3.2.4-International Trade and the Global Economy Flashcards
What are Commodities?
Raw materials e.g. iron, corn, crude oil
What is an Embargo?
Orders to stop trading with another country
What is Free Trade?
International trade left to its natural course without tariffs, quotas or other restrictions
What are infant industries?
New industries yet to establish themselves
What is interdependence?
The reliance of countries on each other resulting from specialisation and free trade
What is internal trade?
Trade within a country
What is international trade?
Where foreign companies sell their products on international markets
What is protectionism?
Government actions to protect domestic producers
What is Retaliate?
Actions countries take as a result of another countrie’s actions
What are Tariffs?
Taxes on imports
What are Trade Barriers?
Measures designed to restrict imports
What is Trade liberalisation?
Move towards freer trade by removing the barriers
What is a Trading Bloc?
Groups of countries situated in the same region that come together to enjoy free trade
What is the WTO?
International organisation set up in 1995 to promote and enforce better trade relations through-out the world
What is Appreciation?
When the value of the currency rises in value to another
What is Depreciation?
When the value of the currency falls in value to another
What are Exchange Rates?
The value of one currency for the purpose of conversion to another
What are Fixed Exchange rates?
When the value of a currency is pegged (fixed to) another major currency such as the US dollar
What is a Foreign Exchange Market?
A market where foreign currencies can be bought and sold, FOREX is the largest private company that offer this
What is Free Floating Exchange Rates?
Where the price of cirrency is determined by market forces (supply and demand)
What are Reserve Assets?
Currency, commodities, or other financial capital held by monetary authorities, such as central banks, to finance trade imbalances
What is the EU Single Market?
The EU as one territory without any internal borders or other regulatory obstacles to the free movement of goods and services
What is Globalisation?
The worldwide movement toward economic, financial, trade and communications integration
What is an LEDC?
Less Economically Developed Country
What is an MEDC?
More Economically Developed Country
What is a Multinational Corporation (MNC)
Having operations in 2 or more countries
What is Over-Population?
When there are not enough resources to support the population without a decline in living standards
What is Sustainability?
Development that meets the needs of the present without comprimising the ability of future generations to meet their own needs
What is Tax Avoidance?
Practice of paying less tax in legal ways
What is Tax Evasion?
Practice of paying less tax in illegal ways
What are disadvantages of free trade?
- Environmental damage
- Unemployment (overreliance on imports)
- Over specialisation
What factors impact exchange rates?
- Trade
- Speculation
- Economic growth
- Interest rates
- Political stability
Why do we trade?
- Cheaper goods
- Cannot produce goods ourselves
- Improving choice
- Selling off unwanted commodities
What is impacted by a strong pound?
Imports are cheaper and exports are more expensive
What is the difference between a free trade area and economic union?
Economic union has a common tax system and employ the same currency
What are disadvantages of international trade?
- Overspecialisation
- Unemployment
- Environmental damage
- Infant industries
- Interdependence
What are advantages of free trade?
- More choice for consumers
- Increase in living standards
- GDP growth-world economic growth
- Economies of scale
What are pros and cons of the EU’s enlargement?
Pros:
* Increased potential for economies of scale
* Decreased production costs
* Low wages of new accession countries
Cons:
* MEDCs coping with influc of migrant workers
* New countries may require additional support from EU
* Lots of Bureaucracy in decision making
What are the advantages of being in a trade bloc?
- Cheaper goods from free trade
- More consumer choice
- Economies of scale for businesses
- More FDI
- Sharing of resources
What are the disadvantages of being in a trade bloc?
- Less global free trade
- Financial costs for governments
- Over reliance on trading within bloc
- Firms merge-monopolize markets
Who controls world trade?
The WTO
What does the WTO do?
- Trade negotiations
- Building memberships
- Settling disputes
- Implementing and monitoring
What are the criticisms of the WTO?
- Allowing exploitation of workers in developing countries
- Depleting of resources in LEDC’s
- Uneven playing field-LEDC’s lower trade barriers when needed
- Developed world pushing down the price of products from LEDC’s
- Destroys the environment
What are the reasons for protectionism?
- Protect jobs
- Protect small businesses
- Protect the environment
- Improve the current balance
- Raising domestic demand-spending
What are the problems with protectionism?
- Lose benefits of free trade
- Less competition
- Trade wars
What are ways to protect trade?
- Tariffs
- Quotas
- Subsidies
- Administrative barriers
What is dumping?
Where a country over produces a commodity and the government / state subsidise it to reduce the price below what other countries can produce it for
Why has globalisation happened?
- Technology
- Infrastructure
- Deregulation
- MNC’s
How do countries encourage globalisation?
- Open borders
- Little protectionism
- Easy planning permission
How do governments encourage businesses to invest in their country?
- Low interest
- Government Grants
- Relax laws
- Investing more in education
- Lower taxes
What benefits does globalisation cause to the government?
- Investment in infrastructure
- Investment in education
- More employment
- Economic growth
What benefits does globalisation cause to the business?
- Access more markets
- Access to resrouces/close to suppliers
- Reduce cost of production
What are examples of development aid?
- Grants
- Loans
- Tied aid
What are the advantages of globalisation for MEDC’s?
- Higher profits for MNC
- Higher Y and Employment
- Lower prices
- Increase in quantity of labour
- Greater Consumer choice
- Less conflict
What are the advantages of globalisation for LEDC’s?
- Increase in Y
- Increase in tax revenue
- Increase in exports
- Increase in employment
- Transfer of technology
- Improvement in quality of human capital
- Enterprise development
