2.2 International trade Flashcards
Why should most countries trade
Comparative advantage - producing what they are best at
Why does trade remain limited
Barriers to trade (mostly due to protectionism)
What is a barrier to trade
Government imposed restraints on trade
Give an example of some barriers to trade
Tariff
Import Quota
Import licence
Embargo (complete ban)
Scientific/Ethical reasons (Bio hazard to farming, or Nestle using child labour)
How has the volume of international trade changed
Since 1995 when the WTO took over, tariffs have shrunk to 1/10 of what they were, causing trader to increase
The financial crash in 2008 reduced trade
How is the pattern of international trade changing and why
G7 countries still dominate 50% of world trade
Growth in NEES like China and Africa
Growth in purchase of fair trade
Growth of ethical investments
What was the 2013 world merchandise trade value and what will it be in 2020
$19 trillion
$35 trillion (almost double)
What is FDI
Foreign direct investment , a VERY IMPORTANT source for funding NEES
What are the trends of FDI
$1 trillion FDI flows around the globe each year with top investors USA, China and Belgium
Why do people invest in FDI
- Plentiful resources (Mittal Steel, Luxembourg in over 60 countries)
- Access to consumer markets
- Financial services
What is fair trade and examples of some products
Social movement with aims of achieving fair trade, sustainable for NEE’s
Bananas, Cocoa and Cotton
Why was the fair trade movement started and what do they advocate for
Producers had little influence on the price, but extremely relied on it
- Higher income
- Better working standards
What are the 2 scales of fair trade
International - organsise into cooporatives and combine produce
Small scale - buy directly from retailers
Give an example of a small scale fair trade company
Cafe Direct work directly with over 280,000 small farms
What is an ethical investment
Choosing to invest in socially responsible choices based on personal beliefs
(social and environmental)
Give an example of an ethical investor
Monsoon - in 2013 their Chinese farms were said to kill Angora rabbits when plucking their fur, so they puled out of the producing company
Give an example of international fair trade
Banana trade wars
Why is it important to study the banana trade wars
They are the 5th most traded agricultural product due to high volume, energy and potassium
It raised numerous social, environmental, economic and political concerns
What are some environmental issues outlined by banana trade
- Largest agrochemical input into environment
- Deforestation (soil+water damage)
- 1 tonne of bananas = 2 tonnes of waste
What are some social, economic and political issues outlined by banana trade
- TNC’s and retailers control the markets and set the prices
- WTO ruled against development (the lome convention)
- Producers have no control and only 10% is paid back to them
- 20 year trade war with EU and US
Who currently dominate world banana trade
ACP - African , Caribbean pacific
Dollar producers (USA owned)
Who import and export the most bananas
US and EU import over 50% total
Latin America and Caribbean produce 80% total (Ecuador the most)
How has global banana trade changed
80% of it was controlled by 5 large, vertically integrated TNC’s like Chiquita owning the transport, plantations etc
Now they only control 45% of the trade due to the growth of ACP and by freeing themselves of plantations to only distribute
What is a race to the bottom
Suppliers moving to the cheapest plantations possible
How long was the banana trade dispute
20 years (1992 till 2012)
Why did the banana trade wars occur
EU countries made the “Lome convention agreement” to stop tariffs with 70 ACP to help their small scale farms compete with Dollar producers
In 1992, The large TNC’s like Chiquita complained as they lost revenue
The WTO ruled against the EU for being protectionist
Both EU and US were unhappy, so they put large sanctions on each others imports and wasn’t resolved until the EU eventually agreed to slowly buy more dollar producer bananas
