Why are major European economies not on the same level of trade deficit with Japan like the US is?

http://www.worldstopexports.com/japans-top-import-partners/

Trade deficits can be a good or bad for an economy, but trade surpluses can also be a good or a bad sign. Even a trade balance of zero meaning that a nation is neither a net borrower nor lender in the international economy can be either positive or negative.

Components of a National Account Balance

· Goods

· Services

· Income receipts and payments

· Unilateral transfers

In the past it was common to track the physical items that were transported by air, ocean or ground between countries as a way of measuring the balance of trade. This measurement is called the merchandise trade balance. In most high-developed economies, goods make up less than half of a country’s total production, while services compose more than half. The last two decades have seen a surge in international trade in services, fueled by technological innovation in telecommunications and computers that made it possible to export or import services like telephone answering service, financial, law, advertising, management consulting, software, construction engineering, and product design among others. Most world trade still is in the form of goods rather than services, and the merchandise trade balance is still posted by governments and reported by newspapers. In economic analysis, however, one must rely on broader measures such as the balance of trade or the current account balance which includes other international flows of capital and foreign aid.

Overall trade in services is still relatively small compared to trade in goods, the importance of services has expanded substantially over the last few decades.

In reference to the third component of the current account balance, labeled “income payments,” it accounts for the money received by U.S. financial investors on their foreign investments and payments to foreign investors who had invested their funds in the U.S. The reason for including this money on foreign investment in the total measure of trade, along with goods and services, is that, from an economic perspective, income is just another economic transaction as equivalent to the shipments of cars or wheat or any other commodity.

The last item of the current account balance is the unilateral transfers of funds, which are payments made by government, private charities, or individuals where money is sent abroad without any link to merchandise or service. Foreign aid or military assistance to other countries qualifies in this category, as does it spending for charities of poverty or social programs.

When a person from the United States spends money overseas, it is also counted in this category. The current account balance considers these unilateral payments as imports, because they involved a stream of payments leaving the country.

Public opinion regarding trade deficits and surpluses might change if we the review the labels if for instance a trade deficit is called obtaining foreign direct investment and trade surplus renamed investing abroad the negative connotations of labels can be dispensed with. The relationships between trade flows of merchandise, services and flows of international payments must be clearly understood because these relationships are about the causes, benefits, and risks of different kinds of trade balances.

For example the United States exports 14% of GDP while Germany exports about 50% of its GDP.

What are the consequences?

It indicates that Germany has a higher level of trade than the United States whilst the United States has a large domestic economy so its internal trade is voluminous. As a result a large economy tends to have lower levels of international trade and it has little impact on its trade imbalance. Moreover, an imbalance between domestic investment by government and private sector contrasted with national saving will always lead to a trade imbalance, but has little to do with the level of trade.

Why do economies have such a huge trade deficit?

In economic studies a point of contention has been whether or not a trade deficit, also known as a current account deficit, is beneficial or harmful to a country's economy. More often than not the observed data and the underlying economic theory don't line up.

A trade deficit occurs when a country’s outlays for imports is bigger than what it receives from its exports. Because of its economic size the United States owns the largest trade deficit worldwide, with a trade imbalance of over $7.3 trillion accumulated over the past few decades. However other countries also have trade deficits among them: Spain, the United Kingdom, Australia, Mexico, Turkey, and Brazil, are all experiencing trade deficits. In the meantime, other countries have trade surpluses among them are: China, Russia and Japan with large current account surpluses.

Economic theory not consistent with data collected

Employment theory: If a country persistently experiences a trade deficit there are predictable negative consequences that can affect economic growth and stability. If demand for imports is higher than exports, domestic jobs may be lost to foreign manufacturers.

Data collection: It suggests that unemployment levels can actually persist at very low levels even with a trade deficit, and high unemployment may occur in countries with surpluses.

Currency Value: Demand for a country's exports impacts the value of its currency. Manufacturers of American goods that sell abroad must convert foreign currencies back into dollars in order to pay their workers and suppliers, bidding up the price of the dollar. In theory, as demand for lower cost imports increases the value of a currency should decline as in a market of floating exchange rates, where trade deficits should correct automatically. Nonetheless, data shows that a trade deficit is just an indication that a nation's currency is desired in the world’s currency exchange market, specially, when said currency qualifies a reserve currency as the dollar happens to be.

