Discuss two ways in which a country's international competitiveness could increase (8)

International competitiveness refers to how attractive a products in country are in international markets in terms of quality and price. One way in which Britain could increase its international competitiveness is through a relaxation in government laws and regulation, more specifically in reducing the minimum wage. In reducing the minimum wage the government would allow firms to reduce their cost per worker and therefore their total costs, by consequence they profit per unit has increased and they can lower the price of their product accordingly to compensate. This boosts price competitiveness since said good is now at a lower price than previously whilst quality is retained and becomes more attractive on international markets. However one drawback of this could be that workers have less incentives to work as hard since they are receiving a lower wage and as a result the quality of product may drop thus resulting in a fall in non-price competitiveness since buyers abroad regard the product as inferior in spite of the fall in price and consequently purchase from elsewhere. A second way in which Britain's international competitiveness could increase is through a depreciation of the pound. A depreciation refers to a decrease in the exchange rate and therefore would entail that the pound has fallen in value relative to another currency, for example, the euro. This could be down to a decrease in UK relative interest rates for example. The effect of a depreciation would mean that UK exports are now relatively cheaper abroad and therefore are relatively more desirable since a buyer in France can acquire the same amount of British goods after the change in exchange rate for fewer euros. This is an example of a change in price-competitiveness. However this may not act as a long term solution to boosting international competitiveness as exchange rates are constantly fluctuating due to relative interest rates and therefore inflation in relevant countries so this is not a long term guarantee of international competitiveness.