IntroductionIn current years, our country has made a great achievement in developing the industry, and we are now becoming closer and closer to a modern industrial country. However, there are many barriers against us, and we get too little from international trade. As a government officer, I just advise that Free Trading can be realized, and as well enter the European Union (EU) as soon as possible. As a European country, the benefits of doing this will be absolute.Section 11.1)Efficiently using global resources, enriching and facilitating people’s life.Through trading internationally, we can purchase materials and other goods from other countries at a quite lower price, this can reduce our cost of producing products, and our people can buy more kind of goods just in domestic shops.2)Making the enterprises of Berce become more competitive and full filled withinnovation spirit. Since international trading is trading between different countries, companies from other countries will occupy the international market with our companies. In order to facing these challenges, our companies should make changes to adapt the global market, and this will help them establish the innovation spirit and the companies will be more competitive.3）This is also a good chance to raise our international standing. International trading can not only bring us wealth, but also bring us the opportunity to be known by people throughout the world. We should make use of international trading to participate in the international activities, so that our national power can be shown and developed.2. Free trade, now sometimes termed international trade, had the original intention that goods and services could be exchanged freely between countries with no barriers to this exchanges.For example, since the policy of free trade, Unilever purchase material from other countries more easy in the European Union, and sell its products to any other European Union countries without paying tariff. Governments of the European Union countries also won’t set an y barriers against Unilever. Through free trade, Unilever can acquire materials which it cannot or expansive to produce, and no tariff let its good become more cheap, since its cost been reduced down. Since Unilever is a multinational organization, through the international division of work and exertion of the comparative advantage, the resources will be positioned reasonably, also the free trade countries’ employment will be raised.3. Absolute advantage is said to occur when one country can produce a good or service to a pre-determined quality more cheaply than another country, for example, the UK may be able to produce cars more cheaply than say Indonesia. But Indonesia can produce excellent coffee far more efficiently than the UK. Each country is said to have an absolute advantage in producing these single commodities.Comparative advantage was first described by David Ricardo, a British economist in 1817. effectively it states that: ‘even when a country has an absolute advantage over another country in terms of commodities they wish to trade it will still be to their mutual advantage to trade providing each country has a comparative cost advantage’.Example: The economist Paul Samuelson provided another well known example in his Economics. Suppose that in a particular city the best lawyer happens also to be the best secretary, that is he would be the most productive lawyer and he would also be the best secretary in town. However, if this lawyer focused on the task of being an attorney and, instead of pursuing both occupations at once, employed a secretary, both the output of the lawyer and the secretary would increase.4．Protectionism1)Protecting industries: if a new industry is showing promise of growth and tobecome a major player, countries may feel a need to nurture this industry while it grows to become large enough and competitive enough to match foreign firms which are already enjoying economies of scale. These new industries are sometimes termed ‘infant’ or ‘sunrise’ industries.2)Over specialization: some industries may be protected because they are almostthe only one and if they decline drastically this could have a very severe impact on an economy.5. The most well known barriers to trade are tariffs. These are taxes or customs duties placed on foreign products to artificially raise their prices and this hopefully, suppresses domestic demand for them. Sometimes they may be used by a government as a way of raising revenue if they feel they cannot stem the flow of goods inwards. The United Kingdom at one stage had a special tax which was levied on imported cars. The purpose was to try and protect the UK automobile industry from foreign competition. But it failed because the UK population ‘ perceived’ the imported cars to be still better value than UK sourced vehicles and the proportion of imported to home produced vehicles steadily rose. This particular tariff was obviously not very effective.Embargoes: these are an extreme form of barrier. In effect a country which imposes an embargo is saying ‘we will not allow you to import any quantity at all’. These tend to be only used when there are very serious disputes between countries or in even more extreme situations such as war e.g. gulf wars, Kosovo etc.6. The WTO dealt with in attempts to establish itself as the policing body promoting free trade.Dumping: anti-dumping policy is one of the few forms of restriction as allowed by the two rules.As an example, WTO issued final rulings on a long-term Brazil-U.S. cotton dispute, recently, authorizing Brazil to impose annual sanctions worth some 294.7 million U.S. dollars against illegal U.S. subsidies. By these two ways, WTO successfully settled many trade disputes.7. EU initiatives for simplifying national and community rules include SLIM(simpler legislation for the internal market) and the European business test panel, which allows for consultation with business during the drafting stage of new legislation. Currently, a single currency is in use between the 16 members of the Euro zone since 1999. If considered as a single economy, the EU makes it