As a result, demand for U.S. dollars has remained quite strong despite persistent deficits. Surplus countries like China who do not utilize a floating currency regime, but rather keep a fixed pegged exchange rate versus the dollar and thus, benefiting its trade by keeping their currency artificially high.

In economics the balance of payments must always net out to zero. As a result, a trade deficit must be offset by a surplus in the country's capital account and financial account. This means that a trade deficient nation can experience a greater degree of foreign direct investment and foreign ownership of government debt like the ongoing ownership of US debt by China. However, fiscal and monetary policy tells us that the GDP to debt ratio must not be greater than one because debt holders will demand higher interest rates as result of the higher risk. For a small country this could be detrimental, if a large proportion of the country's assets and resources is owned by foreigners who can then control and influence how those assets and resources are used.

In conclusion

The United States, as the world's largest deficit nation, has consistently proven that trade deficits theories are not consistent with the data collected. This results in a special status for the United States as the world's largest economy and the dollar as the world’s largest reserve currency. Notwithstanding, growing budget deficits such as the large tax cut the Trump administration just passed into law indicates that fiscal and monetary policy are by far a more risky and concerning issue to the US economy for law makers if the current budget deficit trend is not corrected.

On the other hand, smaller countries have experienced the negative effects that trade deficits can bring over the short run. Nonetheless, the consensus among proponents of free markets, is however, that any negative effects of trade deficit will correct itself over time through exchange rate adjustments and through competitive advantage leading to an adjustment in what a country produces more effectively. A large trade deficits is simply a reflection of consumer preferences and may not really matter much at all in the long run.

What are the main advantages and disadvantages of exporting goods within the EU?

Alfonso Llanes, Master Degree in International Development

Answered just now

EU membership which allows the free movement of goods within the trading block can be appreciated when comparing the domestic trade of a large country like the United States when crossing boundaries of individual state rules. This would be the equivalent of domestic trade in the EU among national members. The individual’s national membership interest might be better served by action taken within the EU at a collective level like WTO trade accords,

The free movement of goods has been one of the most significant advantages of EU membership. However, there are clearly occasions when national industry and specific sectors have been disadvantaged for the greater good.

Advantages of a Common Market

• Commerce in the EU has expanded exponentially because of the fewer boundaries which has led to a greater predictability in the logistics of goods resulting in better planning of production schedules, lower inventory levels and maximization of economies of scale. Overall, it has helped large European manufacturers to consolidate their production into economies of scale
• Free circulation of manufactures are not subject to customs duties when crossing EU borders thus, reducing cost because goods are either duty free or are manufactured in the EU and duties are paid once at the place of entry instead of paying duties every time a border is crossed.
• Rules of origin are only statistical data points for goods in free circulation if manufactured in the EU or duty has been paid at the port of entry.
• Customs clearance is minimized which reduces administrative and transport costs as well as documentary requirements and delays that are kept to a minimum.
• The overall impact of these advantages is to lower the cost of trading goods in a common market.
• There are concerns that the lack of inter-border controls it is more difficult to supervise trade and prevent fraud, and/or the movement of prohibited and restricted goods that avoid paying VAT and Excise taxes.
• It is more difficult for the government to keep track of goods that need be concerned with as long sections of the common frontiers are unguarded-increasing the likelihood of smuggling. Once in the EU this would be virtually impossible to detect for instance, the sale of un-inspected horse meat and/or the spread of disease in trees and plants.
• EU free trade also makes national security more difficult to enforce effectively for all the reasons mentioned before.
• Intrastate paperwork is still required although it is regarded as an unnecessary administrative accounting burden but the commercial evidence of a transaction has to be stated for the statistical record.

