GS: International Trade And Access To Markets

Question 1

How can the basis of trade be explained

Answer 1

By the theory of comparative advantage; countries specialise in activities for which they are best equipped in terms of resources and technology. A country can then trade surpluses in order to provide the income needed to buy in goods that cannot be produced efficiently, or at all, in the home economy.

Question 2

When studying this topic what should you consider

Answer 2

When studying these topics, you should consider how international trade and variable access to markets underlies and impacts on people’s lives across the globe. In addition, you should consider how they impact on you life, and influence the way in which you live.
Live how you wanna 🤹🏻‍♀️🤺🤼‍♀️

Question 3

Define trade

Answer 3

The movement of goods and services from producers to consumers. In geographical terms, it is measured by movement of these items from one country to another.

Question 4

Define comparative advantage

Answer 4

The principle that countries can benefit from specialising in the production of goods at which they are relatively more efficient or skilled.

Question 5

In 2013, which groups of nations accounted for trade of goods

Answer 5

In 2013, the top ten trading nations accounted for 52% of global trade in goods. Developing countries accounted for 44%. The total value of exports was US$17.8 trillion

Question 6

In 2013, which groups of nations accounted for how much of global trade in commercial services

Answer 6

The top ten trading nations accounted for 50% of global trade in commercial services. Developing countries accounted for 34%. The total value of exports of services was US$4.6 trillion.

Question 7

In 2013, how much of exports of goods were sent to who

Answer 7

52% of exports of goods from developing economies are sent to other developing economies. On the other hand, developed countries sent 30% of their exports to developing countries.

Question 8

In 2013, what was the trend in trade with least developed countries (LDCs) by both developed and developing countries

Answer 8

It’s increasing, but they are both small in amount.

Question 9

Tell me what LDC exports amounted to in 2013

Answer 9

LDC exports amounted to US$215 billion. 44% of this was exported to Asia (23% to China), 24% to Europe (20% to the EU) and 12% to North America.

Question 10

In 2013 what did China become

Answer 10

China became the worlds biggest trader in goods, with imports and exports totalling US$4,159 billion. It recorded a trade surplus of US$259 billion.

Question 11

In 2013 who was the second biggest trader in goods

Answer 11

The USA was the second biggest trader in goods, with imports and exports totalling US$3,909 billion. The US trade deficit was US$750 billion.

Germany was third in place, with a trade surplus of US$264 billion.

Question 12

How has the regional share in world exports of commercial services changed in recent years

Answer 12

World exports of commercial services totalled US$4,645 billion. The regional share in world exports of commercial services has changed in recent years. In 2013, Europe’s exports of commercial services accounted for 47% of world receipts, down from 52% in 2005. There were rising exports by other regions, such as Asia, which accounted for 26% of global services exports in 2013. This was driven by increasing commercial services in India, Macao and Thailand.

Question 13

What does UNCTAD stand for

Answer 13

The UN conference on trade and development

Question 14

Tell me how FDI is expected to rise

Answer 14

A report by the UN conference on trade and development (UNCTAD) in 2014 showed that inflows of global foreign direct investment (FDI) grew to US$1.45tn in 2013. It is expected to rise to US$1.85 in 2016.

Flows to developing countries reached a record high of US$778 bn, which makes them worth 54% of the worldwide amount. This meant that developing countries took more investment than developed ones, which, with US$566 bn, had a historically low share of 39%

Question 15

What’s the trend in FDI been to the EU

Answer 15

FDI to the EU began to grow again, with its member countries receiving US$246bn, an increase of 14% on 2012. However, the eu still received less than 30% of what it was getting in its peak year 2007.

Question 16

What’s the trend been to FDI in America

Answer 16

Although Latin America and the Caribbean saw overall positive growth in FDI inflows, it was mostly due to growth in Central America, despite an overall 6% decline in South America.