the largest economy in the world by nominal GDP and the second largest trade bloc economy in the world by PPP valuation of GDP. It is also the largest exporter, and largest importer of goods and services, and the biggest trading partner to several large countries such as India and China.Section 28. The balance payments are the record of all financial transactions between a country (in this case the UK) and the international 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 Current Account concerns income and expenditure and is divided into four categories. Includes Trade in Goods: covers the exports and imports of goods; Trade in Service: this will be the result of exporting services against the import of services. Income: this comes to a very small extent from compensation for employees includes direct and portfolio investment income and reserve assets; Current Transfers: consists of payments and receipts where there is no corresponding exchange of a good or service.The Capital Account consists of Capital Transfers and acquisition and disposal of Non-produced Goods. The investment grants by the government and debts which the government has agreed with the creditor do not need to be metThe Financial Account which is the flow of direct portfolio and other investment and reserve assets.9. The trends in the UK economy over the last 30 years show a marked increase in the balance of trade deficit. Even a very marked increase in the income generated in the income section has not been sufficient to overcome this deficit and therefore the current account balance has also usually been in deficit.However these deficits have generally been reasonably well balanced out by surplus figures in the capital account. There has also been a much more relaxed attitude in any event towards the balance of payments position. The reasoning is that whilst a deficit is not particularly desirable if it can be financed relatively easily then there is no real reason to allow this to cause problems in the UK economy. The UK economy has shown fairly consistent growth over the last decade and this has helped.10. A UK firm manufactures hard discs for a computer firm in the USA. The cost is £100. The rate of the $ to the £ is $1.5 to £ 1. Cost to the American firm is £150. The rate change s to £=$2 which means the pound is stronger and the cost of the disc to the American firm is now$200. The American firm may consider this to be too expensive and look elsewhere for a cheaper alternative. If the value of the pound then falls to £1 to $1 then the cost to the American firm will be $100 and they are likely to purchase more at this cheaper price.The above example hopefully explains the effect that falls and rises in the value of a country’s currency can cause. Many businesses in the UK, particularly in the manufacturing sector complain bitterly about the strength of the UK pound.11. Advantages of single currency for UK:1)Reduce costs: firms and individuals do not have to pay as they move themselvesor goods or services from one EU country to another.2)Reduce exchange rate uncertainty: the UK pound will be at the same rate for allERUO members.Disadvantages of single currency for UK:1)Transitional cost: mainly those of changing systems, e.g. tills, computerizedsystem. Other aspects include staff training.2)Inability to devalue independently: individual governments lose this policyinstrument.12. Effect on individual:1)Transparency: the above also reduces the scope for price discrimination and willhelp create pressure to keep prices low.2)Keeps interest rates lower: the commitment to low inflation should alloweconomies to operate with lower costs.Effect on business:1)Increased foreign investment: direct inward investment should be attractedbecause of the reduction of uncertainty.2)Asymmetric interest rates: the UK operates a variable rate system. Most eurocountries operate a fixed rate system.13.1)Subsistence agriculture: much of the land is given over to this and there istherefore very little capital equipment employed and low productivity.2)Birth rates are usually high with a low life expectancy. In the most affluentcountries life expectancy is in the high 1970s and into 1980s. in the LDCs it may be as low as the 1940s.Section 314.1)They may be expected to increase taxes to help pay for investment –but theydon’t have a tax base.2)The aid programmers they get from the World Bank or IMF often carryconditions which they feel are difficult to comply with, and are expensive.The UK is one of the countries which appears to recognize this and is acting to reduce the debt owed to it by LDCs.15. These have already been mentioned earlier but to recap: they are companies which produce products in more than one country. Foreign multi-nationals which have branches in various countries including the UK are FORD, GENERAL MOTORS, NESTLE, IBM, MITSUBISHI and NISSAN. They may bring the following benefits:1)Increase employment.2)Increase income.3)Invest in new technology.4)Force domestic industries to modernize.They may cause the following problems:1)They may use up natural resources very quickly.2)They may use their financial strength to impose their will on host countries.3)They will move to wherever costs are lowest.4)They may transfer most of their profits back to home country.ConclusionCompany should know that there are many gains come from trading internationally. But many countries have lots of trade barriers to protect their own industries, because they have absolute or comparative merits. Therefore, organization like WTO or EU provides a basic flat form like free trade to transfer goods or services. Otherwise, BOP is the exceedingly main standard to ensure the level of transaction between one country and others. It makes of current account, capital account and financial account. The European countries utilize single currency in recent years; growing developed countries place their extra capital into LDC or NIC.Reference:(1).Economics 2: The World Economy by China Modern Economic Publishing House, Page –33-35(2)./library/Enc/FreeTrade.html(3)./wiki/ASEAN_Free_Trade_Area(4)./wiki/Absolute_advantage。
