3.3.1 International trade and access to markets Flashcards
Why do nations trade?
- To take advantage of comparative advantage (where you specialise in something you can produce efficiently) e.g. Umbrella city.
- It is easier to trade if there are fewer barriers to trade.
- Trading should lead to increased production, and therefore increased GDP.
How has the volume of global trade changed since the 1980s?
The volume of global trade increased by eight times between 1980 and 2008.
How has the pattern of global trade changed?
Developed countries remain the biggest global traders, but some emerging economies are catching up - China is now the largest exporter of goods in the world, largely due to the rapid growth of its manufacturing sector.
More countries are opening themselves up to international trade by removing barriers to trade. This is partly due to the formation of trade blocs.
There has also been a rise in fair trade.
Fact showing the how trade varies depending on wealth of courties. [reword this?]
The poorest 49 countries make up 10% of the world’s population, but still only account for 0.4% of world trade.
How has the pattern of global investment changed?
Until the 1980s, developed countries mainly invested in other developed countries. Since the 1980s, developed countries have begun investing more in emerging economies and developing countries. In the past ten years, China, India, Brazil and Mexico were some of the largest receivers of foreign investment.
Another big change has been where the investment has come from. Emerging economies now invest heavily in less developed countries, e.g. China invests a lot of money in countries in Africa and South America.
Ethical investment has grown since the 1990s - the amount of ethical investment by US companies almost tripled between 2005 and 2016.
Ethical investment is when a person, company or group only invests in areas that are considered socially responsible.
What is Foreign direct investment (FDI)?
When a person, company or other group spends money in another country in order to generate a profit, e.g. by opening a new branch of their business or investing in local infrastructure.
How has the volume of FDI changed?
It rose dramatically, from about $400 billion in 1996 to nearly $1500 billion in 2016.
How do foreign investors choose where to invest?
Foreign investors may be attracted by the size of the market (how many people they can sell to), the stability of the market (e.g. not in a war zone), the possibility of extracting resources for themselves (e.g. from mines in Africa) or the ability to access financial services, as in countries like Luxembourg with large banking sectors.
What is protectionism?
Where countries limit trade using tariffs and quotas to shield their industries from foreign competition.
What is the role of the WTO?
To increase trade and help to restore trade disputes between member counties. It sets rules about how countries should trade with each other.
It promotes free trade and the removal of barriers to trade.
What is ethical investment?
When a person, company or group only invests in areas that are considered socially responsible.
Case study for ethical investment
The Co-operative Bank
CASE STUDY: The Co-operative Bank
The Co-operative bank is the most ethical bank – it is member-led.
Its current focus is to ‘make poverty history’.
Some of their campaigns include:
- In 1998, they stopped financing fossil fuel extraction.
- In 1999, they successfully campaigned to ban landmines.
It is the best rated ESG (Environmental, Social, Governance) bank in the country.
They pushed the use of fairtrade – for example, all the coffee in their offices was fairtrade certified.
The Co-op banks work with cooperatives and social enterprises. They committed £1.7m of funding.
Since 1992, the Co-operative bank declined £1bn due to conflicts with their ethical policy.
In 2008, they had an ethical policy review, which over 80,000 customers responded to.
What is fairtrade?
A social movement, looking at helping producers achieve better trading conditions and to promote sustainability.
What are the main commodities included within fairtrade?
Coffee, tea, cocoa, fruit and bananas.
These are traditionally products which are exported from developing countries to richer nations.
Differences between free trade and fair trade
