13.1. Trade Flows and Trading Patterns Flashcards

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1
Q

Globalisation

A

The growing interdependence of countries worldwide through an increasing volume and variety of cross-border transactions in goods and services and of international capital flows, and through the more widespread diffusion of technology
- Evidence: Cargo ships and containerisation

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2
Q

What is meant by Growing interdependence of countries

A

a network of dependence of countries on each other like a relationship between country A, B and C.

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3
Q

What is meant by Increasing volume and variety of cross-border transactions in goods and services

A

increasing amount and variety of goods / services being traded with one another

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4
Q

What is meant by International capital flows

A

movement of money into and out of a country for trade, investment or business production

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5
Q

What is meant by Diffusion of technology

A

slow spread of technology from HICs to LICs

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6
Q

International Trade

A

the exchange of capital, goods, and services across international borders or territories

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7
Q

What is Capital?

A
  • Financial or physical assets which can generate income, such as property or investments
  • One of the factors of production, it is the stock of man-made resources used in the production of goods and services
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8
Q

Visible imports and exports

A
  • Actual goods that are sold to other nations;
  • For example, agricultural goods, extracted minerals, oil,
    manufactured goods.
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9
Q

Invisible imports & exports

A
  • Services which are sold to other nations.
  • For example, banking and financial services, insurance,
    construction, tourism etc
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10
Q

Trade Balance

A

the difference between the monetary value of the exports and imports of a country.

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11
Q

A positive trade balance is known as a

A

Trade Surplus

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12
Q

A negative trade balance is known as a

A

Trade Deficit

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13
Q

Would governments prefer Trade surpluses or deficits?

A
  • A trade surplus is often seen as a positive thing, as there is a flow of money into a country and hence national income and employment should rise.
  • However, it’s not as simple as this and some countries, notably the US, operate with a trade deficit.
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14
Q

Patterns of Visible Trade around the world

A
  • Dominated by North America, Western Europe and Asia
  • In 2012, Asia’s share of exports of manufactured goods at 41%, Europe at 38%.
  • Majority of manufactured exports go to HICs as people there can afford it more and less in LICs due to lower standards of living, smaller market with few affluent people
  • In HICs, luxury goods (high-end products) would be produced so they would need to import low value goods being made in LICs / MICs like clothes (in countries who have a comparative advantage to manufacture these goods)
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15
Q

Patterns of Invisible Trade around the world

A
  • North America and Western Europe are the only net importers of services.
  • North American trade in services dominated by receipts from royalties and license fees (18% of regional share).
  • Europe’s exports of financial services accounted for 8% of regional share.
  • HIgher number of exports from HICs due to high level education, development
  • Headquarters of TNCs are mostly located in HICs like Europe, Japan and USA
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16
Q

Factors affecting Global Trade

A

1) Resource endowment
2) Locational Advantage
3) Historical Factors
4) Trade Blocs / Free Trade
5) Changes in the global market

17
Q

Resource endowment (Factors affecting Global Trade)

A
  • Countries endowed with raw materials (coal, oil, gas, spices) are more involved in trade
  • Middle East countries dominate the export of oil because of their large oil reserves.
  • Countries endowed with other raw materials such as food products, timber, minerals and fish also figure prominently in world trade statistics.
18
Q

Locational Advantage (Factors affecting Global Trade)

A
  • Location of market demand influences trade patterns.
  • It is advantageous for an exporting country to be close to the markets for its products; for example, it reduces transport costs.
  • Some countries and cities are strategically located along important trade routes, giving them significant advantages in international trade.
  • For example, Singapore, at the southern tip of the Malay peninsula is situated at a strategic location along the main trade route between the Indian and Pacific Oceans.
19
Q

Historical Factors (Factors affecting Global Trade)

A
  • Historical relationships, often based on colonial ties, remain an important factor in global trade patterns.
  • For example, the UK still maintains significant trading links with Commonwealth countries.
  • Colonial expansion heralded a trading relationship
    dictated by the European countries mainly for their own benefit.
  • The colonies played a subordinate role, which brought them only very limited benefits at the expense of distortion of their economies.
  • The historical legacy of this trade dependency is one of the reasons why poorer tropical countries have such a limited share of world trade according to development economists.
20
Q

Trade Blocs / Free Trade (Factors affecting Global Trade)

A
  • It increases the trading going on between countries.
  • Almost all countries are now part of some sort of trade bloc.
  • The different trade blocs around the world all have varying degrees of economic integration between member states.
  • Trade blocs arguably work to the advantage of member
    states and the disadvantage of those outside them.
  • Etc. The EU is an economic union so there is free trade between countries.
21
Q

Changes in the global market (Factors affecting Global Trade)

A
  • The changes in the global market in the past 70 years or so are sometimes referred to as a global shift.
  • The global shift is the movement of economic activity from HICs initially to MICs and more recently to LICs (especially in Asia and Latin America).
  • Initially in the 1960s this was a movement of manufacturing (goods) activity, but since the 1990s, service activity has been involved.
  • Foreign Direct Investment has also changed the global
    market.
  • RRICS have rapidly expanding economies = emerging economies.
  • Exporting more, but also more affluent populations means growing domestic demand for imported goods.
22
Q

Foreign Direct Investment (FDI)

A
  • Foreign Direct Investment (FDI) is when a company from one country buys a company in another country, or expands an existing business in that country.
  • FDI can improve economic growth in LIC and MIC countries through the influx of capital, advanced technology and increased productivity.
  • This can increase the amount of trade for these countries.
  • One criticism is that the profits from this may be repatriated to the original investing company and not benefit the LIC.
23
Q

Trade Bloc

A
  • A trade bloc is a group of countries that share trade
    agreements between each other to stimulate trade.
  • Since the Second World War, there have been many examples of groups of countries joining together to stimulate trade between themselves and to obtain other benefits from economic co-operation.
24
Q

Trade Tariff

A

A tax on any imports or exports into the country;

25
Q

Import Quota

A
  • A limit on the quantity of a commodity or service that can be produced abroad and sold domestically.
  • Quotas raise the domestic price above the world price so that domestic suppliers are better off.
26
Q

NAFTA

A
  • the world’s largest free trade area, covering the United States, Canada, and Mexico.
  • It was the first time that a trade bloc was established between two HICs and an LIC.