1.1 Purpose of the Report
For the purpose of conducting this report the nation that has been chosen is the United Kingdom of Great Britain and Northern Ireland (commonly known as UK).The main purpose of this report is to analyse UK’s trade patterns over a forty year timeline and to identify the major ups and downs via linking to domestic economic policies or perhaps international events or either any significant circumstances that are relevant.
1.2 Background Information
1.2.1 The United Kingdom (UK)
UK is structured with England, Wales, Scotland and Northern Ireland. UK has a significant role in the European Union (EU), UN and NATO with major hands in international affairs throughout the globe. The current head of state is Queen Elizabeth II while the prime minister is David Cameron. IMF (2012, 1) maintains that as of 2011 UK’s GDP stand at USD 2,480.978 billion.World Bank(2012) data also indicates that unemployment’s rates are 7.7% in 2009 and FDI inflows are about USD 36279841634 in 2010. 1.3 Scope
This report is based on UK and its trade patterns specifically; information was gathered from various sources including websites, database and reports on UK. Moreover UK’s trade balances (net exports) have been computed for a deeper investigation of its trade patterns.
1.4 Structure of the report
This report is structured to comment on UK’s trade patterns for the past 40 years; which are divided into three periods, (1)1970-1980, (2)1980-1990 and (3) 1990-2010.
For the simplicity of this assignment detailed description of trade creation and diversion effects have been eliminated. Nonetheless since UK is a member of the EU; EU policies and events shall be highlighted if necessary or relevant.
2.0 Timeline of U.K trade patterns from 1970-2010
2.1 1970-1980 climaxes
2.1.1 Major ups and downs during 1970-1980
UK achieved surpluses on its net exports for the years 1970-72(see table 1 & 2).Fascinatingly the surplus on the balance on trade(net exports) from 1970 -71 is remarkbale since an increase of USD$ 922514586.6 is witnessed on net exports (USD$ 2226814514- USD$ 1304299927, see table 2) and also a 0.53221433% increase in terms of GDP (1.577364855- 1.045150525, see table 1) Conversely the downturns on trade patterns are witnessed during 1973-76 when UK suffered balance of trade problems with large and persistent balance on trade deficits. The balance on trade figures shows that from 1973-74 UK had difficulties in restricting imports; the deficit on net exports increased by vast fromUS$ -3958367690 to US$ -9161318512(see table 2). However since 1975 U.K has attempted to decrease these deficits from about US$-3437500272 to a surplus net exports US$ 13346502440 until 1980(see table 2).Interestingly, UK managed to accomplish this positive outcome by evaluating industry performance in home and overseas markets (Hitiris&Bedrossian,1987).
2.1.2 International events and domestic policies adapted during 1970-1980 Following, almost a decade of trade deficits, unemployment concerns and major economic downturns in 1960-69, Edward Heath won the general elections of 1970 and served as the prime minister of Britain during 1970-74. Heaths government included major reforms in the local government. In 1973 Heath led the UK in to European Economic Community (EEC)(Google,2012,1).During Heath's premiership unemployment rates amplified, however(See appendix 1.0).Yet these aren’t reasons that properly justify the deficits throughout 1973-76. So, exactly what happened throughout 1973-76 raises curiosity? The apparent unprecedented size of these deficits are however very illusory. Baimbridge & Whyman (2008) asserts that since UK joined EEC it had to reduce 20% of tariffs (especially in manufacturing industries) among member nations during the years 1973-77 and hence it became easier to import for countries such as Denmark and Ireland. This can explain the sudden...