Question 17

In 2013, which country received the most FDI

Answer 17

USA stays as the top country, with US$188 billion investment after growth of 17%

Question 18

Which five countries received the most FDI in 2013

Answer 18

USA
China
Russia
Hong Kong
Brazil

Question 19

Tell me about trends in FDI outflows in 2013

Answer 19

The report from UNCTAD also looked at the amount spent by companies and other bodies in each country. These are called FDI outflows. Despite a decline of 14.5%, North America (USA and Canada) is the top region of outward investment of US$381 billion. Outward investment from Asia is increasing - FDI outflows from China grew $101 bn in 2013 and is expected to surpass its inflows within 3 years.

Question 20

Tell me about general differential access to markets

Answer 20

The trading agreements discussed and the various other ways in which countries become involved in the dealings of other countries, whether by trade or aid, or a combination of both (as illustrated by china’s dealings overseas), have impacted the economic and societal well being of the people within those nations.

You should study examples of how differential access to markets impacts nations and people. One example could be at a national level, such as how different areas of Mexico are affected by their trading relationship with the USA. Another could be to examine how individuals can gain access to markets in order to raise their personal living standards. (Examined briefly next)

Question 21

Tell me about differential access to markets: Mexico and NAFTA

Answer 21

There is huge variation of incomes within Mexico as the country modernises. For example, economic productivity in Nuevo León, a heavily industrialised state close to the US border (capital Monterrey), is at level equivalent to that of South Korea. Here maquiladora are common. In the south of Mexico productivity is close to that of sub Saharan Africa. The country’s industrial clusters devoted to the manufacture of cars, planes, electric goods and electrical equipment - categories that between them account for 2/3s of Mexico’s manufacturing exports, and thus for about 18% of GDP - are largely to be found in a band next to its northern border and in the central states to the south of it. These states account for about 70% of the country’s 120 million population. These figures are largely due to the access to the North American market that the region possesses, resulting from NAFTA.

Question 22

What does Microfinance refer to

Answer 22

Microfinance refers to a number of different financial products. Inducing:
Microcredit
Micro savings
Micro insurance 
Payment management

Question 23

What is microcredit

Answer 23

The provision of small scale loans to the poor, for example by credit unions.

Question 24

What’s micro savings

Answer 24

For example, voluntary local savings clubs provided by charities.

Question 25

What’s micro-insurance

Answer 25

Especially for people and businesses not traditionally served by commercial insurance, which can act as a safety net to prevent people from falling back into poverty after, for example, a harvest failure.

Question 26

What’s payment management

Answer 26

For managing remittance payments sent between individuals. One of the most well known mobile phone based solutions is M-pesa in east Africa.

Question 27

What does microcredit simply attempt to do

Answer 27

Reduce poverty

Question 28

How does microcredit attempt to reduce poverty /what are its key characteristics

Answer 28

If often provides small loans for the working capital requirements of the rural poor, especially women There is minimal risk assessment of borrowers compared with commercial banks. Security is rarely demanded for the money Based on the loan repayment history of the members, Microfinance institutions can extend larger loans to the members repeatedly

Question 29

For many people, who is Microfinance and microcredit essential for

Answer 29

Microfinance and microcredit are essential and produce many benefits for poor and low income households. Microfinance can also help to unlock a community’s entrepreneurial potential and allow them to access markets for their products.

Question 30

What are the criticisms of microcredit and Microfinance

Answer 30

This type of money lending is not without its critics. There are sometimes problems in terms of maintaining manageable interest rates, gender inequalities (experts agree that women should be the primary focus), and being able to reach those in most need while still covering operational costs. There are also problems of people defaulting on their loans and the scheme losing its assets.

Question 31

What’s the traditional view of a TNC

Answer 31

The traditional view of a transnational corporation (TNC) is firm that has the power to coordinate and control operations in more than one country. Such organisations are hierarchal and usually have a recognisable home base incorporating the headquarters and research and development (R&D) arm in developed countries, with centres of production overseas.

