-hnd经济学2世界经济学.doc

Economics2: The World Economy
F86E 35

Candidate Name: REN LU
Grade and Class: 2013 BA1

Introduction 2
1. Free trade 3
2. Absolute advantages and comparative advantages 3
3. The benefits of free trade 4
4. The purpose of carrying out trade protectionism 5
5．One Mechanism of the World Trade Organization 6
6. One measure of European Union promotes economic integration 8
7. Balance of payments 9
8. The general trends in UK trade over the last 30 year 10
9. The balance of payments affected by exchange rates 12
10. Advantages and disadvantages of fixed rate and floating rate 13
11. Effects of fixed rate and floating rate on individuals and company 15
12. The characteristics of the newly industrialized countries and the developing countries 16
13. The issues of the newly industrialized countries and the developing countries 17
14. The influences Multi-National Corporations bring to newly industrialized countries. 18
Conclusion 19
Reference 20

Introduction
This report has introduced the world economics simply. The content includes: International trade, free trade, Protectionism, the role of WTO and under-developed nation, UK absolute and comparative advantage, the protectionism and two recent examples about demonstrate arguments which government may put forward for its use, two barriers of trade, a EU initiative about the role of the EU in promoting trade, the composition of the balance of payments, the general trends in UK trade over the last 30 years, the way which the balance of payments affected by exchange rates, an analysis of two current issues that face LDCs, and the aid of recent examples about two impacts of multinationals on NICs and LDCs.

I. Free trade
(1). Free trade is a type of trade policy that allows traders to act and transact without interference from government. Thus, the policy permits trading partners mutual gains from trade, with goods and services produced according to the theory of comparative advantage.

China-ASEAN free trade area was formally established in January 1, 2010, covering a population of 1900000000. China-ASEAN free trade area’s GDP amounted to $6 and trade amounted to $4.5. It is the largest free trade zone among developing countries.
After the establishment of CAFTA, more than 90% products are carried out for zero tariffs on both sides. Average tariffs from Chinese to ASEAN decrease from 9.8% to 0.1%, Average tariffs from ASEAN’s six old members to Chinese decrease from 12.8% to 0.6%. Tariffs’ huge reduction promoted the rapid growth of bilateral trade.
China and ASEAN countries’ trade investment grows, economic integration deepens, companies and people are widely benefit, realizing goals of mutual benefit and win-win cooperation and common development. China and ASEAN’s total quantity of bilateral trade grows rapidly. From January to October this year, the bilateral trade volume has reached to $295900000000, a year-on-year growth of 25.7%.

(2). Absolute advantages and comparative advantages
Absolute advantages is said to occur when one country can produce a good or service to pre-determined quality with less resources or more cheaply than another country.

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 the comparative advantages.

UK is a major importer of manufacturing goods such clothes, shoes, toys, electronic produces etc. as these labor oriented consumer goods will cost more in UK before 1980s. UK has the With the development of service, the advantage of trade is service trade.
The goods that courtry import and export change over time as the goods in which they have a comparative advantage change over time. Before 1970s, manufacturing industry is its absolute advantage. After 1970s, service industry is more competitive for international trade such as computer software, business service and pharmaceuticals. These industry are seen to bring the possibility of long term growth, while the industries based on heavy capital investment or requiring relatively cheap labor will not be competitive with developing countries.

2. The benefits of free trade
(1). Goods and services produced at lower cost. Free trade can promote the cooperation of different countries in the world. It can decrease the cost of producing goods.
(2). Greater range of commodities for consumers, more choice. Any countries cannot produce all products, they all have products which are unable to produce. Trade allow us to buy all of them. Greater range of commodities provide customers with more choice.

(3). Increased world-wide output. Each country producing according to their respective advantages has high efficiency. Under the same resources, it has high yield. Therefore, international trade increased world-wide output.

3. Barriers to International Trade
Trade barriers are government-induced restrictions on international trade. The barriers can take many forms, including the following tariffs and non tariffs.

Non Tarriff Barriers-exchange controls
In a real world, there is and should be a certain degree of government intervention on foreign exchange. Imports need foreign currencies to buy gooods and services from abroad.Importers must apply to the cenytal bank for the currency they need to purchase goods in that country, The Central bank can erxert control over the variety and volume of both imports and exports by controlling the quantity of foreign cuurency it will issue to exporters and importers.
Non Tarriff Barriers-Import Depoits
Government requires importers to lodge a non-interest bearing deposit in advance with its Central Bank before they can buy goods and services from abroad. Besides, the deposit is usually in an amount equal to all or part of the cost of imported goods. This is time consuming and obviously expensive since it reduces the liquidity of the importing firms, which tend to hinder their importing activities. Before 1984, the Nigerian advanced import deposit ranged from 50% to 200% of the value of a list of import items.

Give a example about tariffs, 35% tariffs on Chinese tyres imposed on the United States on 11th September in 2009. It make Chinese tyres firms have to increase price if sales in America.

For example, t non tariffs in Russia to Ukraine for embargoes which suspension of Ukraine imports of juice on 29th July in 2014. It make Ukraine’s juice not allow sale in Russia.

4. The purpose of raising barriers to International Trade
(1) The purpose is to protect employment.
Footwear manufactureers associations of Italy, Spain ad Portugal are reported to have field applications to the EU to curb footwear imports from China. Local shoemarkers in Elche, the capital of Spain’s once flourishing footwear industry, argue that “made in China” is taking away their jobs by that Chinese shoes have been booming in Spain just because of good quality and reasonable prices.

(2) The purpose is to anti-dumping. In July 2012, SolarWorld AG, a German giant, led a consortium of around 25 EU solar panel producers to file a complaint to the EU Commission to investigate whether there has been distortion of competition by Chinese counterparts due to dumping. Soon Germany against China low price.