Disadvantages of EU Membership

• Because of a growing membership and greater economic divergences with the WTO and WCO there are serious concerns that agreements would be more difficult to achieve and take longer than when within the EU.
• Brexit has caused a great deal of turmoil within the EU because the general perception is that the free movement of merchandise has benefited UK businesses, specially, larger ones who have profited the most.
• In theory, all businesses should benefit from EU trade, however, official statistics indicate that only 15% of UK businesses are engaged in any form of international trade which is a significant but not decisive percentage. Also, choice, availability and supply have been expanded, nonetheless, in many cases the same or similar goods are available from outside the EU.
• Free movement of EU goods is not free of fraud and it is probably more difficult to detect like tobacco and alcohol which trade avoiding taxation affecting the brewing industry and undercutting legitimate trade. Statistics indicate that EU trade is twice as much with each other as a result of the single market. The impact of this has been that per capita income is estimated to be 6% higher than if the UK had not participated in this increase of trade.
• The UK has benefitted from Customs facilitations as liberal transit rules do not required guarantees to certain customs regimes, particularly those which have economic impact. These benefits will cease when the UK exits the EU.
• For private individuals the single greatest benefit is to buy goods for personal use without the need to pay tax when returned to the EU country of origin. The issue of taxation within the EU remains unresolved because of variations in VAT rates between individual countries and how it creates huge problems for companies trading across the EU seeking to maximize the benefits of a centralized customs clearance.
• Harmonization of rates seems as beneficial for EU trade-providing a level playing field. Nonetheless, one of the most noteworthy examples is the interpretation of Temporary Storage regulations between countries and move more towards a stricter regulatory system closer to the German model, which involves transit and withholding entries until goods have been moved from the border to the Temporary Storage Facility. In Holland they have established a trial under which the goods move within Temporary Storage avoiding the need to use Transit and so, speeding the movement of goods.
• A Union Customs Code (UCC) which has taken at least 10 years to pass is the Lisbon Treaty which was renamed the Lisbon Strategy, also known as the Lisbon Agenda or Lisbon Process. This an action and development plan devised in 2000, for the economy of the European Union between 2000 and 2010 that delegated provisions for Implementation and functioning of the UCC.

One more trade related issue that needs to be underlined is the benefit of trade treaties under EU sponsorship under a common block as the one being currently negotiated with the USA. As part of a large trading block, member countries enjoy greater influence than would be the case if negotiating as an individual nation. Moreover, for countries outside the EU, it is more attractive to negotiate with a more economically large blocks than a treaty negotiated by each country.

Who has said that international politics is the study of policies of a country?

After the end of World War II the realist perspective was stated convincingly by Hans Morgenthau in a highly successful and very influential textbook, (Politics Among Nations, 1948). In his book, Morgenthau highlighted the importance of power in the achievement of national objectives. Disagreeing mainly with those who denounced “power politics,” Morgenthau stressed that the fracas for power takes place in all social relations and that international politics is not excluded from this general perspective. In addition, Morgenthau’s book conveyed heated debates between the “realists” and the “idealists.” Morgenthau defined power as the “ability to influence the minds and actions of men” exercised by political, psychological, and military means; there was a tendency for realists to emphasize the importance of military power.” Idealists, on the other hand, stressed the importance of assuring that ideological ends not be subverted through the pursuit of tangible instruments of power.”

This central concept of power in international relations networks, provoke concern about the analytic effectiveness of giving so much meaning to one concept. Difficulty arose for instance when trying to explain the occasions when smaller nations predisposed the behavior of larger nations, in essence revealing the limitations of using a single measure to describe national power. The concept developed into a fad which was underlined by Denis Sullivan, in his analysis of international relations textbooks. This finding by Sullivan brought light to the fact that individual authors were using the concept in a number of ways that aggregated compounds confusion to the meaning.

“International relations” and “foreign policy” are different concepts and have a number of significant characteristics.”

Statements from the review of the literature of International relations and foreign policy:

• · International relations are a comprehensive and wide-ranging term that describes the relations existing among States.
• · Foreign policy is the way in which countries follow their goals and interests to set forth international relations.
• · International relations provide a number of theoretical frameworks to analyze and understand foreign policy;
• · Foreign policy is one of the main subjects when a nation outlines its interaction areas of interest of international relations.
• · Foreign policy determines the relations among and between individual States.
• · International relations are theoretical frameworks designed to explain the reality on the ground.
• · International relations as a social concept is neutral and only describes the interaction among actors nations for analysis and understanding.

