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Trade Creation & Diversion
Trade creation refers to the quantity of total goods and services
trading within a bloc. Trade Diversion refers to the quantity of
total goods and services trading between a non-member and
member in a bloc. The EU has helped influence these by removing
barriers and restrictions within the member countries which has
allowed more imports and exports. With this being possible, it has
opened up a much wider market where businesses can reach their
target market in different countries, or potentially find a new gap.
With the increased competition within markets, businesses have
more incentive to produce more efficiently and better meet
customer needs (Allocative efficiency).
Trade Policies CET & CAP
The EU has what's known as a CET or Common External Tariff,
which is an agreed quantity of imports of a product from a
non-member country; i.e. Members of the EU agree on a limit to the
number of goods imported of a specific category. The CAP or
Common Agricultural Policy protects EU farmers from foreign
competition to retain a viable market for local farms; this is a form
of trade diversion.
Benefits vs Barriers of the European Union
The benefits of the EU mainly relate to trade and how it has
increased over time. There have also been many positive legal and
political aspects of the EU such as the anti-competitive practices.
There are still barriers that exist, particularly in the quaternary
sector where specific skills are required and are heavily influenced
by the media and government regulations or beliefs.
Will the UK one day have the Euro?
Currently only 19 out of 28 countries use the Euro. The UK would
benefit from the Euro as there would be no exchange rates
between other Euro countries, which would therefore encourage
businesses to export more goods from the UK. By having the pound,
we have better control over taxes and bank rates of inflation which
can be increased or decreased as appropriate for the UK.
Content © to Lee Murphy Via Get Revising.
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