1. International Competitiveness
Definition:
International Competitiveness is the ability to sell goods and services at competitive prices in a foreign country
Exercise:

2. Global Competitiveness - Eight factors…?
Relative Unit Labour Costs
(Total Cost of Employing Labour / Units of Output Labour produces). As £ costs are expressed in $, weaker £ = lower RULC
Generally recorded in index value ie 100 in 2000, 105 in 2001 etc.
Relative Export Prices = Export prices of UK Goods compared to export prices of main trading partners – expressed as an Index.
index = export prices relative to partners = Competitiveness
Export vs Import Prices: ie if X prices  vs M prices then likely that UK losing competitiveness.

3. Productivity (Output/worker) – effects RULC
Wage and non-wage costs (H&S, carbon taxes, waste and recycling, employment protection, employer contribution to pensions etc.)
Regulation
Quality (After-sales service, design, reliability and performance)
R&D
Taxation
Govt Supply Side Policy
Govt Exchange Rate Policy
Govt Control of Inflation (& Trade Gaps/Business Cycle)

4. Other costs / effects - besides Labour for Intl Competitiveness – Evaluation Points
Land – cheap resources could boost competitiveness
Capital – high fixed capital formation ie investment in productive capacity – could boost competiveness and make Labour more productive
Innovation – Are some countries just more culturally entrepreneurial than others?
Other - Does fluency in English / English as world language confer an advantage on UK, USA, Canada, Australia etc?

5. The British Problem – poor productivity?
UK: Low Inv’t relative to GDP (in comparison to our competitors) – Aging or “shallowing capital” and “Labour Hoarding”? (using too much labour
Low spending on R&D
Poor UK management / Skills gaps in UK Industry (Hi- tech/Pharm/Construction)
Outdated Infrastructure (Example Heathrow debate, Northern Powerhouse?, poor internet roll out?)
Topical – will being outside EU reduce “red tape” – promote entrepreurship?
Stability of Economic fundamentals in long term => “Macro stability” (Low Inflation, stable banking system, competitive exchange rate and comparable tax structure to competitors)

6. Global Competitiveness Index
Figures from WEF 2014
Switzerland / Singapore / Finland / Germany ….UK 9th

9. Determinants of Relative Unit Labour Costs
Macroeconomic stability – encourages capital investment
Level of human capital – skills & education
Capital investment – UK has tended to under-invest in long-run infrastructure
Labour market flexibility – lack of competition in labour markets raise wage rates (workers bargain harder) – UK unemployment is very low

11. Problems of sustaining international competitiveness
Low wage costs are likely to grow
Other costs likely to rise
Current account surplus is likely to lead to a rise in the exchange rate

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