Chapter 18
Foreign Trade
December,2005
Procedure
1,Summary of chapter 18
2,Students’ presentations
3,In-class activities
A1 Introduction – From Imperial
Power to European Partner
? The dominant economic philosophies in
nineteenth century Britain were laissez-faire (non-
involvement of the government in business) and
free trade,
? After World War II,Britain initially established
EFTA (European Free Trade Association) in 1950,
along with other non-EEC European countries,
? Increasingly closer union between Britain and her
European partners,
A2 Imports & Exports
?With 1% of the world’s population,Britain
has approximately 5% of world’s trade,
? Britain is the fourth or fifth largest trading
nation in the world,ranking behind the USA,
Germany and Japan,and sometimes
France,
M a j o r t r a d i n g n a t i o n s ; v a l u e s o f e x p o r t s & i m p o r t s i n U S d o l l a r s
( b i l l i o n s ) 2 0 0 0
0 200 400 600 800 1000 1200 1400
S w i t z e r l a n d
B e l g i u m
N e t h e r l a n d s
C a n a d a
I t a l y
B r i t a i n
F r a n c e
J a p a n
G e r m a n y
U S A
I m p o r t s
E x p o r t s
? In the past,the Commonwealth countries
were Britain’s chief trading partners,This
trade has declined and trade with Europe
has increased,The diagram on p.291 shows
the changing pattern of Britain’s export trade,
? The European Union
--- Britain joined the EEC in 1973 and as one of its members Britain is now part
of an EU trading bloc accounting for about one third of the world’s trade,
--- Nowadays the nations of the European Union taken as a whole are the
largest group of countries both as suppliers and markets for the UK,In 1998
they bought 58% of British exports and provided 55% of the country’s imports.
--- Within the EU Germany is Britain’s major market and supplier of imports
(mainly machinery and manufactured goods including cars and chemicals),
Next in importance are France,which sells manufactures and food to Britain,
and the Netherlands which provide dairy produce and other food,followed by
Italy,Belgium and Ireland.
--- In 1992 the Single European Market was introduced,This enables the free
passage of goods,capital and labour between the member countries,
A3 THE INTERNATIONAL ROLE
OF THE CITY OF LONDON
The City of London has
? the greatest concentration of foreign banks in the world.
? a banking sector that accounts for the largest share - almost one-fifth -
of total international bank lending.
? one of the world’s biggest international insurance markets.
? the world’s largest foreign exchange market.
? the largest centre in the world for trading overseas equities.
? one of the world’s most important financial derivatives markets.
? the principal markets for transactions in a large number of commodities.
? a comprehensive range of ancillary and support services,including
legal,accountancy and management consultancy.
? a history of innovation and flexibility,which contributes to London’s
strength as a financial centre,
A4 MULTINATIONALS
? In 1999 Britain ranked second in the world at attracting
inward investment,It attracted 29% of all inward
investment into the EU,Overseas businesses investing in
Britain generate an estimated 40% of UK exports,48% of
inward investment projects in Britain are from the USA.
? British investments overseas are even greater,The UK
was the world’s largest outward investor in 1999 (US $212
billion),surpassing the United States for the first time since
1988,This amounts to approximately 15% of the world
total,
Company Product Country
Ford Motor vehicles USA
Philips Electrical goods Netherlands
Michelin Tyres France
ICI Chemicals UK
Haier Domestic
appliances
China
Marks &
Spencers
Clothing and
food
UK
In-class Activity
?Work in group of four?
Draw up a list of advantages and disadvantages
that you can see for Britain (or any other host
country) in multinationals.
Among many others,the advantages of multinationals are
a) to ease the tensions of unemployment by bringing chances of jobs to the local
area,
b) to make contribution to the Britain’s balance of trade,and c) to introduce
efficient working methods.
The disadvantages of multinationals include:
a) bring with them strong competition to the local economic market;
b) be considered as a threat to the home economy; and
c) have a bigger chance to sell their products in otherwise restricted markets;
d) they easily switch production to another country where labour is cheaper or
where there are more incentives,e.g,investment grants;
e) they pay less tax than local companies since they arrange for profits to be made
in low tax areas.
