13.1 Trade Flows + Trading Patterns

Question 1

What is global interdependence?

Answer 1

• describes the world wide mutual dependence - individual countries rely on other countries to supply the goods + services they can not produce themselves = trade
• countries have become more interdependent as many places do not have the raw materials + manufactured goods they need, so buy from elsewhere

Question 2

What is visible trade?

Answer 2

Involves items that have a physical existence + can actually be seen

Question 3

What is invisible trade?

Answer 3

Trade in services that include travel + tourism, and businesses and financial services

Question 4

What is a trade deficit?

Answer 4

When the value of a country imports exceeds the value if it’s exports

Question 5

What is a trade surplus?

Answer 5

When the value of a county’s exports exceeds its imports

Question 6

What is terms of trade?

Answer 6

The price of a country’s exports relative to the price r of its imports, and the changes that take place over time

Question 7

How does terms of trade impact global trade?

Answer 7

• country’s that rely on low value exports + need high priced imports, will need to export large quantities to afford them
• many LICs are primary product dependent = general low world market price
• when the price falls, a country’s economy will see a sharp fall in export income = higher trade deficit = can’t fund state led investment in education, healthcare + infrastructure

Question 8

Example of terms of trade?

Answer 8

• Zambia’s main export is copper
• 2000-2010 the Zambian economy grew by 7% due to high price of copper which was 80% of their exports
• this boom needed in 2011 - copper prices fell + Zambia had to borrow money to spend on infrastructure

Question 9

What is resource endowment?

Answer 9

the natural occurrence of resources in a country

Question 10

How does resource endowment affect trade?

Answer 10

• country’s that are endowed with a particular resource control + dominate world trade of that resource
• HOWEVER - this is dependent on value of export = agricultural products are low value + puts these countries at a disadvantage due to fluctuations

Question 11

Examples of resource endowment?

Answer 11

• OPEC made of many Middle Eastern countries regulate oil prices by controlling oil supply —> increase in supply = decrease in price + vice versa
• 80% of Uganda’s exports are agricultural products —> overproduction of e.g. coffee between 1995-2000 led to a fall in export price + their ability to earn foreign currency

Question 12

What is comparative advantage?

Answer 12

idea that countries will specialise in producing specific goods + services in which they are best endowed

Question 13

How does comparative advantage affect world trade?

Answer 13

• a country will trade its good to other countries to obtain the goods + services it needs
• HICs often specialise in high value goods rather than primary goods
• some countries dominate the production of manufactured goods through trade blocs

Question 14

Example of comparative advantage?

Answer 14

• Japan is a big producer of high-tech + Germany of cars
• EU is a major trade bloc which charge high tariffs on imports outside of the bloc = protecting HICs + creating an unfair advantage as businesses in NICS/LICs find it difficult to compete in the world market

Question 15

What is locational advantage?

Answer 15

When location of market demand influences trade patterns

Question 16

How does locational advances affect world trade?

Answer 16

• advantageous for an exporting country to be close to the market for its products = reduced transport costs
• some countries/cities are strategically located along important trade
• location can pose disadvantageous to some LICs, such as those in sub-Saharan Africa

Question 17

Examples of locational advantage?

Answer 17

• tourist industry in France benefits from large populations in neighbouring countries
• Canada’s manufacturing industry benefits from proximity to huge US markets = 70% of their exports went to the US in 2016
• Singapore located on the main route between India + Pacific Ocean
  IN CONTRAST..
• south-Sudan is land-locked + unable to get to transport links in Sudan due to conflict between the two countries

Question 18

What is investment?

Answer 18

• act of committing money or capital to an endeavour with the expectation of obtaining additional income or profit

Question 19

How does investment affect world trade?

Answer 19

• investment is key for many countries to increase trade + growth
• the amount of money TNCs invest is dependent on the security of their investment, which relies on the economic, social + political stability of the country
• most likely to invest in NICs = established infrastructure + low labour costs

Question 20

Examples of investment?

Answer 20

• sub-Saharan African countries not attractive for investment —> political unstable = conflict in South Sudan + Sudan, poor infrastructure + no trade links due to land lock nature
• NICs such as China highly attractive = China is now a leading export country

Question 21

How does historical factors affect world trade?

Answer 21

• historical international relations such as colonial ties e.g. commonwealth led to world wide trade dependency + why poorer tropical countries have limited share of world trade

Question 22

Examples of historical factors

Answer 22

• UK still has strong trade links with countries within the commonwealth —> historically they exploited LICSs in the empire to boost England’s economy
• made LICs unable to develop like LICs outside of empire

Question 23

How are changes in the global market affecting global trade?

Answer 23

• rapid growth of NICs have bought economic strength = BRIC countries (Brazil, Russia, India + China) are known as emerging economies
• enabled rapid industrial growth, technological development + employment opportunities
• sub-Saharan Africa still not seen these benefits = primary product dependent = vulnerable to trade inequalities

Question 24

Examples of changes in the global market?

Answer 24

• the developed country grew at a rate of 2.1% in the first decade of the 21st century —> emerging markets grew at 4.2%
• HICs controlled 64% of the global economy in 1990 —> fell to 52% by 2009
• apparel industry has opened doors for international trade for Bangladesh = enabled through invest,ent by TNCs

Question 25

How are trade agreements affecting world trade?

Answer 25

• trade bloc = countries that share trade agreements between each other —> regional trade agreements have increased in the last 20 years
• those outside trade blocs disadvantaged due to being subject to tariffs = limiting their economic development

Question 26

Examples of trade agreements?

Answer 26

• 1990 = few then 25
• 1998 = more than 90
• e.g. EU, NAFTA, ASEAN