Question 32

Define TNC

Answer 32

Transnational corporation (TNC) is a company that operates in more than one country

Question 33

Over the last few decades TNCs have developed different forms and have moved into a wide range of activities, list them

Answer 33

Resource extraction Manufacturing Services

Question 34

Tell me about the activity of a TNC: resource extraction

Answer 34

Particularly in the mining and oil and gas industries (for example, BP, Exxon, Royal Dutch Shell and Chevron)

Question 35

Tell me about the role of TNCs: manufacturing

Answer 35

In high end products such as computers and electronics (Apple) and pharmaceutical (GSK), large volume consumer goods with products such as cigarettes, drinks, foods and cosmetics (BAT, Fosters, Unilever, Kellogg’s, L’Oréal)

Question 36

Tell me the top 3 largest public TNCs, 2014

Answer 36

ICBC (China) China construction bank (China) Agricultural bank of China (China)

Question 37

Tell me the top 3 worlds largest non financial TNCs,2014

Answer 37

General Electric (USA) Royal Dutch shell (UK) Toyota (Japan)

Question 38

Tell me the top 3 largest TNCs by brand in 2013

Answer 38

Apple (USA) Samsung (Korea) Google (USA)

Question 39

The nature and role of TNCs have become much more complex, what two different types of operation have arisen

Answer 39

Genuine overseas branch plant operations Business arrangements known as global production networks (GPN)

Question 40

Tell me about the type of TNC operation: genuine overseas branch plant operations

Answer 40

Production or retailing facilities resulting from FDI and owned by the parent company. An example would be ford, a US car company with its headquarters in the USA, but having branch plants in countries such as the U.K. and Mexico.

Question 41

Tell me about the TNC type of operation: business arrangements

Answer 41

Business arrangements known as global production networks (GPN). Large corporations, ranging from Dell to Tesco, have established thousands of subcontracting partnerships while building their global businesses. The term ‘transnational corporation’ cannot cover this. A TNC that orchestrates a GPN can be described as a hub company.

Question 42

What does GPN stand for

Answer 42

Global production network

Question 43

Define global production networks (GPN)

Answer 43

A system whereby a TNC manages a series of suppliers and subcontracted partnerships while building its global business.

Question 44

Tell me how GPNs have grown over time

Answer 44

As globalisation has accelerated, the size and density of GPNs have grown. GPNs span food, manufacturing, retailing, technology and financial services. Food giant Kraft and electronics firm IBM both have 30,000 suppliers providing the ingredients they need and helping to generate huge revenues. The worlds largest firms have multiplied the size of their supply chains many times over through corporate mergers and acquisitions (for example, Kraft acquired the Cadbury’s GPN in 2010, adding it to its own)

Question 45

List me the advantages of TNCs on the host country

Answer 45

Employment Injection of capital into the local economy Multiplier effects New working methods

Question 46

Tell me about the advantage of a TNC on the host country: injection of capital into the local economy

Answer 46

More disposable income will create a demand for more housing, transport and local services

Question 47

Tell me about the advantage of a TNC on the host country: multiplier effects

Answer 47

Investment by a TNC can trigger more employment through the process of cumulative causation bringing greater wealth into a region, eg component suppliers and distributors.

Question 48

Tell me about the advantage of a TNC on the host country: new working methods

Answer 48

The transfer of technology will create a more skilled workforce. Also, new methods will be adopted, such as just-in-time (JIT) component supply and quality management systems.

Question 49

Define Just-in-time (JIT)

Answer 49

A manufacturing system designed to minimise the costs of holding stocks of raw materials and components by carefully planned scheduling of deliveries.

