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WESTERN CULTURE AND SOCIETY: THE UNITED KINGDOM (UK) -
British Trade and Foreign Policy
Trade: Although some countries may be capable
of producing all the food, manufacturing products or services needed by
their population, they will normally specialise in the production of only
some of these goods and services. By specialising, surpluses are created
which can be traded with other countries. The UK has some natural resources
such as oil, but needs to trade to get other resources such as iron.
The UK has to trade with other countries for the following reasons:
It lacks some
natural resources and raw materials. The type of climate and weather
means that certain foods can not be grown naturally.
The UK needs
foreign currency to buy what it can not produce, and this foreign
currency is gained by selling exports from the UK.
increases, unemployment may fall, which will benefit the country, as
well as individuals.
gains from a wider choice of goods and services.
Changes in UK Trade: Until recently the UK was
regarded by other countries as a producer of manufactured goods for export.
They traded these goods against food and raw materials in return. the
largest imports into the UK are now finished manufactured goods, with food
taking a smaller percentage of imports.
The reasons for the UK
reducing its export of manufactured goods are as follows:
competition - other countries now manufacture more goods
Lower costs in
other countries, wages overseas are less and costs of raw materials
may be cheaper
Lack of staff
training - Many managers and workers in the UK do not learn any
The Balance of Payments:
The "Balance of Payments" records the inflow and outflow of a
countries foreign currency. Inflows of foreign currency come from the export
of goods or services, outflows come from imports of goods and services where
money leaves the country.
The Balance of Trade is
calculated by "visible exports" less "visible imports" -
"Visible" means goods only, not services, chemicals, engineering
products and textiles are examples of visible goods. The balance of payments
included the invisible trade as well as visible.
Both countries and individual firms benefit from exporting. A firm which
exports gains a wider market, and should therefore get higher profits.
However there are some problems to face when exporting:
measurements - different weights, sizes, electrical voltages etc.
difficulties - Product labels, communication etc.
difficulties can occur from selling overseas, non payment etc.
Costs - higher
delivery costs, insurance, currency differences etc.
restrictions - There may be limits on how many goods can be imported
into a country
There may be complicated documents and procedures for firms to comply
realise the advantages gained from international trade they may assist
companies in exporting. They may set up trade associations and
"Chambers of Commerce" (local business organisations).
Restrictions on Trade:
Sometimes governments may impose restrictions on trade, they can do this by
any of the following methods:
These are import duties or taxes, the UK has "Customs and
Excise" duties that people must pay when they export goods to the
UK. This can make imported goods more expensive, therefore encouraging
people to buy goods produced at home rather than imported goods.
Quotas - These
are physical restrictions on the amount of goods that can be imported
into a country over a period of time. The UK has a quota on the number
of cars that can be imported from Japan.
Subsidies - By
providing money for home producers the businesses in the UK can
compete on price against imports.
Embargoes - This
is when bans are placed on importing certain items from overseas.
The restrictions on
trade may be placed in order to raise revenue from tariffs, to protect
existing industries from overseas importers, to protect new businesses who
can not yet compete or to restrict "dumping" of foreign goods
(goods which are exported at a very low price by countries wishing to
establish a market in another country).
The European Union
Influence on Trade: The EU was founded to
increase trade between member states. It provides subsidies, for example to
agriculture through the common agricultural policy (CAP). The EU promotes
free movement of labour and investment between member states and helps lead
to increased efficiency and trade. Other policies provide training and
funding for business and education. The EU controls standards for quality
and safety of goods. The UK is now linked to the rest of Europe by the
Channel Tunnel, a direct rail link between the UK and France.
UK Trade and Investment:
The UK is an open economy. This means that the living standards and the
competitiveness of industry depends on the ability to trade and invest
freely. The UK is currently the world’s fifth largest exporter of goods (£188
billion in 2000) and second largest exporter of services (£67 billion in
2000). Exports are equivalent to more than one-quarter of GDP.
Trade and Investment:
How the UK Benefits: Trade allows countries,
and the firms and individuals within them, to specialise in economic
activities which best allow them to exploit their relative strengths,
abilities, resources and expertise, and to buy from and sell to other
countries doing likewise. In this way trade:
Means lower prices
and wider choice for consumers.
through better access to competitive sources of components and
materials, boosting their performance at home and abroad.
competition and innovation
growth in developed and less developed economies, and helps generate
the resources to promote higher standards of employment and
political stability throughout the world.
politicians agreed to establish the GATT and work for trade liberalisation
after witnessing the damaging and tragic effects of widespread protection
during the 1930s. Since then, average industrial tariffs of developed
countries have fallen from nearly 40% to less than 5% through eight rounds
of multilateral trade liberalisation. This has gone hand-in-hand with a
twenty-fold increase in world trade and a more than six-fold increase in
& Trade: Trade doesn’t just benefit the
UK. Developing countries also have much to gain. The available evidence
suggests that open economies have faster growth rates than closed economies.
Gains for developing countries do not come solely through improved access
for their exports. Competitive domestic markets are a necessary condition
for improving their rate of growth.
have much to gain from further liberalisation. On average manufacturing
exports from developing countries to developed countries face an effective
tariff 4 times higher than that on exports between developed countries. They
would also gain from lower tariffs on trade between themselves, which are
currently far higher than those in developed countries.
