Pattern of Trade

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Changes in the UK's Pattern of Trade

Between 1986 and 1998, the UK averaged a small trade deficit of around £5bn. This then grew until 2002 where it reached £30bn and has stayed roughly stable ever since.

UK exports

In 2016, UK exports were valued at around £300bn.
The main exports in the UK were financial services, cars, wholesale medicines, gas turbines, petroleum and gold.
The leading recipients of UK exports are the USA, Germany, the Netherlands and France.

Changes in UK exports

Since 2000 the UK has decreased its share of exports to the EU from 55% to 45%, taking advantage of the rapid economic growth of countries such as Brazil, China, Russia and India.
As London grew as a financial hub from 2000-2008, there was an increase in financial services exported to the rest of the world. This slowed after the global financial crisis of 2008, but is still a major contributor to UK exports.

UK imports

In 2016, UK imports were valued at around £500bn.
The main imports were cars, vehicle parts, aircraft, gold, petroleum and wholesale medicines.
The leading suppliers of imports to the UK are Germany, China, the USA and the Netherlands.

Changes in UK imports

Since 2000, over 50% of UK imports have come from the EU.
The rapid growth of China as an exporter has meant that lots of UK imports now come from China.
The decline of the UK manufacturing industry has meant that we import lots more manufactured goods, including computers.

Factors Affecting the Pattern of Trade and Trade Flows

Four key factors influence international patterns of trade and trade flows.

Comparative advantage

David Ricardo's theory of comparative advantage explains why nations specialise in producing different products.
Many developing nations have comparative advantage (and specialise in) producing primary products (commodities) like Brazil.
They export these primary products to nations that have specialised in manufacturing products (the secondary sector) like China.
These exports are bought internationally. Nations like the USA have specialised in tertiary services, however, these are consumed more in the USA. This is one reason for the USA and UK's current account deficits.

Emerging economies

Emerging economies like China started producing lots of manufactured goods.
They had far lower labour costs than developed markets like the UK and USA.
This led to deindustrialisation in the developed world because jobs relocated from developed countries to developing countries.
Emerging economies like China export a lot of manufactured goods to countries all over the world.

The growth of trade blocs

Trading blocs and bilateral trading agreements like the EU (or European Economic Area) and NAFTA reduce tariffs and barriers to trade within trade blocs.
The EU encourages tariff-free trade between members but imposes a common external tariff on goods from outside the EU. This encourages the consumption of EU goods and discourages trade with nations outside of these agreements because they are at a relative pricing disadvantage.

Changes in relative exchange rates

Changes in relative exchange rates can adjust trading patterns.
Nations like Greece, who joined the Euro, saw their relative exchange rate appreciate because they were part of a larger, more successful economy and currency. This would have discouraged the purchase of Greek exports internationally.
When Brazil had a political crisis in 2015, its nominal and real exchange rate declined by over 30%. Holidays to Brazil became more affordable and popular because the Brazilian Real became so cheap.