13.1 Trade flows and trading patterns Flashcards
globalisation
countries drawn together into a single global economy
trade
the buying and selling of goods and services between countries
imports
goods or services bought from other countries
exports
goods or services sold to other countries
Balance of trade
the difference in value between a country’s imports and exports
Trade deficit
When a country’s imports exceed it sexports in value
Trade surplus
When a country’s exports exceed its imports in value
Visible goods
tangible products that can be seen and touched such as manufactured goods, raw materials, food products
invisible goods
services and intangible products such as banking services, tourism, intellectual property rights
What are the five factors affecting trade flows
- Resource endowment
- Locational advantage
- Historical ties
- Trade agreements
- Changes in the global market
Explain how resource endowment can affect trade, with an an example and a counter argument.
The higher the resource endowment, the higher the trade. For example oil rich countries in the OPEC group like Saudi Arabia’s revenue from the oil and natural gas industry composes of 50% of the nation’s total GDP. However some countries are resource rich but have low trade such as the Democratic Republic of Congo which does have a high reserve of oil however as it is a hinterland, there is poor accessibility for the oil to be transported.
Explain how locational advantages can influence trade. Give an example and a however…
The geographical location of the countries can influence the trade as it links to the cost of transport. Countries on coastal areas would have a locational advantage over landlocked countries. In addition a country’s strategic position on a trade route would highly increase trade eg Singapore being by the Strait of Malaca, Egypt by the Suez Canal and Panama by the Panama Canal. For example, Singapore a small island with a lack of natural resources is highly developed with a high trade flow due to its strategic position on the important trade route from the West to the East by the Strait of Malaca. Singapore also acts as a good natural port with deep water and how it’s sheltered. However, Switzerland which is a landlocked country surrounded by the Alps doesn’t benefit from its locational advantage but still has a high trade flow with chemical products and pharmaceuticals bringing a high trade value to Switzerland’s exports
Explain how historical ties can influence trade flows + example . Negative of this
Historical ties such as colonialism of certain countries would have established trade links from the colonial period. Countries like Ghana which has now gained independence form the UK still have remaining trade links which back to the historical ties. Ghana as a developing country primarily exports commodity goods like cocoa where the UK is still the top 5 importer of cocoa from Ghana.
However, because there is a set farming season, cocoa enters the market at the same time in large volumes which means that consumers have a high bargaining power and some have even called the relation between the UK and Ghana a form of neocolonialism as Ghana as developed somewhat of a trade dependency to the UK
Define neocolonialism
The control of less developed countries by more developed countries through economic, financial, trade policies (indirect control)
Define trade dependency
When a developing country relies on its advanced trade partners
Define what is mean by a trade agreement and what are its aims?
Any contractual agreement between states related to the trade relationship. This aims to reduce trade barriers, and increase trade flows between states
How can the changing global market affect trade
The growth of NICs (newly industrialized countries) such as BRICS leads to an improvement in education and transport/infrastructure brings in FDI where there is a rise of employment in the manufacturing industry (this has mostly been in Asia) which creates a global shift. As a consequence of globalization, the flow of FDI and NICs has increased where de industrialization of Western countries has occurred.
What is a free trade agreement, give an example of one
FTAs removes tariff and offer quotas among member states, some commodities are also protected.
An example is NAFTA (North American Free Trade agreement) —> USA, CANADA, MEXICO
What is a custom union, give an example
Custom unions have free trades as well as common external tariff on imports for non member states. This means that the member states have to agree not the same tariff to goods from outside this union. An example is how Andorra, Monaco, San Marino and Turkey joined together to form the European Union Customs union
What is the common market/single market. Give an example of this
The common market is essentially the same as custom unions + the free movement of goods, services, labor and capital investment. An example can be the EEA (European economic area) where Iceland, Lichtenstein and Norway partnered together.
What is an economic union, give an example of this
Economic unions include all the benefits of the common market + have common economic polices eg policies regulating the agricultural and transport industries. This is the highest level of economic integration. An example is the EU which is the largest trade bloc which also uses common currency
What are SEZs and what are its key characteristics
SEZs are special economic zones which offer no tariff on imported goods as long as the goods stay int he SEZ. These are usually along the coast as it has access to ports. This can also encourage TNCS to set up the manufacturing hubs in this zone. An example of an SEZ is the Hainan Province in China.
