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International competitiveness is the degree to which a
country can, under free and fair market conditions, meet the
test of international markets, while simultaneously maintaining
and expanding the real incomes of its citizens.
A nation's competitiveness depends primarily on keeping
productivity growth rates equal to or greater…

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2. Productivity and Unit Costs of Production

Annual growth in UK labour productivity.

If there is an increase in relative productivity, meaning industry can
produce more with lower costs then UK will become more

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This graph shows that between 1990 and 2005, UK labour
productivity increased at a faster rate than the UK. This helped the
UK to improve their relative competitiveness.

3.Current account / Balance Of Payments

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This is a rough guide to international competitiveness. If the
current account improves then the value of exports has increased
faster than imports, suggesting an improvement in

The persistent UK current account deficit, suggests a decline in

However, the current account is also affected by the demand for…

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over time that country becomes more competitive because its
goods will be increasing at a slower rate. For example, in the post
war period Japan and Germany had relatively lower inflation rates
than major competitors, this helped them to become more

This graph of relative inflation rates showed that…

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technology and education, a country can enjoy higher labour
productivity and therefore produce goods at a lower cost. Higher
labour productivity is the key to increasing competitiveness and
living standards at the same time.

German vs Italian labour productivity.
During this period, Italian labour productivity growth has tended to

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This shows labour productivity index for UK and Germany.
Between 1990 and 2005, Germany labour productivity increased
25 base points. UK labour productivity increased by 35 base
points. Showing that the UK had faster improvements in labour
productivity during this period.

3. Exchange Rate
Movements in the exchange rate will…

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example, China has been accused of exchange rate manipulation.
China buys large quantities of US securities, this causes an
increase in the value of the dollar and helps to keep the Yuan
undervalued. Therefore, this helps Chinese exports to be more
competitive and explains the large Chinese current account surplus…

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See: EU Competitiveness

4. Tax Rates
Tax rates on labour and corporations will be a factor in determining
competitiveness. For example, higher labour taxes will increase the
unit cost of labour faced by firms, leading to lower

5. Cost of Doing Business

It is argued that countries with more…

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6. Norway
7. United Kingdom
8. South Korea
9. Iceland
10. Ireland

6. Infrastructure
A key factor in determining competitiveness is the cost of
transport. For example, some argue the UK's competitiveness is
undermined by bottlenecks in transport, such as limited airport
capacity in London and traffic jams on major…




This contains 11 readable pages explaining what is for many a trickier part of the unit 3 exam. It can be adapted for student's own use eg made into a mind map.

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