In an Economist article, Better out than in, the author raises alarm at the diminishing rate of exports in Britain. Once a leading exporter, Britain now is in 11th place behind Belgium, Italy, and Netherlands. Britain has a large service sector, but it has a growing goods deficit, which is eliminating the surplus it gains from services and income. The country now has to borrow form abroad to close the gap between what the country buys and sells.
The lack of exporting has some concerned because a country that sells "goods abroad is a good way of developing a market for services." Exporting countries also tend to employ "more workers and offer better wages than non-exporters," as well as, "invest more in research and development". A main reason for why Britain exports so little is that jobs are located in large international corporations. "Of Britain's 24m private-sector workers, 10m have jobs in firms that employ more than 250 worker", which resulted from a boom that happened between 1997 and 2007 where most jobs were specific to the domestic economy.
The Economist sites an increase in exports and manufacturing as a possible cure to a struggling economy. According to World Trade, Britain is number one in terms of trade and expansion and even the Economist writes that Britain's manufacturing is held in high regard, which means that policies aimed at trade could bring Britain out of its economic slump.
Britain also has a huge competitive advantage right now in foreign direct investment, so maybe they can create a situation advantageous to increasing exports.
ReplyDeleteIdeally this all sounds great, but is it possible in reality? Also I fail to see how the heavy presence of international corporations in Britain is related to its decline in exports. And if this is the case, is it in Britain's best interest to expel these corporations? What could they begin to export that they currently are not producing?
ReplyDeletePerhaps the answer, ironically, lies in international corporations and franchises. Maybe Britain would be better off if such businesses engaged in Foreign Direct Investment by building or utilizing factories within Britain. But this would require a re-evaluation of labor codes and laws, and with the heavy presence of unions this seems unlikely. Britain, like the rest of the EU, faces a bleak economic future.
I agree with Nat, I too fail to see how the heavy presence of international corporations in Britain correlates with the decrease in exports. Is there a specific reason as to why all of the sudden there is such a diminish in exports from Britain, besides the job arguement? Tying all of this into the class theme of export orientated markets , seen with the Asian Tigers, is it possible for Britain to make the shift efficiently? Even with this Economist article stating that Britain's manufacturing sector is held in high regards, is that enough incentive for the government to open up and implement trade policies?
ReplyDeleteI think that another reason for decline in Britain's exports could also be their unwillingness to be a part of the EuroZone and increasingly opting out of many sections of EU treaties. Britain only wants the EU as a trading partner, however, the EU wants its member states to be more thoroughly integrated than Britain is willing. Therefore, their increasing isolation from Britain could be affecting the demand for their goods. In order to increase exports and trade they may have to commit to being more than just a trading partner to the EU and this is something I dont think they will easily enter into given the economic climate of the EuroZone member states as a whole.
ReplyDeleteI think one thing that needs to be taken into account is the Pound's foreign exchange rate. The Pound is an extremely expensive, albeit valuable, currency to deal in. For example, currently 1 Pound costs 1.14 Euros, while 1 pound costs $1.53. These are small monetary differences but they add up in the long run. To boost those exports they've got to find a way to become more economically competitive and perhaps devalue their forex slightly.
ReplyDeleteIn addition to what Benjamin had said, due to the high value of the pound in the world market, it makes the UK a very hard country to have international corporations based there, since payments must be made in pounds and the UK's taxation also doesn't technically helps with such a high valued currency.
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