5．The Role of WTO
The World Trade Organization (WTO) is an organization that intends to supervise and liberalize international trade. The organization officially commenced on 1 January 1995 under the Marrakech Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade(GATT), which commenced in 1948. The organization deals with regulation of trade between participating countries by providing a framework for negotiating and formalizing trade agreements and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments.
The WTO dispute settlement mechanism is measures of dealing with trade disputes between members.It is the effective way for countries especially the developing countries to resolve the economic friction and safeguard their legitimate rights and interests.It is very unfavorable for the developing countries to resolve trade disputes especially trade disputes with the developed countries through bilateral channels. The bilateral approach pursues strength doctrine. Involved in trade disputes among developing countries, the WTO dispute settlement mechanism ruling is comparatively fair and reasonable. As either the complainant or respondent, the legitimate interests of the developing countries have been effectively protected. It is because the WTO dispute adjudication has very strong fairness, developing countries generally have a high enthusiasm to use the WTO dispute settlement mechanism. Some larger economic scale developing countries is more active in the use of WTO dispute settlement mechanism.It helps to reduce the economic friction between countries, and promote friendly relations among nations.

The Uruguay Round was the 8th round of multilateral trade negotiations (MTN) conducted within the framework of the General Agreement on Tariffs and Trade(GATT), spanning from 1986 to 1994 and embracing 123 countries as "contracting parties". The Round led to the creation of the World Trade Organization, withGATT remaining as an integral part of the WTO agreements. The broad mandate of the Round had been to extend GATT trade rules to areas previously exempted as too difficult to liberalize (agriculture, textiles) and increasingly important new areas previously not included (trade in services, intellectual property,investment policy trade distortions)

Here are some others areas the WTO has dealt with in attempts to establish itself as the policing body promoting free trade. The Banana Dispute. The WTO ruled that the European Union discriminated unfairly against the US with its banana import rules. The WTO allowed the US to slap a $191 million sanction on the EU. Was it paid? We do not know but probably not so.
6. One measure of European Union promotes economic integration

The European Union (EU) is a politico-economic union of 28 member states that are located primarily in Europe. The EU operates through a system of supranational institutions and intergovernmental negotiated decisions by the member states. The institutions are: the European Commission, the Council of the European Union, the European Council, the Court of Justice of the European Union, the European Central Bank, the Court of Auditors, and the European Parliament. The European Parliament is elected every five years by EU citizens

(1) EU can eliminate customers duties and quotas on imports and exports of goods between member states and eliminate tariffs between EU members. Though the institutions, members can establish common policies for agriculture and transport for free trade.

(2) It can accelerate the investment from a wide range of contries. With the rising status of the euro and development of European capital market, members’ cost of capital will decline, which is conducive to investment and economic growth. The European Central Bank (ECB) develop and implement a unified monetary policy, each country’s interest rates, prices and investment returns will gradually narrow the differences or reach to unanimous, leading to an overall decline of price and the level of interest rates.

7. Balance of payments

(https://www.gov.uk/government/statistics/announcements)
The balance of payments (BOP) of a country is the record of all economic transactions between the residents of a country and the rest of the world in a particular period (over a quarter of a year or more commonly over a year). These transactions are made by individuals, firms and government bodies. Thus the balance of payments includes all external visible and non-visible transactions of a country during a given period, usually a year. It represents a summation of country's current demand and supply of the claims on foreign currencies and of foreign claims on its currency

This table illustrates current account, capital account and financial account in UK during the 20 years from 1980 to 2010. In terms of current account, there just four years the figure is positive when between 1980 and 1983. And then the figure almost negative from 1984 to 2010. And the figure achieves the lowest number about -55190 million in 2008. This situation illustrate that the economy of UK develop not very well.

As for capital account, the data shows that this account experience a fluctuate trend. First, the figure was -4 million in 1980 and then the figure decrease to -79 million in 1981. After that the figure was 6 million in 1982 increase to 159 million in 1987. What is funny thing is the figure fall again to -39 million in 1988. After that the figure experience a fluctuate and what is no table is the figure gain a lowest number -1527 million in 2006.

In terms of financial account, the figure see an positive trend from 2157 million in 1980 to 122 million in 1986. And then the figure experience a negative trend between -9690 million in 1987 and -23296 million in 1993. And from -20261 million in 1999 to -30276 million in 2010 this account experience negative trend again, and get the lowest number in 2008 because of the financial crisis the figure was -39301 million.

8. The general trends in UK trade over the last 30 year

Overall, the evolution of trade in goods show an upward trend. With the quick development , UK need to keep up with the times, the country must through trade in good to increase country’s income so with the passage of time, there are more and more trade in UK.

The table shows the evolution of trade in goods and services in UK between 1980 and 2008. The trade in goods account stand 20 billion in 1980. The trade in goods account has remained in deficit. The deficit grew remarkable in the late 1980s to reach a peak of about 24 billion in 1989. And then decreased back to 20 billion in early 1990s and keep a stable at 10 billion from 1991 to 1998. In 1998 the deficit jumped by over 9 billion, and it has continued to rise since, reaching a cash record of 92.9 billion in 2008.

The chart shows that the total goods exports are less than imports, which leads to deficit. However, the total service exports are more than total service imports, which results in surplus.

It shows United Kingdom is in a large fiscal deficit in the last 30 years. The highest surplus is in 1981, however the current balance deficit from 1984 to 1990. From 1984 to 1989, the current balance deficit and in 1987, the deficit increase quickly. The current balance deficit fell sharply from 1990 to