The World Trade
Organisation: In 1995, the WTO was established
to succeed the General Agreement on Tariffs and Trade (GATT), which had long
been the mechanism for international trade negotiations. The GATT was formed
in 1948 as a ‘provisional’ instrument initially intended to pave the way
to an International Trade Organisation (ITO) which would operate alongside
the the World Bank and International Monetary Fund. The ITO would have had
an ambitious agenda covering trade disciplines, employment, international
investment, services, competition, and commodity agreements.
The GATT brought
together 23 countries, including the UK, to lower customs tariffs and give a
boost to world-wide liberalisation. They also agreed to accept some of the
trade rules of the draft ITO Charter ahead of its agreement, to protect the
gains made from the tariff reductions. However, the Havana Charter, which
would have established the ITO, was never ratified, meaning the Organisation
was never formed, and GATT remained the only multilateral instrument
governing international trade.
An informal organisation
was built around the GATT to discuss trade-related issues and negotiate
further liberalisation. Taking place in ‘rounds’, these negotiations at
first concentrated on lowering tariffs before moving on to additional issues
such as subsidies. The eighth trade round - the Uruguay Round - ran from
1986-94 and was the most extensive of all, covering trade in goods,
services, and intellectual property. It also established the WTO, which is a
permanent organisation with permanent, enforceable rules.
The World Trade
Organisation exists to regulate international trade. It is based on non
discrimination, ensuring that similar products from different countries must
be treated the same way. The WTO serves as a forum for trade negotiations
and also provides an arbitration service for countries embroiled in trade
Although the UK is a
member of the WTO in its own right, for all practical purposes it is part of
the WTO through the membership of the European Union (EU), as required by
the Common Commercial Policy of the European Community (EC).
Summary of UK Trade:
The UK depends on foreign trade for its survival. All countries can benefit
from increased international trade. Countries can specialise in goods and
services and import the goods and services which that can not produce
themselves. Firms have to face many difficulties in implementing exporting
facilities, however if they do begin to export there are many benefits.
Foreign Policy: After the Second World War
Britain was active in setting up the United Nations and gained a seat on the
UN Security Council, along with the Soviet Union, China and France. After
the break up of the British Empire the UK decided to build and maintain its
own nuclear weapons to ensure that it would remain superior to most other
states in terms of military capability.
A major factor that has
influenced British foreign policy is the fact that the UK is an island, and
until the Channel Tunnels was build it was separate from any other country.
Britain continued to maintain links with the countries which are still a
part of the commonwealth of countries. Canada was a very good trading
partner for the fur trade. Australia was used to transport criminals to - a
much cheaper option than keeping them in prison in Britain.
The Prime Minister and
the government decide on the general direction of Britain's foreign policy.
There are many government departments who are concerned with foreign policy,
the Foreign and Commonwealth Office (FCO) is the main department, but other
departments also play a big part, including the Ministry of Defence (MoD)
who control the security and defence of the UK.
A main factor which
influences Britain's foreign policy is the relationship between the UK and
America. Britain and America worked together when there were concerns about
the Soviet Union. There are also close links regarding war policy and there
are over 60 American military bases in the UK.
The Mission of the
Foreign & Commonwealth Office is to promote the national interests of
the United Kingdom and to contribute to a strong world community. The
following are the main issues in British foreign policy:
Attempts to Restore Peace and Moving The Peace Process Forward
Asia Pacific Region:
Balkans: Focus on
Stability Pact for SE Europe
Britain and the
European Union: Policies, Relations with the rest of the world etc.
Britain, China and
Hong Kong: Hand over of Hong Kong, Trade Relations etc.
Commonwealth Games, Diverse Community, Commonwealth debate etc.
International Crime: Tackling the Threat, Coordinating the international
drugs and crime efforts. Tackling the major drug threats.
Change, Environmental Security, Pollution etc.
Constitutional Status, Contacts with Argentina. Economy & Natural
Resources, Geography & History, Security, Sovereignty, etc.
Global and regional
organisations: Commonwealth, Council of Europe, EU, NATO, United Nations.
Issues: Globalisation, International Organisations
Coalition Against Terrorism: The future of Afghanistan, World Consensus
and Response to the terrorist attacks, Responsibility for the terrorist
atrocities, Muslims in the UK.
Security: Arms Control, European Security and Defence Policy
Latin America and the
Caribbean: Development Assistance, Drugs, Environment, Human Rights
Middle East Peace
Environment & Conservation, Human Rights etc.
Promoting the UK:
British Council, Scholarships, Working with Foreign Journalists, World
Public Forum: The G8
Summit in Genoa, The Nice Treaty, The future of the Commonwealth, The EU
Relations with Iraq:
Oil for Food contracts, Proposed Changes, The Iraqi Regime's Record, Human
United Nations: Drugs
& terrorism, Emergency assistance, Human rights, International
Criminal Court, International law, Millennium Summit, Peace &
security, Sustainable development, The UK commitment, The UK's stake in
Britain spends more on defence than most other developed countries. It
continues to maintain nuclear weapons, despite many protests and much
opposition. The UK is a member of NATO (North Atlantic treaty Organisation).
The purpose of NATO is to protect member states and to provide a foundation
for security in Europe. It also provides transatlantic defence co-operation
(USA and Canada). NATO is only meant to be used in self defence against
attack from other nations. Britain has a naval nuclear force, currently with
four nuclear submarines.