Global Economic Cooperation
Impact of Rising Multinational Corporations
Multinational corporations are major drivers of economic globalization. Economic globalization often pulls through when forces existing in the market are regulated giving way for allocation of goods and services by commercial activities.
Multinational corporations highly affect trade between the United States and the United Kingdom. The corporations give dictation to cultural habits and create a platform for demand. This is achieved by creating an influence on the public through funding research, marketing and advertisement. This results in good alignment of corporate and public interest. When both societies have good cultural homogenization, a good ground for achieving maximum profit is created.
Multinational corporations may lead to wage inequality in both countries. It is very common to experience a situation where multinational companies give high wages to their employees as opposed to firms which are owned domestically. Multinationals hire more educated and qualified workers. They pay their staff more but still gain benefit from low cost of labour. According to Foley (2015), the high demand for skilled labour as exhibited by multinational companies has led to shifts in labour demand. There have therefore been imbalanced earnings when the skilled and unskilled labour is compared. Wage inequalities are experienced in these countries, and there has been a decrease in the number of jobs which the home countries need.
Multinational corporations have also led to conflicts of interest. All corporations are driven by profit and the need to ensure that they have large market shares in the countries where they are hosted. Conflict of interest between the corporations and both United States and the United Kingdom come up and are mostly based on property rights, operation decisions which may bring effect to environment or rights of humans or the process of repatriation of profits. Since most of the multinational corporations have their decisions based on economics, the United States and the United Kingdom being host countries need the decisions to be based on the social and political needs of the country.
How Changes in Technology Affect the Levels of Trade between Two Countries
Technological innovation has a great impact on how the United States and United Kingdom trade. It has facilitated ease of access. According to Burstein (2017), both trade players agree that trading has been made more accessible by innovations in technology. Most of the traders in the countries can easily participate in various industries.
Technology has also made it possible for traders in the United States and the United Kingdom to attain freedom and flexibility while trading. Traders are in a position where they can monitor trades from whichever place so long as they have internet. The traders are highly informed on what is going on in the market and as a result, running their businesses becomes easy.
Technology has also resulted in a more fast and automatic execution of activities. Just as other industries experience the benefits associated with automation, the trading industry has not been left behind. Automation has taken place in operations running in the back office, where most of the manual systems have been turned to automatic. More automation has resulted in less need for a dealer to intervene. This, therefore, means that trades will be executed in a faster means and chances of missing trades for traders will be minimized.
Technology has also intervened on speed where execution of activities has become faster. In the current world of interconnection where instant access is important, speed is considered a major factor. Technological innovations have made it possible for trade providers to get rid of time delays and participate in millisecond execution activities.
Levels of trade between the UK and the US
The United Kingdom and the United States have a high level of trade. The United States is the United Kingdom’s largest export destination, with a market which is worth £3.5 billion. The items exported by the United Kingdom to the United States are industrial chemicals, animals and vegetable fats mostly. The United States is the United Kingdom’s largest source of imports coming from Germany and China. As per the United Kingdom’s market, up to 17% of exports by Britain went to the United States in 2012. The United Kingdom and the United States are large foreign investors of each other. The investments are a big support to the job sector offering up to a million jobs in each of the two countries. In the year 2005, the direct investment America had in the United Kingdom amounted to $324 billion while the amount of direct investment in the British amounted to $282 billion.
How Trade between Countries Affects the Countries and Citizens Involved
Trade between the United States and the United Kingdom has a great impact on the countries and the citizens of the country. As a result of exports, jobs are created. When citizens of a country have good jobs, the standards of living improve hence boosting the economy of a country. Exports create a platform were domestic companies gain more experience in production for foreign markets (Ebenstein, 2014). In time, companies can have a competitive advantage in the world market.
Imports, on the other hand, give way for foreign competition to be able to minimize the price they set for the consumers of their products. People shopping for goods and services can receive them in variety.
A disadvantage of trade is experienced when governments choose to reduce tariffs and to introduce blocks to imports. This is all to boost exports and make trade easy. However, jobs in domestic industries are reduced as a result.
A Transatlantic Trade and Investment Partnership (TTIP) is a negotiation deal meant to reduce tariffs and barriers for trade between the United States and the European Union. The industries which it will affect are the energy, financial sector, chemicals, pharmaceuticals, food and drinks. The government of the United States claims that its shoppers would benefit when import tariffs on items such as cars are removed.
How Cessation of Trade Can Affect the Countries and Citizens Involved
Cessation of trade would have a high impact on both countries. Since exports create job opportunities, the job opportunities would decrease. This will result in low standards of living among the citizens of both countries. Most of the citizens would therefore not be in a position to invest as compared to when trade existed between the countries. Economic growth level, therefore, goes down. With no imports, prices for consumers would not be reduced, and it would be very costly for consumers to participate in shopping activities. As a result, the countries would not be in a position to effectively participate in the global market. Their competitive advantage would decrease making them vulnerable.
Ebenstein, A., Harrison, A., McMillan, M., & Phillips, S. (2014). Estimating the impact of trade and offshoring on American workers using the current population surveys. Review of Economics and Statistics, 96(4), 581-595.
Foley, C. F., & Manova, K. (2015). International trade, multinational activity, and corporate finance. economics, 7(1), 119-146.
Burstein, A., & Vogel, J. (2017). International trade, technology, and the skill premium. Journal of Political Economy, 125(5), 1356-1412.