The study of international relations as envisioned is to educate us about how the world works however, the simplistic brand names such as "neocons" or "liberal hawks” have dominated foreign-policy debates. It follows that in a radically changing world, the classic theories of international relations have much to say. Instead of effecting radical change, academia has just adjusted existing theories to meet new realities.

In 1998 Stephen M. Walt published a much-cited survey of the field in these pages (“One World, Many Theories,” 1998). In his book he outlined three different approaches: realism, liberalism, and an updated form of idealism called “constructivism.” Walt argued that these theories shape both public discourse and policy analysis. Realism focuses on the shifting distribution of power among states. Liberalism highlights the rising number of democracies and the turbulence of democratic transitions. Idealism illuminates the changing norms of sovereignty, human rights, and international justice, as well as the increased potency of religious ideas in politics.”

“Columnist Charles Krauthammer and political scientist Francis Fukuyama collided over the implications of these conceptual paradigms for U.S. policy in Iraq. Backing the Bush administration’s Middle East policy, Krauthammer argued for an assertive amalgam of liberalism and realism, which he called “democratic realism.” Fukuyama claimed that Krauthammer’s faith in the use of force and the feasibility of democratic change in Iraq blinds him to the war’s lack of legitimacy, a failing that hurts both the realist part of our agenda, by diminishing our actual power, and the idealist portion of it, by undercutting our appeal as the embodiment of certain ideas and values.”

The importance of non-state actors is a challenge to the assumptions of the theory about the behavior and motivations of these groups. Realist author, Robert A. Pape, has argued that “suicide terrorism can be a rational, realistic strategy for the leadership of national liberation movements seeking to expel democratic powers that occupy their homelands.” The standard theories of conflict and anarchy are used to explain ethnic conflict in collapsed states within a wide-ranging intellectual convention rooted in the lasting philosophy of Thucydides, Machiavelli, and Thomas Hobbes which are valid today when applied to some non-state groups able to resort to violence.

Countries in transition to democracy, with fragile political institutions, are more likely to get into international and/or civil wars. In the last 15 years, this type of conflict has taken place countries like Yugoslavia Armenia, Burundi, Ethiopia, Indonesia, and Russia. For the most part, this violence has been caused by ethnic groups’ competing demands for national self-determination, which is more often than not a problem in new, multi ethnic democracies. The violence that is frustrating the experiment with democracy first in Iraq and now Syria is just the latest chapter in a turbulent story that began with the French Revolution.

Moreover, of the three theoretical traditions has the capability to explain change which is a significant flaw in such stormy times. For instance, Realists failed to predict the end of the Cold War. By the same token, liberal theory of democratic peace is better at predicting what happens after states become democratic than in predicting the timing of democratic transitions or worse yet prescribing the way to make transitions happen peacefully. Constructivists are better at describing variations in norms and ideas, but they are not as good on the material and institutional settings necessary to support consensus on new values and ideas.

In conclusion, theories of international relations allege to explain the way international politics works, however, each of the existing dominant theories don’t meet that goal. One of the major needs that international relations theory can make is not about predicting the future but providing the terminology and theoretical context to ask hard questions of those who think that making changes to a changing world is an easy task.

Why do monopolies/oligopolies limit the market supply when they could just raise prices?

Definition of an Oligopoly

An oligopoly is a market arrangement that is highly concentrated under a few firms control. It is possible however, that many small firms can also operate within an oligopoly market. For example, major airlines like American, United and Delta operate their routes with only a few close competitors, but there are also many small airlines catering for the short haul market like Alaska and Hawaii Airlines.

Ratios of Market Concentration

Oligopolies can be identified by concentration ratios, which is the proportion of total market share controlled by a given number of firms. High concentration ratio in an industry gives economists the argument to identify the industry as an oligopoly.

