4.1.3 Pattern of Trade Flashcards
What is the geographical pattern of trade
Are the countries whom businesses and people trade
Countries tend to trade most with other nations in closest proximity - lol Brexit
What intra-regional trade
Is trade between countries in the same region (European Union, African Union, etc)
Different from inter-regional trade, like from Europe to Africa
Who is the UK’s largest trading partner
In 2018, UK exports to this place were £ x billion and what percentage of all UK’s exports
EU
x = £289 billion
46% of all UK exports
What is the gravity theory of trade
Trade flows within regions, like the EU, are far greater than trade flow between regions or continents
The UK, for instance, currently exports about 50% to Ireland than it does to China
What factors affect the Gravity Theory of Trade
- Businesses trade more in markets in close geographical proximity and big market size
- Shared borders help facilitate high levels of trade and labour mobility especially in a single market
- Share language and single currency cut cost of trade contracts and market transactions
- Similar consumer preferences
- Countries with similar stages of development will have over-lapping capabilities
What is the commodity pattern of trade
- This is the type of products that are traded internationally
- We can see the extent that a country has dependence on primary vs manufactured vs service exports
- Many less economically developed countries rely heavily on primary product exports
Patterns of trade can change through what
as countries move through different stages of development
As a nation develops increasing complexity and more capabilities, then they become capable of supply and then exporting a broader range of products within the global economy
Switching from growing/extracting processing primary products to final assembly/manufacturing
Developing new comparative advantage
One could say comparative advantage is a what concept
dynamic
What factors affect comparative advantage, causing it to be a dynamic concepts
- Quantity and quality of natural resources available
- Demographics - ageing population, net migration etc
- Rates of new capital investment including infrastructure spending
- Investment in research and development which can drive business innovation
- Fluctuations in exchange rates, affecting export/import prices
- Import controls, tariffs, export subsidies and quotas
- Non-price competitivness
Describe the transport mechanism of trade patterns on emerging economies
- Rising income leads to purchasing more goods/services from elsewhere in the world, beyond basic necessities
- Attracts MNC activity and growth of domestic companies in other companies
- Selling more medium/high value exports
- Currency volatility in emerging markets can have a large impact on commodity/raw material prices
- Rising tension between developed economies
What is a preferential trade area
there is reduced protectionism on a number of select goods/services amongst countries involved
What is a free trade area
for countries involved, but each country can set their own trade restrictions on countries outside the agreement
What is a Customs union
there is completely free trade between countries involved and they all agree to impose the same trade restrictions on other countries as each other
What is one key impact of the increase in number/strength of trading blocs on global trading patterns
How does this relate to comparative advantage
Is that they often lead to more intra-regional trade (within the trade bloc)
and less inter-regional regional (trade between regions/blocs)
This means that countries do not always gain the benefits from specialising according to their comparative advantage
What are the impacts of relative exchange rates on trade patterns
A country can either have a fixed or floating exchange rate
A strong currency makes exports appear relatively more expensive and imports appear relatively cheaper
A weak currency makes exports appear relatively cheap and imports relatively expensive
