Economics. Dr. Pass Christopher

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СКАЧАТЬ of structural changes. Intra- and inter-takeovers-mergers have occurred (e.g. the Lloyds-TSB Banks’ tie-up and their takeover of the Cheltenham and Gloucester building society); foreign banks have increasingly moved into the UK through either takeover (e.g. Hong Kong and Shanghai Banking Corp’s takeover of the Midland Bank and Deutsche Bank’s acquisition of the Morgan Grenfell investment house) or by setting up local offices; building societies such as the Abbey National, Woolwich and Halifax have converted themselves into banks. Direct banking services (via the telephone and the internet) have increasingly taken market share away from traditional branch networks. This has led to pressure on banks to cut costs by reducing the number of their branches. Another notable development has been the rapid rise in ATMs (AUTOMATIC TELLER MACHINES, referred to popularly as ‘hole in the wall’ machines).

      The commercial banks play a unique role in a country’s monetary system through their capacity to engage in multiple BANK DEPOSIT CREATION by providing credit through loans and overdrafts. Bank deposits constitute by far the largest single component of the broad MONEY SUPPLY (especially M4) and as such are a crucial target for the application of MONETARY POLICY in controlling the economy. See MONEY SUPPLY DEFINITIONS, BANK OF ENGLAND. See also EFTPOS.

      commission 1 payments to AGENTS for performing services on behalf of a seller or buyer. Commissions are usually based on the value of the product being sold or bought. Examples of commissions include salespersons’ commissions, estate agents’ fees and insurance brokers’ commissions. 2 a body that acts as an ‘official’ regulatory or administrative authority with respect to a specified activity. For example, the COMPETITION COMMISSION hears cases of monopolies, mergers and anti-competitive practices referred to it by the Office of Fair Trading under UK competition policy. The European Commission is the main body responsible for the day-to-day administration of the affairs of the EUROPEAN UNION.

      commodity 1 see GOODS. 2 raw materials rather than goods in general: for example, tea, coffee, iron ore, aluminium, etc.

      commodity broker a dealer in raw materials. See COMMODITY MARKET.

      commodity market a market for the buying and selling of agricultural produce and minerals such as coffee and tin. Commodity business is conducted through various international commodity exchanges, some of the more prominent ones being based in London, for example the London Metal Exchange and the London International Financial Futures Exchange.

      Commodity markets provide an organizational framework for the establishment of market prices and ‘clearing’ deals between buyers and sellers (see CLEARING HOUSE SYSTEM). Commodity dealers and brokers act as intermediaries between buyers and sellers wishing to conclude immediate spot transactions (see SPOT MARKET) or to buy or sell forward (see FUTURES MARKET).

      commodity money products that can be used as a means of payment (see MONEY) but which are valuable in their own right, for example, cigarettes or alcoholic drinks. Commodity money is generally only used as a means of payment if confidence in money falls as a result of, say, rapid INFLATION.

      Common Agricultural Policy (CAP) the policy of the EUROPEAN UNION (EU) for assisting the farm sector. The main aims of the CAP are fair living standards for farmers and an improvement in agricultural efficiency (see AGRICULTURAL POLICY).

      The CAP is administered by the European Agricultural Guidance and Guarantee Fund, with major policy and operational decisions (e.g. the fixing of annual farm prices) residing in the hands of the Council of Ministers of the EU. The farm sector is assisted in four main ways:

      (a) around 70–75% of EU farm produce benefits directly from the operation of a PRICE-SUPPORT system that maintains EU farm prices at levels in excess of world market prices. The prices of milk, cereals, butter, sugar, pork, beef, veal, certain fruits and vegetables and table wine are fixed annually and, once determined, are then maintained at this level by support-buying of output that is not bought in the market. MONETARY COMPENSATION AMOUNTS are used to convert the common price for each product into national currencies and to realign prices when the exchange rates of members’ currencies change;

      (b) variable TARIFF rates are used to increase import prices to internal price-support levels in the cases of the products referred to above, thus ensuring that EU output is fully competitive. The 25% of EU farm produce that is not subject to direct price-support relies entirely on tariff protection to maintain high domestic prices;

      (c) EXPORT SUBSIDIES are used to enable EU farmers to lower their export prices and thus compete successfully in world markets;

      (d) grants are given to facilitate farm modernization and improvements as a means of improving agricultural efficiency.

      The CAP is the largest single component of the EU’s total budget. In 2003 it accounted for 45% of total EU spending. Over 90% of the CAP’s budget in recent years has been spent on price-support and export subsidies.

      Although the CAP can claim a number of successes, most notably the attainment of EU self-sufficiency in many food products, critics complain it has many drawbacks: consumers lose out because they are required to pay unnecessarily high prices for food products; resources are misallocated because inefficient, high-cost farmers are overprotected, and too little of the CAP’s resources are devoted to long-term structural reform and modernization of the sector; artificially high prices supported by intervention buying encourage gross overproduction and results in large surpluses (‘mountains’) of produce that are expensive to stockpile and difficult to sell off; subsidized exports from the EU can depress world farm prices, making life even more difficult for the less developed countries, many of which (specifically non-LOMÉ AGREEMENT countries) had already been hard hit by the trade diversionary effects of the EU (see TRADE DIVERSION).

      However, the CAP has become less protectionist as a result of the ‘Uruguay Round’ of trade concessions (see WORLD TRADE ORGANIZATION). The EU committed itself (over a six-year period starting in 1995) to reduce its import levies by 36%, reduce its domestic subsidies by 20%, and reduce its export subsidies by 36%. Further reductions are currently being negotiated as part of the ‘Doha Round’. See INCOME SUPPORT.

      common currency see EURO.

      common external tariff see CUSTOMS UNION, COMMON MARKET.

      common law the body of law built up over many years as a result of previous court decisions interpreting legislation. These establish legal precedents that then need to be followed consistently in subsequent court cases. Compare STATUTE LAW.

      common market a form of TRADE INTEGRATION between a number of countries in which members eliminate all trade barriers (TARIFFS, etc.) amongst themselves on goods and services and establish a uniform set of barriers against trade with the rest of the world, in particular, a common external tariff (see CUSTOMS UNION). In addition, a common market provides for the free movement of labour and capital across national boundaries. The aim of a common market is to secure the benefits of international SPECIALIZATION, thereby improving members’ real living standards.

      The short- and medium-term impact of the formation of a common market is mainly felt through an increase in trade between member countries. TRADE CREATION is typically associated with a reallocation of resources within the market favouring least-cost supply locations and a reduction in prices resulting from the elimination of tariffs and lower production costs. (See GAINS FROM TRADE.)

      In addition, a common market can be expected to promote longer-term (dynamic) changes conducive to economic efficiency through:

      (a) COMPETITION. The removal of tariffs, etc., can be expected to widen the area of effective competition; high-cost producers СКАЧАТЬ