As an example of a hypothetical concentration ratio might look like: A concentration results from a 95 participation units in a 140 unit market or 95/140 x 100 = 67.8%

In Banking the Herfindahl – Hirschman Index (H-H Index) is an alternative method for measuring concentration ratios and for following changes in concentration after mergers. “The H-H index is found by adding together the squared values of the % market shares of all the firms in the market. For example, if three firms exist in the market the formula is X² + Y² + Z²; where X, Y and Z are the percentages of the three firm’s market shares. If the index is below 1000, the market is not considered concentrated, while an index above 2000 indicates a highly concentrated market or industry – the higher the figure the greater the concentration.” Square(15%+20%+25%)=1250

Mergers between oligopolies increases concentration to a point that it becomes monopolistic concentration and are most likely to be regulated or be subject to merger disapproval by regulators.

The Key ingredients of firm’s operating in a market with oligopoly concentration include:

Interdependence

Interdependence of a firm operating in a market with just a few competitors must take the potential reaction of its closest rivals into account when making its own decisions. An understanding of game theory and the Prisoner’s Dilemma helps appreciate the concept of interdependence.

Strategy

Strategy is extremely important for an interdependent firm as it cannot act independently and they must anticipate the most likely response of a rival for any given change in pricing or other tactics.

• Oligopolies need to make critical strategic decisions, at times such as:
• Compete with rivals, or collude with them.
• Raise or lower prices, or keep price constant with competition.

There exists a first and second turn strategies to be played. Sometimes it pays to go first because a firm can generate head-start profits. A second move advantage is to wait and see what new strategies are launched by rivals, and then try to improve on them or find ways to undermine them.

Market Entry Barriers

Oligopolies and monopolies more often than not, maintain their dominance in a market because it is too costly or difficult for potential rivals to enter a particular market. These obstacles are called barriers to entry and the incumbent can create them deliberately, or they can use existing blockage.

For instance:

• Economies of Scale
• · Ownership or control of a crucial scarce resource
• · High Start-Up Costs
• · High Research and Development Costs

Fake Barriers Can Be:

• Predatory pricing
• Predatory pricing
• Limit pricing
• Superior knowledge
• Predatory acquisition
• Advertising
• A strong brand
• Loyalty schemes
• Exclusive contracts, patents and license obtain through corruption
• Vertical integration

Another main feature of oligopoly behavior is that firms may attempt to collude, rather than compete where colluding participants act like a single monopoly and can enjoy the benefits of higher profits over the long term.

Types of collusion:

· Overt

· Covert

· Tacit

· Competitive oligopolies

· Predatory pricing to force rivals out of the market

They may also operate a limit-pricing strategy to deter entrants, which is also called entry forestalling price or collude together to discourage new entrants using cost plus pricing.

Non-price strategies:

Non-price competition is the favored strategy for oligopolies but it can lead to destructive price wars such as offering extended guarantees, spending on advertising, sponsorship and product placement, sales promotion, and loyalty schemes among others.

Game Theory Applied to Pricing:

· Raise price

· Lower price

· Keep price constant

The Prisoner’s Dilemma

Co-operation among oligopolies is likely to be highly rewarding. Co-operation reduces the uncertainty associated with a mutual interdependence of rivals in an oligopolistic market. Cartels are illegal in most parts of the world but members can conceal their unlawful behavior.

Aside from all the negatives oligopolies can may provide benefits such as:

· By adopting a highly competitive strategy, they can generate highly competitive market structures that can result in lower prices.

· They can be dynamically efficient in terms of innovation like introducing new product or process development.

· Price stability may bring advantages to consumers at the macro-economy level because it allows people to plan ahead and stabilize their expenditure, which in turn can help stabilize the trade cycle.

How do changes in income affect the demand for a good?

Consumer demand and income

Engel curves

An Engel curve describes how household expenditure on a particular good or service varies with household income. “They are named after the German statistician Ernst Engel (1821–1896), who was the first to investigate this relationship between goods expenditure and income systematically in 1857.” The best-known work is Engel's law which “states that the poorer a family is, the larger the budget share it spends on nourishment.”

“Engel curves for normal goods slope upwards – the flatter the slope the more luxurious the good, and the greater the income elasticity. In contrast, Engel curves for inferior goods have a negative slope.”

