International Trade Flashcards
Globalisation affects the volume and pattern of international trade
International trade is the import and export of goods and services between countries. The volume of global trade has increased dramatically since the 1960s- its value increased by nearly 8 times between 1980 and 2008.
More countries are opening themselves up to international trade by removing barriers to trade. This is partly due to the formation of trade blocs.
Globalisation affects the volume and pattern of international investement
Foreign direct investment (FDI) is when a person, company or other group spends money in another country in order to generate a profit, e.g. by opening a new branch of their business or investing in local infrastructure.
Emerging economies now invest heavily in less developed countries, e.g. China invests a lot of money in countries in Africa and South America.
Global trade rules are set up by world trade organisation.
Some countries limit trade using tariffs and non-tariff barriers to shield their industries from foreign competition-this is called protectionism. Free trade is the policy of removing these barriers.
The World Trade Organisation (WTO) was set up to increase trade and help resolve trade disputes between member countries.
The World Trade Organisation (WTO)
Countries should promote free trade, e.g. by removing as many barriers to trade as possible. reached.
There should be fair competition-one company or country shouldn’t get an unfair advantage over rivals.
Trading Blocs
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 who aren’t part of the bloc.
Special Economic Zones (SEZ) increase the volume of trade with emerging economies and less developed countries.
Access to markets
Access to markets is about how easy it is for countries and companies to trade with one another. Access to markets is determined by the extent of export and import barriers between two countries.
Access is also increased by being a member of a trading bloc-member countries have access to the markets of all the other member countries. Trade blocs of developed countries have access to lots of 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.
SDT agreements
The WTO forms special and differential treatment (SDT) agreements-these let the least developed countries bypass developed countries’ tariffs, which gives them greater market access.
The profits made from SDT agreements allow less developed countries to diversify the range of industries they have, e.g. by introducing manufacturing or tourism sectors.
Differential access to markets has Economic consequences
It’s hard for countries with poor market 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.
Countries with high levels of market access tend to see more economic growth because they can trade more. This means that their citizens are wealthier, they can afford to import a range of products and they can develop high-tech industries which boost their economy further.
Differential access to markets has Social Consequences
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 etc., so quality of life is generally lower. Better access to education in developed countries has created better access to jobs for women and ethnic minorities, giving them more power to shape their own lives and societies
