Global Trade Flashcards
Internationalisation
Increasing activity within the international market by businesses
Globalisation
Similar to internationalisation but also involves creating a global single market with harmonised laws, homogenisation of tastes (e.g regional food sold globally) and the same product sold globally
Benefits of International Trade
Greater choice of products Increased competition Economies of scale (lower production costs for firms, lower prices for consumers) Increased quality Increased employment Correct market failure Specialisation
Drivers of International Trade/Globalisation
Businesses
Communication
Politics
Market liberalisation
Disadvantages of Foreign Trade
Environmental damage Depletion of non-renewable resources Distribution costs Unfair competition Strategic industries Over-specialisation Sunrise industries are unprotected Sunset industries are unprotected Unemployment Over-dependence BoP deficit
Protectionism
The way a country restricts its trade with others
Types of Protectionism
Tariffs Quotas Voluntary export restrictions/VERA/export visas Admin costs/red tape Embargoes Subsidies Public procurement
Arguments Against Protectionism
Economic inefficiency Market distortion Retaliation Higher prices Increasing domestic production costs
Trade Agreements
Either:
Bi-lateral - between two countries
Multi-lateral - between multiple countries
Types of Trade Agreements
Free trade areas - multi-lateral, no tariffs on countries outside the area
Customs unions - similar to free trade areas but have tariffs on imports from outside
Single markets - trading bloc where physical, technical and fiscal borders are removed to permit free movement of factors of production, enterprise and services
Economic union - combo of single market and customs union. Allowing free trade within the bloc and applies a common external tariff. If there’s a common currency it becomes a monetary union
Pros and Cons of Regional Trading Blocs
Advantages:
- Advantages of international trade
- Support for countries in the bloc
- Low cost of imports
- Efficient for negotiations
Disadvantages:
- Inefficiency
- Retaliation
- Unsuitable trading policies
World Trade Organisation
Replaced GATT in 1994, purpose is:
Sets out global rules of trade between nations
Ensures trade flows as smoothly, predictably and freely as possible
Ensures implementation, administration and operation of relevant trade agreements
Provides forum for negotiation and settling of disputes
Cooperates with IMF and International Bank for Reconciliation and Development
Reviews members trading policies - Big 4 (EU, US, Japan, Canada) reviewed every 2 years
European Union
Set up in 1993, purpose:
Reduce customs duties and create a customs union
Create a single market for goods, labour, services and capital across EEC members
Implement a customs tariff and commercial policy towards non-members
Common transport & agri policies
Establishment of European Social Fund
Setting up of European Commission
Economic Operation of EU
Single currency zone - Euro used by most states to encourage free trade
European central bank - sets Eurozone monetary policy, keeps inflation under control, produces currency
The G8
Forum including Canada, Russia (suspended since 2014), Germany, Italy, the UK, Japan and France.
Forum used to discuss issues on health, law enforcement, the environment and trade
