2.1 Trade flows and trading patterns Flashcards
What is Rostows development model?
5 stages
- Traditional society - subsistence, hunting, gathering, little technology, little room for growth due to lack tech, beginning of society
- Pre take off - demand for exports, develop agriculture, investment in changes to physical environment - canalas, irrigation, roads ports
- Develops national identity, individual and social mobility
- Take off - urbanisation, industrialisation, tech, secondary
- Drive to maturity - diverse industry, expansion, manufacturing, transport and infrastructure, social infrastructure
- High mass consumption - industrial base dominates economy, primary sector diminished, consumption of high value goods, high incomes and urban society
Criticisms of Rostow:
- Based on EU and US history
- Countries like Japan with high population to account for growth not accounted for
- Does not account poorest countries of Asia or Africa
- Assumes neoliberal trade allowing trade of lower wage countries
What are the facts of global inequality
Global wealth $260tn
- EU and NA have 20% of population over 67% of wealth
- India and Africa 30% population, 2% of wealth
- China 20% population 8% of wealth
-Skill based tech divide - creates high value as skilled workers complimented by high technology but unskilled workers and replaced. Low skill low pay jobs lost, high skill high pay jobs remain.
What factors affect a trade balance?
- How much it costs to produce the goods
- Resource endowment
- Locational advantage
- Historical factors
- Exchange rates
- Trade agreements and tariff barriers
- Environmental
- Foreign exhchange
What are some of the inequalities in global trade flow?
- Trade dominated b NA, Europe and Asia.
- Value of Asia exports expanded by 3% whereas Europe 2%
- Asia share of world exports rose to 38%, 41% in Europe
- NA and Europe net exporters, rest net importers
Why are some countries wealthier than others?
Demographic - ageing and youthful populations, high dependency ratios,
- low rates of economically active, low education population,
- lack of doctors per person
Economic - Low FDI - 15% pop in africa yet 5% of FDI - 7% in EU yet 45% of FDI.
- Wars, debts, reparations, high tax countries good services
- Resource availability
- Lack of exports
- Influence of trade unions
- Inflation (zimbabwe and venezuela)
Political
- corrupt governments
- Communism
- Poor trade partners and neighbours
- borders
- colonialism - power vacuum
- democracies - arab spring
- more money
- gender equality
- discrimination
Physical:
- borders
- conditions
- resources
- wars
- desertification and flooding
- size
- high pressure
- droughts and heat
- hostile landscape and relief
- rough climates
- natural disasters
- slip faults
- rivers and ports
- irrigation and drinking
- coastlines
- landlocked
What are the trade flows and patterns
Visible trade
- Invisible trade
- Affected by cost, location, resources, history, exchange rates, agreements, standards, foreign exchange reserves
Patterns:
invisible/visible dominated by EU, NA, Asia
visible trade dominates - manufactured goods, commodities
-LICs become more integrated and raised living standards - developed countries often export high value goods and import cheap primary products, opposite true from developing countries - primary producers in LICs have low wages and living standards and little incomes
-Every country in africa in lowest band for economies
-Major trade in NA, Eu and East Asia
What is resource endowment?
- OPEC group of oil exporters - high value and share of value of world exports
- Countries endowed with strong agricultural industry or other primary
- Comparative advantage - specialise in what good at and trade with what they aren’t however there is protectionism and competition and also causes decline in industries
What is locational advantage?
- Proximity to markets and demand
- Transport routes - major ports, countries, coasts, roads and transport lines
What are historical factors?
Colonial ties still remain, trade parteners create flow of goods of primary to colonial power and manufactured goods to former colony
What are investment levels?
Countries attracting FDI with high human capital levels or other features benefit from FDI
What is terms of trade
Ratio of exports to imports. If dependent on priamry products may lead to short time rise but as value fell terms of trade fell, many LICs struggle to get out of poverty
Countries who mainly export manufactured goods e.g. Germany 1.4tn in exports - net surplus 180bn
USA net deficit of 100bn
Changes in global market
emergence of BRICS export manufactured goods at rapid growth rates opposed to market powers
-Held 42% of exchange rate reserves in 2010 - China 30%
Factors encouraging globalisation
Transport
-ICT developments
TNCs
Costs/benefits of TNCs
Advantages:
- Jobs made
- Stable incomes and reliable jobs
- Education and skills
- Infrastructure
- Cheap natural resources
- Economic base
- 300 biggest TNCs own 1/4 of global assets - $5bn
Cons:
- mechanisation - jobs lost
- Poor working conditions
- Environmental damage
- Profits repatriated
- Little reinvestment into local area
- Factory jobs insecure
- Resources exploited