Illustration source www.economicsonline.co.uk

Microeconomic Factors Affecting Consumer Demand

In microeconomics attention is paid on the relationship between the price of a product and how much consumers are willing or able to pay for that product-service, so, it becomes important to observe all of the factors that affect demand for a good or service.

Product Price

There exists an inverse relationship between the price of a product and the amount of that product consumers are willing pay. “Consumers want to buy more of a product at a low price and less of a product at a high price. This inverse relationship between price and the amount consumers are willing and able to buy is often referred to as The Law of Demand. “

Disposable Income

The effect that disposable income has on a product that consumers are willing or able to buy depends on the kind of product is being described. In general there is a positive relationship between a consumer's income and the amount of the good that they are willing or able to buy. In this relationship as income raises the demand for the product increases and when income decreases, the demand for the same product will also decrease. These Items are generally referred to as normal goods.

Data observation on consumer behavior exposes that a change in income has a reverse effect. For instance, a low-quality ground beef at lower cost is attractive to low income families, because it is inexpensive relative to other types of meat. However, when income increases, the data shows that the same family might decide to stop buying this low quality of meat and instead buy higher quality. When this happens, there would be an inverse relationship between income and demand for this type of meat is referred to as an inferior good. These are not necessarily low-quality goods as the term inferior is used in economics it only means the an inverse relationship between one's income and the demand for that good exists.

Price of Similar Goods

Comparison of two goods that are typically consumed together like bread and butter are complimentary goods. If the price of one goes up, the Law of Demand states that consumers will be willing or able to buy fewer loafs of bread. It follows that fewer loafs of bread, we will also result in less butter because typically are used together. This can be summarized by stating that when two goods are complementary to each other, there is an inverse relationship between the price of one good and the demand for the other good.

Moreover, some goods are substitutes for one another which mean they are not consume together, but instead a choice is made to consume one or the other. For example, several brands of soda have similar price and can be substitutes of one another but what is a substitute good for one person may not be a substitute for another person. If the price of a preferred soda increases, it might make a similar substitute relatively more attractive. Summarizing it can be said that when two goods are substitutes of each other, there is a positive relationship between the price of one good and the demand for the other good.

Consumer Preferences

This is a less perceptible data point that still can have a big impact on demand. There are many things that can change a person’s tastes or preferences that can cause people to want to consume more or less of a given product. Here is where advertisement plays a role especially, if the advertiser is a celebrity endorsing a new product, in order to increase the demand. On the other hand, if a health study determines that a given item is bad for a person’s health, it will decrease the demand for such product. Measuring how much decrease is important for advertisers of negative products such as tobacco and alcohol. Moreover, demand can suddenly pick for unexpected items such as a raincoat in a rainy day or a sweater on a cold day.

Consumer Expectation

It doesn't matter what the current fad is if for the near future a consumer expects a better or cheaper product that will soon be available. When people decide to wait, they are decreasing the current demand for a given product because of what is expected of a new product in the future. In a similar way, if one expects the price of oil to go up tomorrow gas station will soon raise their price and one may fill up a car at with at current price. In this case demand goes up for gas today because the expectation is that the price will go up soon. This is a common event during a national disaster all based on the expectation of what would happen when price gouging starts as a result of a rush of higher demand for a needed emergency product.

Consumers Market

The number of consumers in given market also affects the behavior of pricing as more or fewer consumers enter the market it has a direct effect on the amount of a product that consumers are willing or able to buy. For example, a food stand on a high traffic pedestrian area will have more demand and higher sales during lunch hour. In the afternoon, when less pedestrians are on the street, the demand for food will decrease because the number of consumers in the area has significantly decreased.

How do I get an import and export license to do a business in the UK?

Alfonso Llanes, Master Degree in International Development

Answered just now

The following information is publically available in the in the UK Government Website at:

https://www.gov.uk/government/pu...

UK Department for International Trade

About Import and Export Licensing

The Import and Export Licensing Service is being developed by an in-house development team within the Department for International Trade (DIT) developing a new cross-government platform for import and export licensing to replace the current SPIRE IT system. This service is part of One Government @ the border and will be extended to rollout across Government for import and export licensing.

https://www.spire.trade.gov.uk/d...

