13.1 trade flows and trading patterns Flashcards
imports
goods or services produced outside of the country and brought in or purchased
exports
goods or services produced inside of the country and sent elsewhere
balance of trade
the difference in value between a country’s imports and exports
trade deficit
when the value of imports exceed exports
trade surplus
when the value of exports exceeds the value of imports
visible trade
physical goods such as foods,cars,furniture covering raw materials and secondary goods
invisible trade
goods that are services, predominantly in the tertiary sector
has trade always been global?
- trade bas been around for a long time, but changes throughout human history have impacted it
- colonialism established many still relevant links
- patterns of mostly LICs producing primary goods and HICs secondary and tertiary
- more complex pattern emerged at the end of colonialism and WW2
- World trade now accounts for over 30 per cent of GDP – about three times its share in 1960
inequalities in global trade
- Overall, the top ten traders in merchandise accounted for 52 per cent of the world’s total trade in 2013
- The position of China as the world’s largest trading country is the most obvious example of this trend, but other examples include South Korea, Mexico, India, Brazil, Thailand and Malaysia
- The trading positions of affluent countries with relatively small populations, such as the Netherlands, Belgium and Switzerland
- least developed countries’ share of total global merchandise exports totalled only 1.1 per cent, compared to the 75.5 per cent of the G20
- Between 2000 and 2013, trade in services from LDCs grew on average by 14 per cent per year. Examples have been: Cambodia as the leading LDC tourist destination, Ethiopia’s expansion of air transportation services
-LDCs’ share of world exports of commercial services totalled only 0.7 per cent in 2013.
resource endowment
How many resources a country has at its disposal that can be utilized for manufacturing (labour, land, money, entrepreneurship)
- EXAMPLE: OPEC (organization of the petroleum exporting countries) – intergovernmental organisation of global oil supply
- Tanzania: exports plants and food (climate and nutritious soil) to afford imports of gas and technology to produce more exports
- the natural resources (land, minerals) a country has to exploit to produce exports
comparative advantage
- different countries will specialise in producing those goods and services for which each is best endowed
- leads to specialisation in production and employment
- global reputation
- EXAMPLES: German cars, Japanese high-tech, Belgian chocolate, Dutch flowers
locational advantage
- influences patterns
- spatial proximity reduces transport costs: easier surplus
- Advantageous for exporting country to be close to markets
- Strategic locations along trade routes
-EXAMPLE: manufacturing in Canada benefits from proximity of US market - 76% of total exports to US in 2016, 52% imports from US
- France: mass tourism (90 million), helped by nearby European countries with large populations
investment
- FDI (foreign direct investment) key to increasing trade
- Poorest LIC’s have unfavourable investment climates that don’t (cannot) provide support
- Economic, social and political instability (crime and corruption) deters investment- risk
-EXAMPLE: Low income globalisers (China, Brazil, India, Mexico) increased trade-to-GDP ratios significantly
historical factors
- colonial ties of old empires of the UK, Spain, the Netherlands, France etc. still maintain strong trade links
- The Commonwealth is a contemporary example.
- Since colonies were subordinates, they depended on the colonial overlords, creating a trade dependency, which is still applied
- terms of trade are generally disadvantageous to the poor countries, many LICs have high trade deficits
- exploitive relationships prior to independence (1940-70s) maintained, but weakening within colonial groups
the terms of trade
- determines if a deal happens or not
- if country relies on export of cheap commodities and expensive imports it needs to export in large quantities to afford low volume of imports
- poor countries are primary-product dependent: rely on small number of exports
- as prices of primary goods decrease and fluctuate poorer nations struggle deciding on economic and social policies in comparison to HICs
- terms of trade generally disadvantageous for poorer nations thus hard to get out of poverty and results in trade deficit
- HICs: facing fall in trade due to decreasing prices
trade agreements
- a trade bloc is a group of countries that share trade agreements between each other
- in 1990 there were less than 25 by 1998 more than 90
- EU, NAFTA, ASEAN+ : dominates world economy: 67% of all world trade
- Tariffs: tax on imports or exports
- Quotas: limit on number of imports or exports
- Trade blocs: group of countries that manages and promotes trade with shared agreements, to stimulate trade between them
- Free trade areas (NAFTA): no tariffs or quotas for members
- Customs unions (MERCOSUR): free trade area with common external tariff for non-members
- Common markets (EAC): custom union with free movement of labour/capital
- Economic unions (EU): common markets where members adopt common economic policies
- Issues of trade blocs: threaten free trade and promote protectionism by controlling types of trade and establishing tariffs to protect from outside forces.
concerns with trade agreements
- regional agreements can divert trade (inducing a country to import from trading bloc not from a cheaper supplier elsewhere)
- regional groups might raise barriers against each other: protectionist blocks
- regional trade rules may complicate the establishment of new global regulations
free trade areas
- members abolish tariffs and quotas on trade between themselves (NAFTA)
customs unions
- a closer form of economic integration, all members are obliged to operate a common external tariff on imports from non-member countries
