2022 JC2 H2 Prelim CSQ2 (Suggested Answers).docx

Question 2: Benefits and Challenges of Globalisation Extract 6: How Brexit impacts globalisation KeybeliefsofglobalisationliketradeandimmigrationwereamongthefactorsthatpushedtheUKtowards“Brexit”[atermusedtodescribeUK’s decisiontoexittheEuropeanUnion(EU)],leadingmanyexpertstowonderwhetherglobalisationisstillwelcomeintoday’s world.UK’svotetoleavetheEUin2016wasaclearreminderthattheUKpublicwasn’thappywiththesepolicies, which experts said showed dissatisfaction with globalisation. TheEU,whichcomprises27EuropeancountriesincludingtheUK,allowsfreetradeandfreemovementofpeopleamongstitsmembercountries.ExpertswarnedthatBrexitcoulddisrupttrade links with the EU and jeopardize jobs in the UK. Source: https://www.cnbc.com, 28 Jun 2016 Figure 1: Euro/ Pound exchange rate 2016- 2021 Source: Bloomberg Table 2: UK’s annual inflation rateYear Annual inflationrate (%)2016 0.72017 2.72018 2.52019 1.8

Source: https://www.ons.gov.uk Extract 7: Damage of Brexit on UK Theeconomyhasslowed,andmanybusinesseshavemovedtheirheadquarterstotheEU.Businessinvestmentdiminishedby 11% between2016and2019. Someinternationalbusinesseshavemovedout of UK.Brexit'sbiggestdisadvantageis its damageto theUK's economicgrowth. Mostof thishasbeendueto theuncertaintysurroundingthefinaloutcome.UncertaintyoverBrexitslowedtheUK’s growthfrom2.4%in 2015to 1.6%in2019. TheUKgovernmentestimatedthatBrexitwouldlowertheUK’sgrowthbyupto6.7%over15 years. TheBritishpound[UK’s currency]fellimmediatelyaftertheBrexitvote.Thathelpsexportsbutincreases the prices of imports. It has not regained its pre-Brexit high. Source: The Balance, 24 Jan 2022 Extract 8: UK productivity, competitiveness and standard of living ThepublicdebateoverBrexithadnotbeenbasedonafactualunderstandingofthestateoftheUKeconomy. TheproblemsfacingtheUKwerenotcausedbytheEUbutliesathome.Hence,leavingtheEUwillnoteliminatetheseproblems.Therealissueis a patternofpersistentweaknessesin UKcompetitiveness,anditsconsequencesforcitizens.ThelackofeffectiveactiononupgradingUKcompetitivenesshasbeenafundamentalfailureoftheUKgovernment.Brexitcouldtriggerlongover-dueactionbytheUKgovernmenttoboostproductivitytoenhancecompetitiveness.ThisratherthanawaveofnewtradeagreementsoutsideoftheEUshouldbewhat UK should focus on. UKprosperityhasbeenlagging.GDPpercapitaremainswellbelowotherWesternEuropeancountriesinlevelandgrowth.Wagegainshavestagnated,andtheUK’sstandardoflivinghascontinuedto lagpeers.Prosperityhasbeenuneven.Sincethe1990stheUKregisteredthegreatest income inequality of any European OECD country. Changesin prosperityoverthelongtermdependonproductivity. Productivityis thecentralmeasureof competitivenessanda keydriverof a nation’s standardof living.TheUK’sweaknessesin productivityis the root causeof the nation’s disappointingeconomicperformance. UK productivity is lower than other peer countries in OECD. The UK is underperformingbecauseof weaknessesin competitivenessfundamentals.Infrastructurequalityis weakandinsufficientto supportfurthergrowth.Therearemajorskill