GG: International Trade Flashcards
How has the volume of trade increased?
It has increased dramatically since the 1980s - its value increased by nearly 8 x between 1980 and 2008
- international trade is occurring more than ever before
What has happened to the volume of investment over time?
It has also been rising, the FDI has rising from about $400 billion in the 1996 to nearly $1500 billion in 2016.
What are the trends in the patterns of international trade?
International trade is still dominated by a few large economic blocs namely North America, Europe and East Asia. The G7 countries account for about 50% global trade. (The poorest 49 countries account for only 0.6%.) (G7 - The world’s seven most powerful industrialised countries - the US, Japan, Germany, the UK, France, Italy and Canada – it was the G8 until Russia was removed in 2014)
- However, this dominance is now being challenged by the emerging economies. China accounts for the largest share of this. China is the largest exporter of goods in the world.
- LICs tend to have a fairly limited range of exports, often centred on primary products. Such single market economies are vulnerable to market price
What are some of the patterns of international investment?
Foreign direct investment (FDI) – when a person, company or other group spends money in another country to generate a profit.
- Until the 1980s HICs invested in other HICs. Since the 1980s HICs have begun investing in NEEs and LICs.
- NEEs now invest heavily in LICs – e.g. China invests a lot into countries within Africa
- Ethical investment when the investment considers the social and environmental aspects of the impact of the investment has grown since the 1990s – tripling between 2005 and 2016 for US companies
What are the benefits of international trade?
- Access to goods that would not be available otherwise
- Lower costs, production efficiency and innovation (an increase in competition forces companies to make their product more attractive, through features or prices)
- Reduction in market fluctuations
- Outlet for surplus goods
- Resource specialisation (large countries like China or US have access to almost every resource, but smaller countries don’t so rely on imports- specialisation allows nations to specialise in where their resources are best allocated)
- Investment (companies invest in internal research and development to bring new products to market or improve on existing products. Can also affect investment by opening new markets for American investment dollars.)
- Jobs - but while trade agreements have lowered opportunities in the manufacturing sector, trade does tend to promote job growth in other areas.)
- Peace
What are trade blocs?
Agreements between states, regions, or countries, to reduce barriers to trade between the participating regions.
What are the terms of trade?
The phrase “terms of trade” refers to the cost of goods that a country has to import, compared with the price with which they can sell the goods they export.
- HICs tend to import primary products from LICs and subsequently turn these into manufactured goods for export to world markets – in other words, the value of the product increases as it passes through the hands of HICs.
- In general, the price of manufactured goods increases but the price of primary products fluctuates. This means that LICs need to export increased volumes of primary products to purchase the manufactured goods they require.
What are some of the global trade rules set by the WTO?
- countries cant give another country special access to their market without doing the same for every other country. Yet there are exceptions, e.g. can give special access to members of their trade bloc
- countries should promote free trade (by removing as many trade barriers as possible)
- countries should act predictably in their trading (e.g. not raising tariffs on a product once deals have been made)
- there could be fair competition (one country/company should not get an unfair advantage over rivals)
What are the main trading blocs?
EU - The European Union. 28 countries. Free trade within the EU has allowed goods and services to be transported internationally with ease.
- NAFTA - The North American Free Trade Agreement. 3 countries. The aim of NAFTA was to remove barriers to agricultural products, manufactured products, and services.
- ASEAN - The Association of Southeast Asian Countries. 10 countries. The bloc has free trade agreements to ensure political, economic, and social stability.
Other trading blocs include The African Union (AU), The Union of South American Nations (USAN), and The Caribbean Community (CARICOM).
What are the effects of trading blocs?
The effects of trading blocs are both positive and negative. There are obvious positives concerning free trade, the removal of non-tariff barriers, and other trading advantages. However, some criticise that trading blocs limit trade to other countries, causing disadvantages to both the countries within the trade bloc and those outside of it. Overall, trade blocs (among other reasons) are said to limit the access to markets, which will be explored further.
What is fair trade?
Fair trade is a social movement whose goal is to help producers in developing countries achieve better trading conditions and to promote sustainability
- The movement focuses mainly on agricultural products and on goods transported from LICs to HICs.
- Members of the Fair Trade movement advocate the payment of higher prices to producers as well as helping them to achieve social and environmental standards.
- The Fairtrade Foundation was set up in 1992 to ensure producers receive better trading conditions, and since then has developed into a well-known trademark, sold to supermarkets.
How do the relationships change depending on the countries involved?
— > Developed countries - most of the world trade takes place between developed countries - in 2013, imports and exports between the US and EU accounted for over 30% of the global products trade. Most of these products, e.g machinery or chemicals, require a lot of money or expertise to make
—> Emerging Economies - like china and India are increasingly important to global trade. Chinas manufacturing sector has growth massively and a highly educated pop gas grown India’s service sector
—> LICs - most LICs trade with emerging economies and developed countries. E.g. Bangladesh mainly exports to US and EU and imports from China and India
What are SDT agreements (Special and Differential Treatment)?
The WTO forms SDT agree,emits that let LICs bypass developed countries tariffs which gives them greater market access.
- e.g. the EUs 2001 EBA (Everything but Arms) agreement allows for the LICs to export some of their products to the EU without paying tariffs.
- the profits made allow LIDs to diversify the range of industries they have (e.g. introducing manufacturing or tourism sectors)
- however many people criticise this agreement and think trading blocks where countries negotiate prices collectively are better
What are the economic impacts of differential markets?
- hard for countries with poor market access to establish new industries - face high tariffs when sell abroad, making their products uncompetitive and may be undercut by TNCs who sell their products cheaper.
- so have become dependent on selling low-value products (e.g. agricultural goods) that tend to fluctuate in price so they often have poor GNI so less money too invest in industry so economic development is slow
- countries with high levels of market access see more economic growth as can trade more and citizens are wealthier so import more, can develop high-tech industries which boosts their economy further.
What are some of the social impacts of differential market access?
- people in countries with better market access tend to have better jobs, giving them more disposable income which increases their standards of living
- countries with less market access Thame less money available for education and healthcare, etc. so quality of life is generally lower. Better access to education in HICs has created better access to jobs for women and ethnic minorities, giving them more power to shape their lives
- much dangerous, poorly paid work has moved from HICs to LICs (e.g. sweatshops are crowded and dangerous factories, with workers paid little and work long hours, some even employ children, which is illegal in HICs)
