The pound is generally quite a strong currency on the world market. The strength of the pound has a very big impact on UK exports and imports. The stronger the pound is compared other currencies, the more the UK can buy from abroad for a set amount. So the UK will import more if the pound is strong. If the pound is weak, the UK can buy fewer goods with the same amount of money, so they will reduce import levels and produce domestically more...hence exports will rise. Also with a weak pound it is cheaper for other countries to import from them.
Trade barriers
The North American Free Trade Area (NAFTA) is an example of a free trade area, the European Communities (EC) is an example of a customs union and many EC Association Agreements (such as those with North African countries) are examples of asymmetrical agreements.
With the creation of the Nice Treaty, all EU countries must agree to a free trade and employment agreement with other members. This has limited the amount of barriers within Europe and other trade negotiations are handled by the WTO on behalf of the UK.
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