21. International Trade Flashcards
What are the 3 types of economy?
Developed economies have highly developed capital markets, meaningful regulatory bodies and high levels of per capita income. Examples: USA/UK/Germany/Japan
Emerging Economies are countries in the process of rapid growth and development with lower per capita incomes and less mature capital markets than developed countries. Examples: Brazil/China/India/Turkey/Mexico
Developing economies are countries which have a slow rate of industrialisation and low per capita income. Examples: Haiti/Chad/Sierra Leone
What is ODA?
Official Development Assistance is commonly known as Overseas Aid or Foreign Aid.
What are the 3 types of aid?
Bilateral: e.g. UK government granting money directly to projects in developing countries
NGO: Non Government Aid e.g. charities like Oxfam
Multilateral Aid: Assistance by the government to international organisations like the UN who use the money to help poorer countries.
What is the positive impact of international trade on developed countries?
Developed countries can specialise in what they do well and gain economies of scale.
This normally means specialising in high quality, high priced goods and services helping to drive long term economic growth and prosperity.
Also trade increases competition and lowers world prices, which provides benefits to consumers by raising the purchasing power of their own income, and leads a rise in consumer surplus.
What is the negative impact of international trade on developed countries?
On the downside, many developed countries have ended up over-specialising due to international trade. For example, the UK is totally dominate (80%+) by the service sector and has almost completely lost potentially key sectors like mining and steel
This created unbalanced outcomes and structurally unsound economies going forward.
What is the positive impact of international trade on emerging economies?
International trade can help reduce poverty. The best example is China,, experienced a growth in GDP per capita going from $1000 in 2000to $6800 in 2013
International trade creates great opportunities for companies from emerging economy to get into larger markets around the world.
International trade can also lead to more access to capital flows. For example Indonesia has earned vast amount of US$ from trade with the US.
What is the negative impact of international trade on emerging countries?
On the downside:
International trade is believed to exacerbate inequalities between Western countries and emerging countries.
International trade has allowed transnational corporations to maximise profits without any regards for the development needs of local populations.
Some even go as far as to talk about a “race to the bottom” in which developing countries engage to lower environmental standards to attract foreign investment.
What is the positive impact of international trade on developing countries?
Trade boosts economic development through boosting growth
Trade expands choice for consumers in developing countries, giving them access to goods and services they may not previously have enjoyed
Trade allows businesses in developing countries to access new markets, helping them to diversify and grow
What is the negative impact of international trade on developing countries?
International trade has encouraged many developing countries to focus on primary products. In the long run the price of primary goods such as coal, coffee cocoa declines in proportion to manufactured goods such as cars, washing machines and computers
Therefore countries with a high export dependence on primary products (i.e. low diversification in their commodity pattern of trade) may lose out.
They also tend to lose out due to not trading ong fair terms with powerful blocs e.g. the EU who can impose high tariffs on products from developing countries.