Using SPIRE, you can apply for an export or trade license for your activities and items if you require a license for the wide range of "strategic" goods (such as security items, military goods, civilian products designed with a military use or purpose, firearms, police and paramilitary goods, radioactive sources and much more). You can also use SPIRE to make a Ministry of Defense Form 680 application, Private Venture security grading or Exhibition Clearance applications.

Overview of SPIRE System Level Access

 Organisation administrator

- Any users with this level of access have full administration rights for an organisation (including all sites).

- They will be able to add, edit and delete users from the organisation registration, and from all sites associated with it.

- They are able to submit, prepare and view applications (and also be a contact on an application).

- They will also be able to amend details within the registration. It is envisaged that the person with overall responsibility for export controls within a company should be an organisation administrator.

- We recommend that there are at least 2 organisation administrators per registration so that a company retains a level of flexibility when amending the registration details.

 Application submitter

- Any users with this level of access will be able to prepare and submit applications. They will not be able to amend details within the registration and will not be able to add, edit or delete users from the registration.

 Application preparer

- Any users with this level of access will be able to prepare applications, but will not be able to submit them. In order for an application to be submitted, a user with that level of access will have to logon to SPIRE, resume the draft application and can submit the application. It is envisaged that a company would make use of this level if they wanted all applications to be approved by a certain person or team before submission but were happy with others completing most of the application preparation.

Application viewer

- A user with this level of access can view applications for the organisation/site. This level of access may be useful to those involved with export controls who want overview of the export licensing activities of the company but who don’t need the more hands on access that a preparer or submitted has. Note: This

person will still be able to prepare and submit applications for themselves, other organisations who are not registered on SPIRE or organisations who have set them up as users on their SPIRE registration with the appropriate levels of access.

 Application contact

- This level of access can be assigned to any users who need to be added to the application form as a point of contact to answer specific questions (for example, an engineer or technical contact)but who wouldn’t be involved in export licensing beyond this.

Will an increase in interest rate (which leads cost of borrowing, thus leading increased cost of production) cause aggregate supply to shift?

Yes, it Would. Build a macroeconomic model, to understand how the “average price of all goods and services produced in an economy affects the total quantity of output and the total amount of spending on goods and services in that economy.”

Aggregate Supply is the total of all final goods and services which companies expect/plan to produce in a given time period. It also can be viewed as the total amount of goods and services that manufacturers or traders are willing to sell at a given price in an economy.

There are two schools of thought for a Long Run Aggregate Supply: One is the Monetarist “Reganomics” view and two the Keynesian view—Government investing/spending—in the economy. The curve behaves upward sloping in the short run and vertical, or close to vertical, in the long run.

The behavior of the model curve is affected by several factors:

Figure 1 credit: "Building a Model of Aggregate Demand and Aggregate Supply" by OpenStaxCollege, CC BY 4.0 and Khan Academy

1. Adverse supply shocks shift Aggregate Supply (AS) to the left. Usually, a rapid increase in oil prices can cause a supply shock. Unexpected rise in taxes or inflation can also shift AS to the left. A vertical long-run shift of the AS curve suits better the effect of natural disasters or setbacks in the economy by a corrupt or incompetent governments.

2. Changes in the short run resource prices can alter the Short Run Aggregate Supply curve. Unless the price changes reflect differences in long-term supply, the Long Run Aggregate Supply is not affected.

3. Economic expectations of Inflation. If suppliers expect to sell goods at rapidly growing prices in the future, they will be less willing to sell in the current period. As a result, the Short Run Aggregate Supply will shift to the left. New investment and better technology can result in productivity improvements as well as competent political administration, although some factors can only affect Aggregate Supply in the short run.

4. A rightward or an increase in AS implies an increase in productive capacity or technology change in the economy. One can think of this as an outward shift in the production possibility curve. An increase in the quality and/or quantity of the factors of production and/or technological improvements or any other reason for an increase in productivity can cause an outward shift of the Aggregate Supply curve.

Governments can influence (AS) through Supply Side policies such as improvements in health and education services not an increase in the money supply which tends to inflation. An rise in natural resources like new discoveries of energy sources or a shift to cheaper resources can also shift the AS curve to the right.

