4.1.2 - International Trade And Business Growth

Question 1

Imports Explained

Answer 1

• The UK is only a small Island so we need to bring in goods from other countries that we might need. This is called importing.
• Some countries specialise in producing certain goods, and with their low labour costs they can make products at more attractive prices than we can in the UK

Question 2

Exports Explained

Answer 2

• All countries trade with other countries, they send products abroad. This process is called exporting.
• The UK exports:
• Medical supplies
• Cars
• Gas turbines
• And gold….

Question 3

Specialisation Defined

Answer 3

• Specialisation is the process of concentrating on and becoming expert in a particular subject or skill

• In terms of countries it means that a country will have industries in which it leads the world. This may be due to; proximity of raw materials, low labour costs, historical ability or other factors e.g. Belgian chocolate, Scotch whiskey etc.

Question 4

Specialisation and comparative advantage

Answer 4

• A country may decide to specialise in a particular industry or sector
• For example India specialises in IT due to a huge number of IT graduates from its universities
• This means they can set up call centres for overseas companies staffed by English speaking graduates who are on a fraction of the wages required in the UK

Question 5

Benefits to India of specialisation

Answer 5

A. Increased productivity and output, this means reduced average costs and economies of scale
B. As more resources are devoted to the industry rather than being spread out the scale of production can be increased to gain the EOS
C. This gives the Indian call service industry comparative advantage over the next best country
D. The increased productivity will lead to GDP growth and increasing sales will boost economic growth

Question 6

The downside of specialisation

Answer 6

• A country may become over reliant on one industry (eggs in one basket) and this does not spread risk
• Other countries may become cheaper in the same industry and it may be harder to compete
• If the business grows too big it may suffer from DEOS through lack of communication and co- ordination

Question 7

FDI defined

Answer 7

• FDI is foreign direct investment – this means that a business from one country decides to establish themselves in another country.

Question 8

FDI and business growth

Answer 8

• FDI may decide to build factories or other business premises which will create jobs for the host nation e.g. Microsoft, Facebook and Amazon have all setup in India
• Vodaphone bought an existing business in India and trained up the managers with the latest telecom ideas, so MNCs can bring skills and technology to emerging economies