3.1. Trade flows and trading patterns Flashcards
Define trade
refers to the exchange of goods and services for money
Define visible trade
involves items that have a physical existence and is tangible
Define invisible trade
trade in services which include travel, tourism, business and financial services
Define balance of trade
the difference between the value of country’s exports and imports
Define trade deficit
when the value of the country’s imports exceeds the value of its exports
Define trade surplus
when the value of the country’s exports exceeds the value of its imports
Factors affecting the balance of trade
- Prices of goods manufactured in the domestic markett
- Exchange rates
- Trade agreements/barriers/ trade blocs
- Other tax, tariff and trade measures such as quotas
Factors affecting global trade
- Resource endowment
- Comparative advantage
- Locational advanatage
- Investment
- Historical factors
- Terms of trade
- Changes in the global market
- Trade agreements
- Protectionism
Resource endowment (2)
( các nguồn cấp vốn)
- For example, Middle East, Venezuela and Nigeria dominate the export of oil => form OPEC (Organisaton of Petroleum Exporting Countries) to coordinate and unify the petroleum policies and ensure the stabilisation of oil markets
- Criticised for the allegedly political nature of some decisions - wanting to put pressure on USA and other Western countries
Comparitive advantage (1)
Each country will specialise in producing certain goods and services => then trade a proportion of these goods and services with other nations to obtain goods and services that it needs but for which it is not favourably endowed
Locational advantage (4)
- Location of market demand influences trade patterns
- Advantageous for an exporting country to be close to markets for its products since it reduces transport costs
- e.g. France benefits from large populations of neighbouring countries that can reach France quickly and cheaply
- Some countries and cities are strategically located along important trade routes. e.g. Rotterdam located near the mouth of river Rhine
Investment (3)
- FDI
- China, Brazil, India and Mexico have increased their trade-to-GDP ratios
- On the other hand, 2 billion people live in countries that have becomess less rather than more globalised as trade has fallen in relation to national income (mainly African nations)
Historical factors (3)
- Often based on colonial ties
- e.g. UK still maintains significant trading links with Commonwealth
- Colonies play a subordinate (cấp dưới) role which brought them very limited benefits due to trade dependency
The terms of trade (2)
- If countries rely on the export of stock that are low in price and need to import expensive items, they need to export large quantities
- Primary products are generally low and subject to considerable variation making economic and social planning difficult
Changes in the global market (3)
- Rapid growth of NICs and the Pacific Rim countries brought about major changes
- Developed world grew by an average 2.1%/ year, the emerging markets (BRICS) expanded by 4.2%
- In 1990, MEDCs controlled about 64% of global economy as measured by GDP which fell to 52% in 2009
Trade agreements/trade blocs (4)
- Trade blocs = where several countries group together for the purpose of trying to increase the volume and value of their trade.
- They create trade barriers for non group countries
- These barriers are to protect the industry within the group but also mean of LEDCs find it even harder to sell products in the world market => form trade and development gap between MEDCs and LEDCs
- 4 types of trade blocs:
- Free trade areas
- Custom unions
- Common markets
- Economic union
Define Free Trade Areas
members abolish trade barriers but independently restrict imports from outside country. e.g. NAFTA
Define Customs unions
free trade between members exist but a common restriction on imports from outside countries are maintained. e.g. Mercosur
Define Common markets
Same as customs unions, however, also allow the free movement of labour and capital
Define Economic union
Same characteristics as common market but also require members to adopt common economic policies. e.g. EU
3 Facts about regional trade agreements
- In 1990, there were < 25, by 1998 there were > 90
- Most notable are the EU, NAFTA, ASEAN and Mercosur
- One common characteristic is that all arrangements, the preferential terms (điều kiện ưu đãi) that trade participants enjoy more than non-participating countries
3 Concerns about regional trade agreements
- Can divert trade (chuyển hướng thương mại) , cause a country to import from a memeber of its trading bloc (khối thương mại) rather than cheaper supply
- Raise barriers, creating protectionist blocks
- Regional trade rules may complicate the establishment of new global regulations
5 facts about EU and bilateral trade (thương mại song phương) agreement with ACP banana growers
- Trade agreement provided a 775k tonne tariff-free quota for ACP bananas
- UK, France have close political, historic and economic ties with countries in ACP (Africa, Carribean and the Pacific) which depend heavily on banana exports
- Latin American countries complained these arrangements were unfair, should have the same access to EU market as ACP
- Growing conditions in Latin American countries are more favourable => larger scale of production (with large plantations owned by US TNCs) => low costs => free trade means = unfair competition for ACP
- 2007 - WTO said that this agreement violated (vi phạm) global trade rules, giving unfair advantage to ACP
What is the WTO?
- It is the only global international organization dealing with the rules of trade between nations.
- At its heart are the WTO agreements, negotiated and signed by the majority of the world’s trading nations and ratified (phê chuẩn) in their parliaments (Quốc hội)
- The goal is to help producers, exporters, and importers control their business.