UK-An Investors Haven Essay Example | Topics and Well Written Essays - 1500 words

UK-An Investors Haven - Essay Example Similarly, countries that export such goods can then look at importing goods that they feel are more attractive and efficient from third countries. Such 'gains from trade' will help all countries benefit and lead to all-round development and prosperity. Global production and consumption will increase (Bruce E. Moon, Ideas and Policies, 1999)2. This law of comparative advantage was expressed by renowned economist David Ricardo, who concluded that such practices of 'gains from trade' benefited nations economically. The UK has enough coal deposits for consumption; however, it depends on China and Australia for its consumption. Despite the cost of transportation, coal is still cheap when imported from these countries, compared to high-cost production costs here. This way of imports not only helps the local economy, but increases revenue for those countries as well (Sherlock and Reuvid, The handbook of International Trade, 2004)3. Britain, one of the most open economies in the world, is the fifth largest international trading nation, and the second largest exporter of services. She exported 187 billion in goods and sold 67 billion worth of services overseas in 2000. Trade relations with countries other than the EU members fall within the Common Commercial Policy (CCP) of the European Union. Thus, the European Commission negotiates with third countries on the basis of mandates agreed by the Member States (European Communities Act 1972 5.2(1)). This arrangement gives the UK greater clout in global trade negotiations4. 2.0 Executive Summary Because of its open economic policy, UK has benefited both from inward and outward investment. It receives the most in terms of foreign direct investment (FDI) than any other country in the European Union (EU), creating new jobs, finance projects, and providing access to new technologies. Interestingly, UK is the world's second largest supplier of FDI to third countries. The returns earned through interest and capital investment helps run the exchequer in disbursing pensions and other savings. Foreign Direct Investment (FDI) as defined by IMF is 'a direct investment that is made to acquire a 'lasting interest' in a business operating in a country other than that of the investor, and his sole purpose being to have an effective voice in the management of that company'. 'Lasting interest' being debatable, the Organisation for Economic Co-operation and Development (OECD) recommended that 10% or greater ownership should satisfy this requirement.5 The United Kingdom imports cars, coal, oil, electronics and electrical consumer goods, and more, from foreign countries. Most of these products can be produced by the country itself. However, there are genuine reasons for such imports. Three prominent points that come to mind are6: 1. Cheaper priced than those made locally 2. More varieties available for selection due to imports 3. Better quality and features. Liberalisation has helped Trade push the economy and the government's exchequer. There are however several moves by the government that has cast a shadow with the local population.