International Competitiveness

• International competitiveness


  The ability of a nation to compete successfully overseas in order to sustain improvements in living standards and output
• Factors determining international competitiveness

  • Price competitiveness of the nation's goods and services
  • Non-price competitiveness (branding, quality, innovation)
  • Ability to attract foreign direct investment
• Unit labor costs

  Total labor cost divided by output produced, a key measure of price competitiveness
• High productivity


  Drives down unit labor costs and improves price competitiveness
• High minimum wages

  Increase unit labor costs and reduce price competitiveness
• Global Competitiveness Index (GCI)


  An all-encompassing measure of competitiveness, including factors like infrastructure, innovation, tax levels
• Improving factors like infrastructure, innovation, regulation can increase a nation's ranking on the GCI
• Terms of trade

  Index of export prices / index of import prices x 100, a measure of price competitiveness
• Deteriorating terms of trade


  Implies improving price competitiveness of a nation's goods and services
• Key determinants of international competitiveness

  • Unit labor costs
  • Labor flexibility
  • Tax regimes
  • Innovation
  • Infrastructure
  • Regulation
  • Macroeconomic stability
• The UK ranks 9th globally on the GCI due to factors like labor flexibility, skilled workforce, competitive tax regime, and stable macroeconomy
• The UK struggles with price competitiveness due to high minimum wages and low productivity