Aggregate Demand (AD) and Formula

The accepted economic model Aggregate Demand is the total of Consumption, Investment, Government Spending and Net Exports (Exports – Imports).

Aggregate Demand = C + I + G + (X – M). It shows the relationship between Gross National Product (GNP) and the Price Level. C= investment, I= spending, G= government spending X= spending on exports, minus M=spending on imports.

1. When domestic prices increase, then demand for imports increases (since exports are inversely related to imports. (X-M)

2. When inflation increases, real spending decreases as the value of money decreases. This shifts Aggregate Demand to the left.

3. Real Interest is the minimal interest rate adjusted to the inflation rate. When inflation increases, nominal interest rates increase to maintain real interest rates. Lower real interest rates will lower the costs of major products and will increase business capital spending.

4. If consumers expect price inflation in the future, they will tend to buy now causing aggregate demand to increase or shift to the right affecting a shift in GDP as well as aggregate demand is the amount of total spending on domestic goods and services in an economy.

The downward-sloping aggregate demand curve shows the relationship between the price level for outputs and the quantity of total spending in the economy as prices come down demand increases.

Aggregate demand measures must include all four components :( C + I + G + (X – M)

Consumption

Investment

Government spending

Net exports= (exports minus imports)

The aggregate demand model curve:

Figure 2 credit: "Building a Model of Aggregate Demand and Aggregate Supply" by OpenStaxCollege, CC BY 4.0 and Khan Academy

The interest rate effect is that as economic output increases, the same purchases will require more money or credit to accomplish. This additional demand for money and credit will push interest rates even higher. But higher interest rates will reduce the amount of borrowing by businesses for investment and also reduce borrowing needs by households to buy homes and/or cars and added together, it reduces both consumption and investment spending.

What are Mexico's top 3 profitable exports?

Based on estimates from the Central Intelligence Agency’s World Fact book Mexico shipped $409.5 billion dollars worth of goods around the globe in 2017, up by 7.8% since 2013 and up by 9.5% from 2016 to 2017. The same report indicates that Mexico exported goods plus services which represent 37.4% of total Mexican economic output or Gross Domestic Product.

According to Trading Economics report, Mexican exports by value are represented by 82.7% delivered to the United States and Canada under the North American Free Trade Agreement (NAFTA). The value of Mexican shipments to European importers was 5.9%; Latin America and the Caribbean accounted for 5.2% of total Mexican exports compared to 5.6% for purchasers in Asia. Mexico’s population of 124.6 million people, with a total of $409.5 billion in 2017 in export value exports works out to approximately $3,300 per person. Mexico’s unemployment rate was 3.4% as of January 2018 down from 3.6% one year earlier.

The current most profitable exports of the Mexican economy according to Trading Economics are:

• Vehicles: US$101.7 billion (24.8% of total exports)
• Electrical machinery, equipment: $81.6 billion (19.9%)
• Machinery including computers: $65.9 billion (16.1%)

OECD reports that Mexico is the 15th largest export economy in the world. In 2016, Mexico exported $373B and imported $380B, resulting in a negative trade balance of $6.62B. In 2016 the GDP of Mexico was $1.05T and its GDP per capita was $17.9k.

The same report states that the “Mexican economy has had an unprecedented macroeconomic stability, which has reduced inflation and interest rates to record lows and has increased per capita income.” Nevertheless, there still is a very large breakdown remain between the urban and the rural population, the northern and southern states, and in general between wealth and poverty. Some of the outstanding issues include upgrading roads and bridges, modernizing the tax system, better labor laws, and most importantly, the reduction of income inequality. The Mexican government collected tax revenue equivalent to 19.6 percent of GDP in 2013, which is the lowest among the 34 OECD countries.

Export income represents 90% of Mexican trade which is under free trade agreements (FTAs) with more than 40 countries, including the European Union, Japan, Israel, and much of Central and South America. The most beneficial to the Mexican economy is the North American Free Trade Agreement (NFTA), which came into effect in 1994, which was signed in 1992 by the governments of the United States, Canada and Mexico.