Friday, November 2, 2012
Euro effect on world trade
After this big financial crisis that has been happening in Europe their currency value has been depreciating and that in many ways will affect world trade, because Europe does a lot of trading with many other countries and Europe is a fairly large continent. But the depreciation of their currency does affect all parties involved in 2 ways. Firstly other countries purchasing European goods will be able to get more quantity per good at the same price which has a negative impact on European producers who end up worse of in the trade although they will probably export more. But parties buying European exports will come off with the longer end of the stick and keep buying more because they are getting it a cheaper price so they will keep buying more and more. However European countries trading with each other will see no benefit when trading with each other and possible in some manner will suffer a negative impact on them and even more countries that import to Europe will suffer because with a weaker Euro they buy less from other countries which will hurt those countries that export to Europe.
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Yes, I agree with you. In addition, this crisis also has a big impact on the car industry in Europe. Many major car companies have been forced to lay off workers and shut down production lines. As you say, the purchase power of people in Europe becomes weaker and the only way for the car industry to survive in this crisis is to export. Take BMW as an example, it has transformed the target market from Europe to U.S. market and Asian market. As tons of European cars pouring in Chinese market, the Chinese car makers are faced with a big challenge. It incurs a price war in the Chinese car market which is a serious threat to the sustainability of the development of China's car industry.
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