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#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.

This is the ninth of ten messages on international trade. If you like this please give us a star below. If you wish to respond, please send us a message via our contact form.

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#9 - Trade makes shopping cheaper

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