Globalisation From notes Flashcards
What is Visible trade?
Trade of goods which can be counted, weighed and given value. eg food stuffs and manufactured goods.
What is invisible trade?
Trade of services eg. tourism and financial services
What is comparative advantage?
the ability of an individual or group to carry out a particular economic activity (such as making a specific product more efficiently than another activity with a lower opportunity
unequal distribution of resources.
Trade in essential economic growth
Triadic geographical structure of trade-
80% between Europe, North America and Asia. Increased by 8x since 1980.
Trans-pacific vs trans atlantic Trade-
Emerging economies (trans-pacific china/india) trade is growing fastest and challenging previously dominant trans- atlantic (G7)
Less developed countries - sidelined with slow growth-
In 1995 African countries accounted for 2% of world trade, 2010 3%- poorest 49 counties- 10% worlds popularity 0.4% worlds trade.
Intra-regional dominance, intensity of trade decrease with distance-
2006, 74% of internal trade in Europe was between EU countries
TNCs dominate-
Top 500 TWCs account for 70% of world trade
Draw international trading characteristics summary
check notes
Why do developed countries dominate world trade?
6
- Similar well-developed infrastructure
- High value products
- High market volume
- Geographical proximity
- members of trade agreements
- High literacy rate and skill level
What are the advantages of international trade?
6
- Can exploit comparative advantages
- Economies of scale
- Multiplier effect
- purchasing power
- fewer domestic domoplius
- transfer of technology
What are the disadvantages of international trade?
5
- Specialisation (over- specialisation)
- Protectionism
- Deskilling
- Decline of local industries
- Exploitative work practices
What is Single product economy?
A country, usually a LIC which relies on one or very small number of products (usually raw material) for its export earning
What is Primary product dependency?
Heavy dependence measured as a share in GDP, total exports or employment from extraction/cultivation of primary commodities such as copper and oils.
What is fair trade?
- Fair price to producer (minimum price)
- Fairtrade premium (additional money for investment) in socioeconomic welfare)
- Compliance with environmental standards
comparative advantage-
Countries specialise in producing goods which can be produced efficiently and ata low opportunity cost. Higher profits
Economies of scale-
Increasing production causes lower cost per unit (e.g. lower average electric costs, bulk buying. Greater profits, lower prices.
Purchasing power-
Increasing trade causes greater competition that lowers prices and allows consumers to buy more goods and services for their money.
Fewer domestic monopolies-
Greater external competition means one company can never fully control a countries market e.g. where one company controls 25% of market > High prices low quality
Transfer of technology-
Movement of new methods of production ( e.g. between parts of a company) > many lead to design improvements and cost savings as well as supporting innovation.
Multiplier effect-
Small initial change has a larger eventual impact. Positive: International trade > greater prodution> more jobs > greater sending power> creation of more jobs>
Or negative
Over- specialisation-
Countries may concentrate on producing one good> higher output. But: dependence on one good (price falls, droughts etc. can cause problems) and if demand falls or if the same good is produced more cheaply overseas, then production will shift and these places will find it hard to diversify (structural unemployment).
Decline of local industries-
Smaller home - grown industries find it hard to compete with large international companies.
Protectionism-
Country may protect domestic industries from external competition by restricting trade in goods and services (e.g. tariffs).
Deskilling-
As goods produced elsewhere, quality and usage of (traditional) knowledge and skills decreases.
Exploitative work practices-
Labor remains biggest cost> aim to reduce costs by basing factories in LICs with less strict regulations.
What are the positives of fair trade?
Fair price
What are the negatives of Fair trade?
5
- Only receive if produce primary product
- Minimum price- supply not needed inpoversvers no-fair trade farmers
- Minimum standard
- Recipients tend to be well off MNC
- Transfer of products in poor- most in HIC for advertising
What are Tariffs?
Tax on imports- imports more expensive & buy domestically
What are quotas?
Physical limits on the amount of goods you import
What are subsidies?
grant to domestic produces so sell at lower price
What are Voluntary Export Restrain (VER)
Chosen to reduce exports
What are Embargoes?
Ban imports of goods from certain places
What is the WTO?
World trade organisation
The WTO with rules of trade between countries at a global or near-global level.
How many members does the WTO have?
164 members
representing more than 98% of total world trade
What are the strengths of the WTO?
3
Promotes free trade Prevents trade wars Equalty in trade -> tariffs reduced - 1930s- 50% -2000- 9%
What are the weaknesses of the WTO?
7
- Disadvantaged LIC as their import industries- cannot grow
- Consensus- difficult to pass a decision
- Trade agreements outside more important
- TNCs advantages
- Intellectual property rights
- LICs and NIC’s cannot afford copy rights
- Undermines the ability of countries to run themselves