4.1.3 Pattern Of Trade Flashcards
1
Q
Factors that influence the patterns of trade?
A
- comparative advantage
- deindustrialisation
- impact of emerging economies
- trade blocs + bilateral trading agreements
- opening up of communism
- changes in relative exchange rates
2
Q
Examples of countries that specialise in certain goods
A
- cocoa = west Africa
- Germany = cars
- Russia = vodka
- Brazil = soya beans
3
Q
Does the theory of comparative advantage explain patterns of trade?
A
- countries tend to engage in trade of similar goods (intratrade)
- e.g. Germany may export cars, but also import cars
- thereby contradicting the theory of comparative advantage
- intro trade may still be consistent with comparative advantage if countries specialise in particular types of good
- ## but problem of restrictive assumption of the theory
4
Q
Key trends
A
- the G7 share of world trade in manufacturing has fallen significantly over the past century
- trade flows with emerging economies have increased significantly
- trading within trade blocs has also increased (e.g. EU) = trade creation
- BUT at the expense of trade Q the more traditional trading partners e.g. UK with commonwealth = trade diversion
5
Q
Deindustrialisation
A
- like several advanced economies, the UK’s trade in manufactured goods has fallen relative to its trade in commercial + financial services
- less national output generated by their manufacturing sectors
- structural unemployment as a consequence of businesses relocating production to low wage economies
6
Q
Impact of deindustrialisation
A
- any manufactured goods that the UK exports are highly valued goods
- but this is being traced with growth in provision of financial services + other tertiary markets
- the UK now experience a deficit on the balance of payments current account in terms of goods
- but surplus in terms of services
7
Q
Emerging countries
A
- BRIC + MINT
- newly industrialised countries like India + China dramatically increased their share of world trade + share of manufacturing exports
8
Q
Impact of trade blocs
A
- trademark blocs where members freely trade with each other but impose barriers to trade with non-members significantly impacts pattern of trade
- formation of blocs has led to trade creation between members
However, countries outside the bloc have suffered from trade diversion
9
Q
Growth of RTAs
A
- number of RTAs has risen from 70 in 1990 to over 300 now
- reflects the switch towards greater intra-regional trade - most notably between many fast growing emerging market economies
10
Q
Examples of RTAs
A
- EU
- NAFTA = USA, Canada, Mexico
- Mercosur = Brazil, Argentina, Uruguay, Paraguay + Venezuela
11
Q
Opening of markets
A
- collapse of communism led to the opening-up of many former communist counties
- these countries have increased their share of world trade by taking advantage of their low production costs (e.g. low wage levels)
12
Q
Impact of trade on developing countries
A
- increase trade has enabled developing countries to participate more effectively in the global economy
- many have integrated into competitive markets + generated income and wealth
- increased income + wealth = creation of job opportunities = reduces poverty
- pace of growth of emerging economies has led to late rises in the prices of primary resources + foodstuffs = increased revenue for developing countries
13
Q
Impact of trade on developing countries (evaluation)
A
- developing countries may find it hard to access to large markets if they are not members of that trade bloc
- e.g. producers of agricultural products in African nations will have to pay late import duties to sell their products in the EU because of the common external tariff
- the
- the price rises of primary resources may not encourage economic diversity which may harm developing countries in the future with an economic downturn
14
Q
Why is trade between development countries relatively minor?
A
richer countries have greater purchasing power
