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Evaluate the importance of international trade and Foreign Direct Investment to lift the global economy out of the downturn - Essay Example

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The current global economic crisis has been labelled by economists as the worst economic crisis since the Great Depression and the domino effect of the crisis has culminated in the decline of consumer spending, demise of established businesses in key industry sectors and…
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Evaluate the importance of international trade and Foreign Direct Investment to lift the global economy out of the downturn
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Evaluate the importance of international trade and Foreign Direct Investment to lift the global economy out of the downturn

Moreover, the global nature of the economic crisis has not only had a domino impact on national economies, infrastructure and the retail sector; it has also served as a barrier to quick recovery (United Nations, 2).
From a UK perspective, the current financial crisis has reiterated the importance of international trade and foreign direct investment (FDI) to the UK economy particularly in the current global economic downturn. Indeed, the fact that the UK is currently struggling in its recovery process is further testament to the UK reliance on FDI and international trade (Almond & Ferner: 58) The focus of this paper is to critically evaluate the importance of international trade and foreign direct investment to the lift the global economy out of the current downturn with specific reference to the UK. It is submitted at the outset that international trade and inward investment from FDI is a fundamental cornerstone of the UK economy as it is imperative to the sustainability of the economic strengths of the UK to compete in an increasingly competitive economy as a result of globalisation (Almond & Ferner 58).
This argument is further supported if we consider the rationale for the current financial crisis. It is submitted that the immediate trigger was the collapse of the US housing market as a result of the sub prime market disaster upon which the international banking industry had been lending through following trends in the housing market (Ambachtshee et al: 149). Indeed, the United Nations analysis of the global outlook for 2009 asserts that “in little over a year, the mid-2007 sub-prime mortgage debacle in the United States of America has developed into a global financial crisis and started to move the global economy into a recession” (United Nations 1).
Moreover, prior to the sub-prime catastrophe, the significant foreign direct investment in the US and liquidity of the US economy had ... Read More
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