Foreign Trade
December,2005
Procedure
1,Summary of chapter 18
2,Students’ presentations
3,In-class activities
A1 Introduction – From Imperial
Power to European Partner
? The dominant economic philosophies in
nineteenth century Britain were laissez-faire (non-
involvement of the government in business) and
free trade,
? After World War II,Britain initially established
EFTA (European Free Trade Association) in 1950,
along with other non-EEC European countries,
? Increasingly closer union between Britain and her
European partners,
A2 Imports & Exports
?With 1% of the world’s population,Britain
has approximately 5% of world’s trade,
? Britain is the fourth or fifth largest trading
nation in the world,ranking behind the USA,
Germany and Japan,and sometimes
France,
M a j o r t r a d i n g n a t i o n s ; v a l u e s o f e x p o r t s & i m p o r t s i n U S d o l l a r s
( b i l l i o n s ) 2 0 0 0
0 200 400 600 800 1000 1200 1400
S w i t z e r l a n d
B e l g i u m
N e t h e r l a n d s
C a n a d a
I t a l y
B r i t a i n
F r a n c e
J a p a n
G e r m a n y
U S A
I m p o r t s
E x p o r t s
? In the past,the Commonwealth countries
were Britain’s chief trading partners,This
trade has declined and trade with Europe
has increased,The diagram on p.291 shows
the changing pattern of Britain’s export trade,
? The European Union
--- Britain joined the EEC in 1973 and as one of its members Britain is now part
of an EU trading bloc accounting for about one third of the world’s trade,
--- Nowadays the nations of the European Union taken as a whole are the
largest group of countries both as suppliers and markets for the UK,In 1998
they bought 58% of British exports and provided 55% of the country’s imports.
--- Within the EU Germany is Britain’s major market and supplier of imports
(mainly machinery and manufactured goods including cars and chemicals),
Next in importance are France,which sells manufactures and food to Britain,
and the Netherlands which provide dairy produce and other food,followed by
Italy,Belgium and Ireland.
--- In 1992 the Single European Market was introduced,This enables the free
passage of goods,capital and labour between the member countries,
A3 THE INTERNATIONAL ROLE
OF THE CITY OF LONDON
The City of London has
? the greatest concentration of foreign banks in the world.
? a banking sector that accounts for the largest share - almost one-fifth -
of total international bank lending.
? one of the world’s biggest international insurance markets.
? the world’s largest foreign exchange market.
? the largest centre in the world for trading overseas equities.
? one of the world’s most important financial derivatives markets.
? the principal markets for transactions in a large number of commodities.
? a comprehensive range of ancillary and support services,including
legal,accountancy and management consultancy.
? a history of innovation and flexibility,which contributes to London’s
strength as a financial centre,
A4 MULTINATIONALS
? In 1999 Britain ranked second in the world at attracting
inward investment,It attracted 29% of all inward
investment into the EU,Overseas businesses investing in
Britain generate an estimated 40% of UK exports,48% of
inward investment projects in Britain are from the USA.
? British investments overseas are even greater,The UK
was the world’s largest outward investor in 1999 (US $212
billion),surpassing the United States for the first time since
1988,This amounts to approximately 15% of the world
total,
Company Product Country
Ford Motor vehicles USA
Philips Electrical goods Netherlands
Michelin Tyres France
ICI Chemicals UK
Haier Domestic
appliances
China
Marks &
Spencers
Clothing and
food
UK
In-class Activity
?Work in group of four?
Draw up a list of advantages and disadvantages
that you can see for Britain (or any other host
country) in multinationals.
Among many others,the advantages of multinationals are
a) to ease the tensions of unemployment by bringing chances of jobs to the local
area,
b) to make contribution to the Britain’s balance of trade,and c) to introduce
efficient working methods.
The disadvantages of multinationals include:
a) bring with them strong competition to the local economic market;
b) be considered as a threat to the home economy; and
c) have a bigger chance to sell their products in otherwise restricted markets;
d) they easily switch production to another country where labour is cheaper or
where there are more incentives,e.g,investment grants;
e) they pay less tax than local companies since they arrange for profits to be made
in low tax areas.
