The World Economics

Topics: International trade, International economics, Balance of payments Pages: 9 (3039 words) Published: March 19, 2013
Contents Page
Section 13
Section 24
Section 35
Section 46
Section 57
Section 68
Section 79
Section 89
Section 910
Section 1010
Section 1111

In this report, as a member of the government of the nation on the periphery of Europe currently, I will recommend 11 issues related to the free trade, the balance of payment, single currency and etc. And I will give every of them my understanding and analysis to figure out why our nation should choose to join EU and what could we get through joining it as well as the advantages and risks.

On the basis of the report, I supposed to do the project in order to give the introduction and commentary of the following contents: free trade, absolute and comparative advantages, trade protectionism and barriers, WTO and EU, the balance of payments and how it affected by exchange rate, general trend in UK over last 30 years, single currency and less developed country. All of these contents will be explained specifically as following.

Section 1: Free trade
Free trade is defined as the trade based on the unrestricted international exchange of goods with tariffs used only as a source of revenue, which means one country can trade with another wherever they are in the world. For example, following the Phoenicians, the Greek and Romans established trade routes goings as far out as Britain in the West, and China in the East. The Greeks spread their culture and ideas through this trade, and the Romans spread their organization and laws. It was a truism back then as it is today, that free trade tends to make the traders quite wealthy, and thus it formed the basis for Athenian, and later Roman power. There are several main advantages of the free trade. First, increased world-wide out-put: without any trade restrictions between countries, more countries are willing to accept export, which improves the exchange and communication and promote the economic develop. Second, goods and services provided at a lower cost: by increasing the production, countries increase their efficiency. By specializing, countries better allocate their resources and purchase cheaper resources from other countries. Third, bigger range of commodities for customers with more choices: as free trade leads to a global market, consumers benefit from the competition and variety brought to the market, when other countries produce some items cheaper, the consumer purchases products for less. Forth, increasing the total living standard----- as the trade expands, the competition also expands. To stay competitive, companies must seek ways to create the comparative advantage. This leads to increased innovation that improves products. So with the development, people will be lead to a better quality of life. Fifth, producers can gain the benefits of economics of scale (multi-nationals): producers can learn the experience from other countries’ companies and through these technologies improve themselves. Fifth, minimizes wars: as countries work together professionally, mutual respect for the countries' customs and cultures increase. Fears and prejudices diminish, and countries are less likely to fight each other.

Section 2: Absolute & comparative advantages
In economics, absolute advantages refers to an individual, a firm or a country can produce a same quality of good or service more cheaply than others under the same resource. For example, Vietnam can produce 1000 million tons of rice while South Korea can produce 800 million tons of rice, so Vietnam has absolute advantage (since it can produce more than Korea). Comparative advantages refers to an individual, a firm or a country have the ability to produce a particular good or service which at a lower marginal and opportunity cost than others. Same example of Vietnam and Korea. To produce 1 more tones of rice, Vietnam has to give up producing 3 cars. However, to...
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