, such as exchange rate, political risk and barriers and so on. However, the international trade brings more benefits to us than drawbacks, which meets the needs of us better and save the nature resources. Reference http:/en.wikipedia.org/wiki/Less_developed_countryEconomics 2: The World Economy第 11 页 共 11 页