This paper considers how far the UK can influence the international trade environment, and which specific policies best support UK based firms to increase their global competitiveness.
The purpose of trade and investment policy
Within a market economy, trade is a function of need and competitiveness: need, because all nations need certain goods and services that they cannot supply competitively themselves; and competitiveness, where trade reflects an existing competitive advantage.
Openness to trade and investment is a useful indicator both of a nation’s ability to supply its own needs as economically as possible, and of the efficiency of its production, because firms that trade tend to be more efficient to compete internationally, and to grow faster. In turn, this supports jobs, growth, and prosperity. Trade and investment policy needs to be linked to delivery of these goals.
Trade requires open global markets. These in turn depend on governments’ actions and also on firms able to invest and build their competitiveness. Governments’ actions, for good or ill, can be critical (in the financial crisis of 2008-09 the G20 governments were mindful of the disastrous mistakes of the 1930s, when countries closed their markets). Open global markets have benefited not only advanced countries but also developing and emerging economies. The cost-savings enabled by digital trading have led many smaller businesses to enter new markets.
Imports allow for greater specialisation of production and help ensure that more competitive firms actively respond to market conditions while weaker businesses either rise to market challenges or cease trading. So trade openness is important for both exports and imports. Both depend on investment which is linked to trade growth.
International trade increasingly embraces services as well as goods. Historically, trade in goods preceded trade in services, and the global trade system is still skewed towards catering for goods. Since 1945 trade liberalisation has advanced much more rapidly for goods than services. Tariffs and quota restrictions affecting goods can be dismantled rapidly while liberalisation of services requires agreed approaches to regulatory standards, relevant professional qualifications, and often on cross-border movement of workers; all of which are politically sensitive issues.
Today wider issues are being raised about trade in a lower trust global economy. Trade policy has become more politicised, facing challenges over the extent to which it can be used to promote values or proactively influence trade partners’ policies and practices in fields such as human rights, labour conditions, or gender equality. How far should trade only be encouraged between countries that have shared values? Can trade be made more eco-friendly? Does there need to be regulation of digital trade? How can overseas investments best be protected? What process ensures that trade and investment policies remain consistent with national defence and security priorities? And, given that current international institutions active in trade and investment policy were created soon after World War II, can they be fair to developing countries emerging much later, in today’s changed circumstances?
Against this background this paper considers how far the UK can influence the international trade environment, and which specific policies best support UK based firms to increase their global competitiveness...
full paper
more at EIAG
© EIAG - European & International Analysts Group
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article