Question 50

List me the disadvantages of TNCs on the host country:

Answer 50

Competition Environmental concerns Labour exploitation Urbanisation Removal of capital Outside decision making

Question 51

Tell me about the disadvantage of TNCs to the host country: competition

Answer 51

Arrival of TNCs May have adverse effect on local companies, which might not be as efficient

Question 52

Tell me about the disadvantage of TNCs to the host country: environmental concerns

Answer 52

Many developing countries have less stringent pollution laws than in the TNCs home country.

Question 53

Tell me about the disadvantage of TNCs to the host country: labour exploitation

Answer 53

Many have alleged that some TNCs exploit cheap, flexible, non unionised labour forces in developing countries. This has been strongly denied by many TNCs, which point to a basic standard of operation involving worker training facilities, and promotion opportunities for locals, with a minimum wage in force.

Question 54

Tell me about the disadvantage of TNCs to the host country: urbanisation

Answer 54

Establishing factories in major urban centres leads to their expansion as younger workers migrate from rural areas. This can also have serious consequences in those rural areas.

Question 55

Tell me about the disadvantage of TNCs to the host country: removal of capital

Answer 55

There is removal of capital to the TNCs home country

Question 56

Tell me about the disadvantage of TNCs to the host country: outside decision making

Answer 56

Plans affecting your plants in developing countries are made in the home country and are usually for the benefit of the TNC and its profitability.

Question 57

Tell me about the activity of TNCs: services

Answer 57

Banking and insurance (HSBC), supermarkets (Walmart), advertising (Saatchi), freight transport (Norbert Dentressangle), hotel chains (Radisson) and fast food outlets (McDonald’s, KFC)

Question 58

How can we identify the largest or most successful TNC

Answer 58

As there are so many different types and well known names of TNCs, several organisations seek to identify the largest, or the most successful, TNCs in the world. This task is far from easy as there are a number of criteria that could be used, such as profit, turnover, assets and brand success.

Question 59

Trading relations and patterns have been determined over the last 70 years by what

Answer 59

A series of trade agreements and principles, which have been established to deal with the rapid rise of international trade and the issues associated with it. They deal with trade between the large developed economies (eg USA and the EU), emerging economies (eg China and India) and smaller, less developed economies, such as in Latin America and Southern Asia. These agreements and principles can be examined at the international and regional scale.

Question 60

What’s the WTO

Answer 60

The world trade organisation (WTO) replaced the general agreement on tariffs and trade (GATT) in 1995. It deals with the global rules of trade between nations. It’s main function is to ensure that trade flows as smoothly, predictably and freely as possible. At its heart are the WTO agreements, negotiated and signed by the bulk of the worlds trading nations and ratified in their parliaments. Where countries have faced trade barriers and wanted them lowered, WTO led negotiations have helped to open markets for trade. WTO agreements contain special provision for developing countries, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities, and support to help them build their trade capacity.

Question 61

Tell me whose in the European Union

Answer 61

The European Union (EU) was known as the European community prior to 1 November 1993 and before that as the European economic community. It currently consists of 28 members: France, Germany, the Netherlands, Belgium, Luxembourg, Italy (the first 6 members), the U.K., Denmark, Ireland (joined 1973), Greece (1981), Portugal and Spain (1986), Austria, Finland and Sweden (1995), Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia (2004), Romania and Bulgaria (2007), and Croatia (2013)

Question 62

Why was the EU established

Answer 62

The EU was established under the treaty of Rome in 1957 with the objective of removing all trade barriers between member states. The background to this was the desire to form a political and economic union that would prevent the possibility of another war in Europe.

Question 63

Tell me about the monetary union in the European Union

Answer 63

The majority of the countries in the EU use a single currency: the Euro. The treaty of Maastricht (1991) paved the way for monetary union, which came about in 2002 with the adoption of the euro. Some countries - the U.K., Denmark and Sweden - do not take part in this zone. Since then, Cyprus, Malta and Slovenia have been accepted into the eurozone and it is hoped that all the nations that joined the eu in 2004 and 2007 will eventually adopt the euro. Slovakia joined the eurozone in 2009. In the U.K. there has been an ongoing debate regarding merits or otherwise of the EU. This culminated in June 2016 with a referendum result calling for the U.K. to leave the Eu.

