Factors Affecting Global Trade

Question 1

What are the factors affecting global trade?

Answer 1

• resource endowment
• locational advantage
• historical factors (e.g. colonial ties)
• trade agreements
• changes in global market
• comparative advantage
• terms of trade
• investments

Question 2

What is resource endowment + how does it effect global trade?

Answer 2

• natural occurrence of resources in a country
• it impacts international trade patterns as countries endowed w a particular resource, control + dominate world trade of that resource
• affects global inequality bc countries endowed w a lower income export product are disadvantaged bc are prone to fluctuations

Question 3

What e.g.s show how resource endowment affects global trade?

Answer 3

• Uganda, endowed w a low income export product, is disadvantaged bc 80% of its exports are made up of primary agri. products, so are prone to fluctuating prices
• this lead to its overproduction of coffee between 1995-2000, = a 75% dec in its export prices, dec its ability to earn foreign currency + made it harder to attain higher value imports
• Middle Eastern countries, endowed w oil resources, excel at controlling + dominating world trade, so earn lots of foreign currency used to afford high value imports, widening inequality gap

Question 4

How does locational advantage affect global trade?

Answer 4

• countries located close to target markets have proven to be advantageous for exporting countries bc it dec. transport costs
• countries located along important trade routes are also advantaged
• landlocked countries that have conflict w neighbouring countries are disadvantaged

Question 5

What e.g.s show how locational advantage affects global trade?

Answer 5

• France, located close to target markets, benefits from tourist industry bc large pop.s from neighbouring counties influx into country bc can reach it quickly + cheaply, allowing it to earn a substantial income
• Singapore is strategically located on main trade route between Indian + Pacific Ocean
• South Sudan, a landlocked country w conflict, has resulted in having no access to transport links (e.g. ports), limiting their income from exports + restricting necessary imports of resources that aren’t attainable within country

Question 6

How do historical affect global trade?

Answer 6

• old colonial ties (e.g. commonwealth in UK), allows strong trade links w other countries, + so countries w/o historical international relations have been hindered on share of world trade, so economically dev. much slower

Question 7

How do trade agreements affect global trade?

Answer 7

• trade blocs (a group of countries sharing trade agreements between each other), are often set in place by HICs, allowing them to continue dominating production of manufactured goods
• achieved by HICs (e.g. EU) charging higher external tariffs on imports outside bloc, which protects HICs, but disadvantages NICs/LICs bc are subject to tariffs so limits their eco. dev + makes it harder for them to compete in world market

Question 8

How has changes in the global market affected global trade?

Answer 8

• rapid growth + dev of manufacturing sectors in NICs, due to FDI from TNCs, has lead to emerging markets (e.g. Brazil, Russia, India + China) w an inc export value
• e.g. apparel industry has allowed Bangladesh to trade internationally, enabling rapid eco growth, dev tech., + inc employment opps
• e.g. 1990: HICs controlled 64% of global economy, which fell to 52% by 2009