#9 - Trade makes shopping cheaper
International trade makes both sides of the trade better off: It facilitates economic growth in exporting countries and increases purchasing power on the import side because consumer prices fall. This is due to increasing competition on the domestic market: Imports create downward pressure on the prices charged by domestic producers, leading to lower prices for consumers. For example: After the removal of quotas on clothing and footwear in the EU, prices have been falling steadily: Between 1999 and 2012 by almost one third (27 percent) compared to the general price level, calculates Copenhagen Economics, a research institute.
This is great for the EU's consumer and economy
Clothing and footwear constitute a significant share of total private consumption (around 5-7%), and as shown, prices have dropped significantly as a result of the globalisation of the value chain. The large decrease in clothing and footwear consumer prices relative to the general price level has a number of positive implications both for the individual consumer as well as for the European economy:
- Generating additional demand in other sectors of the economy.
- Keeping the general price level down and so contributing to moderate nominal wage increases. This again helps to maintain Europe as a competitive location for production.
- Outsourcing is generating additional income abroad and consequently increasing demand from overseas consumers for European products.
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