European Business Enviroment

Essay text:

Comparative advantage is good to all countries involved. A country can gain comparative advantage by specializing in a particular product which they are good at like Britain specializing in financial services thereby gaining comparative advantage of France that specialize in champagne The principle of comparative advantage (David Ricardo, 1817) states that it is not necessary to have absolute advantage, only a comparative advantage, he further explains that one need to make something at a lower cost in terms of other goods sacrificed to gain comparative advantage A country can have absolute advantage over another country if the country can produce goods using smaller resources than another country like if a unit of labour to produce 90 units of wool in china and 30 units of wine while in France 1 unit of labour produce 20 units of wool and 70 units of wine then china has an absolute advantage in wool while France has absolute advantage in wine China can benefit in trading wool to France’s wine Advantage of international trade The biggest advantage of international trade is that countries trading with each other are less likely to go to war with each other International trade can help a country to establish and specialize on particular goods International trade improves consumer welfare by increasing choices and quality which leads to lower prices Disadvantage of international trade The biggest disadvantage of international trade is the destructions of local industry and labour, when a country so much on imports from abroad like UK once a leading car production country over dependence on car importation destroy it once local thriving car company like range rover etc making them When a country depends so much on trading with a particular country, it makes them vulnerable, the dependent country can be easily influence in the policies by the country they are depending on Limiting trade A country can limit its trade with another country if the country is a threat to the country or if there is any trade sanction or embargo like united nation imposing trade sanction or on Iraq during the tyrannical regimes of sad dam Hussein forcing every one of its member to comply and another example where a country can place embargo on another country because it perceive the country as a threat to them is the USA imposition of trade embargo on Cuba in the 60s because of Fidel Castro’s support of communism Russia in the cold war DISCUSS RECENT TRENDS AND REASONS FOR GROWING ECONOMIC INTEGRATION Growing trends and reason in economic integration is the maximisation of labour worldwide due to globalisation taking UK as a case at hand...