International Trade Flashcards
What’s a tariff
Tariffs are taxes charged on the import of goods from foreign countries.
What is International Trade?
International trade is the purchase and sale of goods and services by companies in different countries
How does globalisation affect the volume and pattern of international trade?
1) International trade is the import and export of goods and services between countries.
2) The volume of global trade has increased dramatically since 1980s- its value increased by nearly eight times between 1980-2008.
3) The pattern of global trade is also changing. Devloped countries remain the biggest global traders, but some emerging companies are catching up.
4) Less developed countries are also becoming bigger traders, but growth is slow. The poorest 49 countries make up 10% of the population, but still only account for 0.4% of world trade.
5) More countries are opening themselves up to international trade by removing barriers to trade. This is partly due to the formation of trade blocs.
6) There has been a rise in fair trade- this is the way of trading that supports people in less developed countries who make products that are exported to more developed countries.
How does globalisation affect the volume and pattern of international investment?
1) FOREIGN DIRECT INVESTMENT (FDI) is when a person company or other groups spend money in a different country in order to generate profit.
2) Foreign investors may be attracted by the size of the market, the stability of the market, the possibility of extracting resources for themselves, or the ability to access financial services.
3)
What are trading blocs?
1) Trading blocs are associations between different governments that promote and manage trade. Trade blocs remove trade barriers between their members while keeping common barriers to countries that aren’t part of the bloc.
2) Many trading blocs are regional. They make it easier for countries to trade with their neighbors.
3) Special Economic zones (SEZs) increase the volume of trade with emerging economies and less developed countries.
How do trading relationships change depending on the countries involved?
Developed countries:
> Most trade in the world takes place between developed countries. Most products e.g. machinery or chemicals require a lot of money.
Less developed countries
> Most less developed countries trade mainly with emerging economies and developed countries.
Emerging economies:
> Emerging economies like China and India are increasingly important to global trade. China’s manufacturing sector has grown rapidly, and a highly educated population has grown India’s service sector.
Why do developed countries have greater access to markets than other countries?
> Access is affected by wealth. Developed countries often put higher tariffs on goods imported from less developed countries- this makes it harder for less developed countries to access the market.
> Developed countries have more money to invest, so they can avoid high tariffs imposed by developing countries by opening factories within them. Less developed countries may also rely on loans that depend on them removing trade barriers and increasing access to their markets.
> Trade blocs of developed countries have lots of access to wealthy buyers. However, less developed countries outside the trade bloc may have to pay high tariffs to export their goods to those markets. This puts less developed countries at a disadvantage.
How do SDT agreements give less developed countries greater market access?
1) The WTO forms special and differential treatment agreements - these let the least developed countries tariffs, which gives them greater market access.
2) The profits made from SDT agreements allow less developed countries to diversify the range of industries they have e.g. introducing manufacturing or tourism sectors.
3) However, some argue that SDT agreements have a negative impact on developed countries by allowing cheap imports into the country. They suggest that regional trade blocs, which allow developed countries to negotiate prices collectively, are more effective at improving their market access.
Differential access to markets has economic and social consequences.
Economic impacts:
> It’s hard for countries with poor access to establish new industries- they face high tariffs when they try to sell abroad, making their products uncompetitive, and they may be undercut in their domestic markets by TNCs producing similar products more cheaply.
> This makes them dependent on selling low-value primary products that tend to fluctuate in price, so countries with poor market access often have low GNI. This means they have less money to invest in the industry, so their economic development is slow.
> Countries with high level of market access tend to see more economic growth because they can trade more (wealthier citizens)
Social impacts:
> People in countries with better market access tend to have higher-paid jobs. This gives them more disposable income, which increases their standard of living.
> Countries with less market access have less money available for education and healthcare, so the quality of life is generally lower. Better access to education in developed countries has created better access to jobs for women and ethnic minority groups.
> More dangerous, poorly paid work has moved from developed countries to less developed countries.
How do trade and market access affect people’s lives around the world?
Trade benefits developed countries more than developing countries- many developing countries export mostly primary products, which are processed in developed countries and exported at higher prices.
Trade and market access also means that a wide range of goods is available in developed countries. This further increases people’s standard of living.
Trade also creates more interdependence between countries- if something goes wrong, other countries are affected.