Question 64

What does NAFTA stand for

Answer 64

North American free trade area (NAFTA)

Question 65

Tell me about why the North American free trade area (NAFTA) was created

Answer 65

The North American free trade area’s (NAFTA) members consist of the USA, Canada and Mexico in an attempt to create the equivalent of the single European market within the North America continent.

Question 66

What’s the biggest geographical impact of NAFTA

Answer 66

It’s biggest geographical impact has been to create the maquiladora in Mexico. These are manufacturing industries operating in a Mexican free trade zone close to the USA Mexico border, where factories import material and equipment on a duty free and tariff free basis for assembly, processing or manufacturing. The products are then re exported back to the USA and Canada. This is offshoring on a huge scale, based entirely on numerous low cost labour forces in northern Mexico.

Question 67

What does ASEAN stand for

Answer 67

The association of southeast Asian nations

Question 68

What is ASEANs role

Answer 68

The association of southeast Asian nations (ASEAN) is a political and economic organisation of ten southeast Asian countries. It was formed in 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand. Since then membership has expanded to include Brunei, Cambodia, Laos, Myanmar (Burma) and Vietnam. It aims include accelerating economic growth and social progress among its Members, protection of regional peace and stability, and opportunities for member countries to resolve differences peacefully.

Question 69

Tell me about general changes taking place in the pattern of trade around the world

Answer 69

Trade involving the emerging economies has been growing rapidly, so much so that for many such nations trade with other countries in the emerging world is now more important than trade with the developed world. Developed nations are exporting less to each other and more proportionately to the emerging economies. Interestingly, one country to baulk this trend is the U.K., which now exports less proportionately to countries in the emerging world than it did in the 1980s. The big trading nations in the world continue to include the USA, Germany, and Japan. These are now being joined by Brazil, India, Russia and most notably, China.

Question 70

Compare the Chinese and American economies

Answer 70

In 2015, China overtook the USA as the largest economy in the world. The Chinese economy became worth US$17.6 trillion according to the IMF, whereas that of the USA was US$17.4 trillion. These figures are based on purchasing power parity. (PPP)

Question 71

Define purchasing power parity (PPP)

Answer 71

Enables you to compare how much you can buy for your money in different countries. As money goes further in China than in the USA, the figure is adjusted upwards.

Question 72

What does TPP stand for

Answer 72

Trans-Pacific partnership

Question 73

Tell me about TPP

Answer 73

In October 2015, a new trade deal, the Trans-Pacific partnership (TPP), was agreed between 12 nations around the Pacific Ocean (USA, Canada, Japan, Malaysia, Chile, Peru, Mexico, Brunei, Singapore, Vietnam, Australia and New Zealand). The deal cut trade tariffs between these nations and aimed to set common standards in member countries. Under the deal, 98% of tariffs will be eliminated on a wide range of products including dairy products, beef, sugar, wine, rice, horticulture, seafood, manufactured Products and energy. The countries of the TPP have over 800 million people and cover about 40% of the global economy. However, there is one major issue with the TPP deal - China is not a signatory, though it did say that it hoped the TPP pact ‘could contribute to the Asia Pacific regions trade, investment and economic growth’

Question 74

How does the IMF predict china’s economy to grow

Answer 74

The IMF predicts that by 2020 the Chinese economy will be worth $26.98 trillion - 20% bigger than the USA at $22.3 trillion. However, longer term financial forecasts from the IMF and others indicate that by 2100 India could overtake them both.

Question 75

List me the positive impacts of TNCs on the country of origin

Answer 75

High salary employment Return of profits

Question 76

Tell me about the positive impacts of TNCs on the country of origin: high salary employment

Answer 76

Even when TNCs move their operations overseas, the headquarters and R&D often stay in the home country.

