GSAGG: International trade and access to markets Flashcards
Name 2 events where the number of trading exports temporarily decreased:
- Global financial Crisis
- Covid-19
Breifly outline patterns of global trade:
- Changed significantly over the past 40 years.
- Trading and investments used to be heavily concentrated within the most developed countries.
- Investments are now mainly concerned with High Income Countries investing.
- Emerging economies are beginning to invest in LICs , causing these emerging economies to rapidly develop. For example, China invests a lot of money into Africa.
How is fair-trade impacted by globalisation?
- Left many less developed markets vulnerable to exploitation.
- Many small-scale farmers in LICs struggle to compete with the
competitive prices of huge plantations owned by TNCs. - This has lead to farmers being paid much less than deserved for a large amount of labour and produce.
- Fair trade aims to minismise this inequality and ensure producers revieve better trading conditions
Give 3 examples of trade blocks:
- NAFTA (North American Free Trade Agreement)
- EU
- ASEAN (Association of SouthEast Asian Countries)
What is the benefit of the EU?
Allows for free trade between 28 countries- allowing goods and
services to be transported internationally with ease.
What is the benefit of the NAFTA?
The aim of NAFTA was to remove barriers to agricultural products, manufactured products, and services between Canada, the USA and Mexico.
What is the benefit of ASEAN?
The bloc has free trade agreements to ensure political, economic, and social stability.
How do trade agreements positively impact access to markets?
- Relationships between countries can allow more trade to occur.
- When LICs are introduced to trade agreements, as they are able to trade at lower prices, sometimes freely.
How do trade agreements negatively impact access to markets?
- Trade agreements disallow countries within them to trade as well with other countries, which may negatively affect these countries and limit their trade (they can only trade with countries inside the trade bloc).
- Countries left out of trade agreements are further disadvantaged e.g. less developed markets especially must pay tariffs when those in trade agreements do not, meaning they may struggle to have access to the market.
- E.g. Countries like Kenya struggle to get a good price
for the food they sell to European markets, due to the tariffs placed on non-EU agricultural produce as an attempt to protect EU farmers.
How do other agreements impact access to markets?
SEZ’s:
The regulations within the SEZs are usually less strict, with lower tariffs and lower taxes. SEZs increase access to markets as countries can afford to invest in the area, increasing international trade from that area.
Special and Differential Treatment (SDT) agreements:
Put in place by the WTO to help specifically developing markets with poor access to markets, so these countries receive special
treatment e.g. reduced tariffs and taxes, priority in trading.
What are special economic zones (SEZ)?
Areas within a country that do not have the same trading regulations as the country they are located in.
How does wealth impact access to markets?
- HICs can afford to pay for higher tariffs on exports and imports, meaning overall they are able to make profits and receive products.
- HICs increase their access to markets through FDI into foreign markets- this allows some countries to save money through cheaper labour and often avoid tariffs.
- LICs may struggle to pay for high tarrifs and cannot save money
through offshoring and outsourcing as they don’t have the funds- reducing LIC’s already poor access to markets.
Outline the spacial organisation of TNCs:
- Headquaters are usually located in HICs (allows for formal communication e.g. meetings).
- Research and development facilities located where the TNC operates from.
- Manufactoring facilites are usually located in LICs (cheaper labour costs, materials).
What are the 2 types of global management systems?
- Economies of scale
- Global supply chains
How do TNCs use global management systems?
Economies of scale: TNCs usually have a large revenue, meaning they can afford to upscale their production. This allows profits to increase as less is spent in production.
Global supply chains : TNCs use global supply chains in order to increase profits. HQ and R&D are in HICs, whereas the production often occurs globally, especially in LICs.
How do TNCs benefit from offshoring?
- Companies that make manufactured products will often have their factories in LICs due to lower labour costs, better taxes, weaker regulations for workers and weaker environmental regulations.
- This leads to much dispute about the ethical issues with TNCs
exploiting poorer citizens in order to maximise their products.
How do TNCs benefit from outsourcing?
- TNCs that provide tertiary industry products (services) will often outsource tasks to other companies in order to save money and time.
- E.g. TNCs like Apple outsource their manufacturing process so that profits can be maximised.
Outline how TNCs benefit from links?
FDI links: TNCs create links with other countries by investing in them, which benefits the country as this creates jobs and contributes to the economy.
Mergers: TNCs join to form one larger company, helping to form foreign links if the TNC is from a foreign country.
Acquisitions: A TNC buys another company in order to expand.
Frequently associated with local job loss as a large TNC will take full control.
Vertical Integration: Taking ownership of part of the supply chain, e.g. buying a plantation.
Horizontal integration: Taking ownership of another company, often one that is in a similar industry. E.g. the food industry where a lot
of large companies control the majority of smaller companies,
Outline trading patterns of TNCs?
- Most trade is with HICs, as the market for consumer goods is concentrated within richer countries and consumerist societies.
- However there is now a rapid increase in demand for popular brands in emerging economies e.g East Asia, Latin America.
-Means TNC trading has increasingly expanded to countries. LICs, though, still see a lack of TNC-made consumer products, as few people have a disposable income to buy these products. - TNCs usually have a lot of disposable revenue, meaning they can afford to take advantage of global marketing e.g. adapting their trademark to the country they are advertising in.
