Organized markets in primary commodities are an important part of the facilities available in the United Kingdom for the conduct of international trade. Markets in primary commodities are found in many countries abroad, some transacting a far greater volume of business than the corresponding markets in the United Kingdom; but these foreign markets are mainly concerned with domestic demand or domestic supply. The distinguishing feature of the U.K. markets is their international character, in the sphere of international merchanting, that is, buying from one country and selling to another, and in the variety of commodities in which they deal, they are collectively the most important in the world. They have their origins in the history of British exploration and investment overseas and industrialization at home, and in the consequent growth of the United Kingdom's world-wide trading links. Because they are international markets, however, they also benefit the economy in two special respects. Firstly, in attracting business from overseas the U.K. markets play an important part in the use of sterling as an international currency. Their existence has undoubtedly made foreign traders more ready to hold sterling and to settle an important part of their international transactions in it. Secondly, there is the benefit of increased invisible earnings. In addition to the profits and commissions earned by the markets direct, a more significant contribution to the UK balance of payments is made by the banking, insurance and shipping services which are employed by commodity traders in the execution of contracts made in the UK markets.
It is customary for these contracts to be drawn up on c.i.f. terms, in which the charges for insurance and freight to the port of destination are included in the contract price, and it follows that bank credits to finance such transactions undertaken by UK merchants, and other related freight and insurance contracts, will tend to be arranged in the United Kingdom.
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| TEXT 24: FORMS OF ACCOUNTING | | | TEXT 26: GROSS DOMESTIC PRODUCT |