If trade barriers are removed then countries can take full advantage of comparative advantage. Countries specialise, trade more and as a result not only do the costs of goods fall, but everyone is better off.
As the EEC became the EC, then the EU the process of greater integration has continued and the pattern of UK trade has changed.
In 1973 the USA was Britain's largest trading partner. At some point in the recent past France overtook the USA as our biggest trading partner (I missed that too) and now it is Germany. France will be crestfallen, but who cares?
Recently a government economic adviser claimed that the benefits of joining the EEC were pretty weak and only based on trade. According to him the benefits have been as weak as expected.
There are countries in Europe such as Norway and Switzerland who aren't part of the EEC, or the EU for that matter, of whom are still major trade partners with the EU and with states around the world. Switzerland is one of the richest countries in the world based on GDP.
ReplyDeleteI doubt either of these countries would like to join at present either judging by the financial turmoil some of the members are still in and because they are doing very very well themselves.
Jason Lee
The benefits of joining the ECC or EU were for a mixture of things and not just trade. There were certain advantages for trade because the EU is all about removing barriers and simplifying trade rules in order to promote free trade and aim towards a single market economy. The EU has helped make companies that do business in the countries involved to lower their prices so as to become more competitive.
ReplyDeleteHowever, another advantage was supposedly the use of a shared currency- the Euro. This uniform currency was supposed to boost trade as there would be less unexpected changes in the exchange rate. However, Britain is a member of the EU yet still keeps its sterling currency and this has had no greatly damaging effect on trade.
There are benefits not directly related to trade such as the free movement of people. Free movement is important because it allows citizens to look for jobs in other EU countries. However this is not only a benefit and creates quite a few disadvantages. The freedom of movement causes social problems such as the transfer of pensions and social benefits and so on. This also has economic problems such as the displacement of local labour force, increasing unemployment rate and reduction of wage level. This happens mainly in countries that people think have an advantageous employment system and so migrates towards them. This influx of people in search of work then leads the countries unemployment rate increasing, the wages getting lower and as a result the home born citizens of the country getting unemployed.
Overall, it seems that it could be argued that the benefits of joining the ECC were pretty weak and based on trade. In an article from February 2013 in The Telegraph it has revealed that Britain is ‘exporting more goods to countries outside the EU than to countries inside.’ Companies are attempting to offset the effects of recession in the Eurozone and the decline for British goods by focusing on the growing economies in Latin America and Asia. As Scott Corfe and Douglas McWilliams at the Centre for Economics and Business research say: "Now, with Europe mired in economic recession and other economies growing faster, exports are reorienting themselves again towards the fast growing emerging economies." If this is the case and Britain is trading perfectly well outside of the EU, then there doesn’t seem to be a great deal of benefit to trade by joining it!