The effect of recession on important world imports & exports

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The effect of recession on important world imports & exports
Recession can have disastrous effects on exportation and importation worldwide. (Hemera Technologies/AbleStock.com/Getty Images)

Recession can have disastrous effects on the exportation and importation of goods worldwide. The UK economy, in particular, survives on a careful balance of exported and imported commodities, which include manufactured goods, fuels, chemicals, food, beverages and tobacco, which it generally decides to trade with Germany, the US, China, France, Ireland and Italy. Having said that, a recession experienced in any part of the world will also affect export and import activity on a global scale.

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It’s a worldwide issue

When recession strikes, it’s rarely a contained problem which remains an issue for one country alone. Recessions have a knock-on effect across the world because they affect the exportation and importation of goods. Countries suffering from a recession are unable to meet exportation demands due to unemployment. This means that they are unable to export as much as they once could. When a country exports less, its economy weakens and it cannot afford to import as much as it used to. This then means that other countries lose out too. They are unable to export as much because the countries that they used to export too can no longer afford to buy and so on.

The effect of recession on important world imports & exports
Recessions have a knock-on effect across the world. (Jupiterimages/Photos.com/Getty Images)

Supply shock

Supply shock is one of the most common effects of recession on import and export trade worldwide. Essentially, when recession hits, there is less consumer demand for certain goods because less people have the money to spare to buy. This means that supply outweighs demand and the manufacturers end up having to sell their goods for less in order to shift the stock. Eventually, the companies go out of business because they cannot survive selling their goods at such low prices.

The effect of recession on important world imports & exports
Supply shock causes many businesses to go into bankruptcy (Hemera Technologies/AbleStock.com/Getty Images)

Protectionism

When a country falls into recession, one of the first measures that it takes to protect its economy from further damage is to revise its protectionism policy. Protectionism is when a country places taxes and regulations on the importation of foreign products and services. This is done in order to “protect” domestic business from foreign competition. In one way, protectionism makes a lot of sense because it helps to keep unemployment at a stable level. However, in the long-term protectionism can be harmful to an economy in recession. Without the outside help of foreign companies and importation, the amount of goods decreases radically and there’s not enough to go around. This then forces prices to rise because products are less available and this means that the majority of the population cannot afford to buy. The economy continues to slow down and the country finds it even harder to pull itself out of its recessive slum.

The effect of recession on important world imports & exports
Protectionism is when a country places taxes and regulations on the importation of foreign products and services. (Stockbyte/Stockbyte/Getty Images)

Recession in the UK

The most recent financial crisis has been a world concern since 2007. As a result, the UK’s economy suffered from the effects of unemployment and deflation. Many people in the UK lost their jobs and this caused the nation to cut-back drastically on its spending. Consumer activity slowed right down and this caused a long-term effect on the price of goods. Imported and exported goods began to lose their value (deflation) which, in turn, caused economic growth in the UK to slow down too. The UK government’s response was to plough more money into public spending (health-care, education and social security) as a way of counteracting the effects of deflation. The move was a direct bid to encourage consumers to regain confidence in the economy, start spending again and help import / export activity in the UK return to its former self.

The effect of recession on important world imports & exports
Unemployment has a knock-on effect on importation and exportation. (Jupiterimages/liquidlibrary/Getty Images)

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