4.1.2 International trade and business growth

Question 1

international trade

Answer 1

the exchange of products (goods/services)

• between economic agents of a country (businesses, governments, consumers)
• benefits to all involved = powerful driver for sustained GDP growth employment & rising living standards

Question 2

UK’s imports and exports

Answer 2

Exports:
more than half of UKs exports go to nations in EU
Switzerland = biggest export maker outside EU

Imports:
EU is biggest source of imported goods/services
for UK, China is now ahead of USA as a supplier of products

Question 3

Uk’s top export commodities

Answer 3

14% mechanical machinery
10% cars
8% electrical machinery
8% pharmaceuticals
6% crude oil
5% scientific/photographic
5% aircraft
3% refined oil

Question 4

exports

Answer 4

goods or services that a firm produces in its home market but sells in a foreign market

Question 5

imports

Answer 5

goods or services brought into 1 country from another

Question 6

benefits from international trade

Answer 6

1-export revenues and jobs = reduce poverty
2-lower consumer prices competitive markets
3-tech is spread = raise productivity
4-knowledge/skills cross borders gain capabilities & resources
5-Econmies of scale = lower units costs and prices
6-better use of scarce resources

Question 7

6 potential drawbacks of international trade

Answer 7

1-transport costs e.g emissions from food miles
2-rising inequality, uneven gains from trade
3-pressure on wages and working conditions
4-risks from global (external) shocks
5-increased competition
6-barriers to entry

Question 8

specialisation and comparative advantage (why some countries and better at producing certain goods or services than others)

Answer 8

1. relative opportunity costs of production for a good/service = lower
2. relatively more productively efficient than another

-specialise = important potential gains from specialisation and trade
e.g. Zambia/Chile = copper mining
Bangladesh = textile
Vietnam= light manufacturing assembly
Angola = crude oil
Ivory Coast = cocoa

Question 9

impact of specialisation

Answer 9

• total economic output increase across global economy
• competitive adv shifting to specialising = higher prices export high tech manufactured goods/high knowledge services
• more capabilities = produce wider range of closely linked goods/services
• lower development stage = fewer capabilities = export a narrower range of products
• South Korea, Japan, Germany, US, UK = all highly diversified pattern of exports

Question 10

comparative advantage

Answer 10

idea countries are better off producing what they are best at producing and trade what they have left over

Question 11

FDI

Answer 11

investment from one country into another

• normally be companies rather than governments
• involves establishing operations or acquiring tangible assets, including stakes in other businesses

-global flows of FDI peaked around $3 trillion just before financial crash in 2008

1. Inward
2. Outward

Question 12

inward FDI

Answer 12

foreign capital is invested in local resources

• factors propelling growth of inward FDI = tax breaks, low interest rates and grants
  e. g. overseas business decides to build a manufacturing factory in UK (foreign retail firm invests to open new stores in UK)

Question 13

outward FDI

Answer 13

• direct investment abroad
• when a local business invests in a foreign country
• backed by government against all associated risk
• e.g UK business expands into an overseas market by opening a new production facility (UK business completes a takeover of a business based in another country)