Question 77

Tell me about the positive impacts of TNCs on the country of origin: return of profits

Answer 77

Successful TNCs return their profits to the home country to be distributed among shareholders. Profits are also taxed, which increases government revenues.

Question 78

Tell me the negative impacts of TNCs on the country of origin

Answer 78

Unemployment Reverse multiplier effects

Question 79

Tell me about the negative impact of TNCs on the country of origin: unemployment

Answer 79

For both the TNCs employees and those in component suppliers

Question 80

Tell me about the negative impacts of TNCs on the country of origin: reverse multiplier effects

Answer 80

As unemployment increases in a region, disposable income falls; leading to a downward spiral (viscous circle)

Question 81

You are required to study a specified TNC - including its impacts on those countries in which it operates

Answer 81

OK

Question 82

You are required to study the world trade in at least one food commodity or one manufactured product

Answer 82

Eg. COFFEE

Question 83

Tell me about the world trade in cars

Answer 83

During 2014, global car exports amounted to US$698.5. This represented a 25.6% increase from 2010 to 2014. It is interesting to note that the several countries feature as both the main importers and exporters of cars - USA, Germany, UK - they are all developed countries or emerging economies. It is fair to conclude that the bulk of world trade in cars is between rich countries, where people have high disposable incomes. At a larger scale, the EU is the second largest importer and the largest exporter. It is worth noting too that the scandal that affected Volkswagen in the autumn of 2015 May impact on this European dominance. China and India are both significant producers of cars, but are not currently exporting significant amounts.

Question 84

Tell me the top five importers of cars, 2014

Answer 84

``` USA China Germany U.K. France ```

Question 85

Tell me the top 5 exporters of cars, 2014

Answer 85

``` Germany Japan USA Canada South Korea ``` (UK is 6th)

Question 86

Tell me about globalisation critique

Answer 86

As globalisation continues apace, and more and more parts of the world have the desire to raise the living standards of their people to a perceived level of expectation, it is apparent that economic development cannot rise smoothly alongside social, cultural and environmental development. Some have argued that globalisation helps integrate the world, thereby maintaining peace and a level of stability. However, while it is in everyone’s interest that people live under better conditions, it is also true that the richest among us, nations as well as individuals, want to maintain their differential, even if their desire to do so impacts negatively on others. Others believe that globalisation has created greater inequality, injustice, conflict and environmental degradation. Globalisation and associated development can also depend on scale and location; it can be driven by decisions of world governance, national and regional governments, or it can be down to the decisions taken by groups and individuals in small communities.

Question 87

What’s 3 arguments for a country staying in the EU

Answer 87

A huge potential market of around 500 million people The combined strength of the members form a powerful trade bloc Freedom of movement for workers within a wide employment market

Question 88

What’s 3 arguments against a country staying in the EU

Answer 88

Poor distribution of EU income, particularly as the Common Agricultural Policy (CAP) takes so much of the budget. Over-bureaucracy within the European Commission has brought into questions its efficiency. The adoption of some European laws has been inconsistent across the Union.

Question 89

Tell me about the success of a Microfinance scheme; Ujjivan Financial Services

Answer 89

In India, Ujjivan financial services was established in 2005. The company now has 2.3 million customers, operates in 22 states and is one of the most dominant organisations in Indian micro-financing. It’s high loan repayment rate of 99.9% is critical to its success. The scheme uses group lending so that it becomes the collective responsibility of the individuals. As they may all want access to future loans, there is increased awareness that no one individual should default on the loan.

Question 90

Explain how a hub company operates

Answer 90

An imaginary example of a hub company would be a US owned TNC that outsources some manufacturing to a South Korean TNC, which in turn has a branch factory in china. The US company also has a branch factory in Mexico and a subsidiary in Germany. In addition, much of the administrative support for all of these is undertaken in back office work in India. There is a complex web of interconnections.