Open economy:-
The UK is an open economy and a rising share of output is exported overseas and a growing percentage of AD is satisfied by imports of goods and services. The UK currently is the world’s 8th largest exporter of goods and the 2nd largest exporter of services. In terms of capital flows, Britain has the highest ratio of inward and outward investment to GDP of any leading economy.
Over time, it is inevitable that the pattern and balance of trade in goods and services changes, reflecting shifts in comparative advantage and movements in relative prices of traded products in many international markets. The pattern of trade is also affected by the economic growth and development of particular countries or regions and by the foreign investment decisions of UK and overseas companies.
The majority of UK trade in goods and services is with our partner countries within the European Union. There has been a long-term shift in our trade with EU since the UK joined the EEC in January 1973. The growth of trade has been encouraged by the Single Market which has led to trade creation and trade diversion effects.
The share of UK trade with North American countries has declined, but the United States remains the largest single export market accounting for 15% of total UK exports. Trade with oil exporting countries has fallen in relative importance over the last fifteen years In 1979, 10% of UK exports went to oil exporting countries, this has now declined to just over 3% as has the share of imports from these countries.
The other significant change in the geographical pattern of trade for the UK is an increasing share of trade with emerging economies in Asia including China, Singapore, Malaysia, South Korea, Taiwan and Thailand. The growth of the Indian economy should also help to boost exports to the sub-continent in the years to come, providing that UK businesses take advantage of the export opportunities available there
Over time, it is inevitable that the pattern and balance of trade in goods and services changes, reflecting shifts in comparative advantage and movements in relative prices of traded products in many international markets. The pattern of trade is also affected by the economic growth and development of particular countries or regions and by the foreign investment decisions of UK and overseas companies.
The majority of UK trade in goods and services is with our partner countries within the European Union. There has been a long-term shift in our trade with EU since the UK joined the EEC in January 1973. The growth of trade has been encouraged by the Single Market which has led to trade creation and trade diversion effects.
The share of UK trade with North American countries has declined, but the United States remains the largest single export market accounting for 15% of total UK exports. Trade with oil exporting countries has fallen in relative importance over the last fifteen years In 1979, 10% of UK exports went to oil exporting countries, this has now declined to just over 3% as has the share of imports from these countries.
The other significant change in the geographical pattern of trade for the UK is an increasing share of trade with emerging economies in Asia including China, Singapore, Malaysia, South Korea, Taiwan and Thailand. The growth of the Indian economy should also help to boost exports to the sub-continent in the years to come, providing that UK businesses take advantage of the export opportunities available there
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