International Trade Flashcards
what is international trade?
exchange of goods, money and services between countries
general trends of international trade
LICs export low value primary goods
- eg raw materials, oil
HICs export high value secondary goods
- eg cars
more than 50% trade in DCs with other DCs
how has the pattern of trade changed?
developed countries still have biggest role in trade
- G7 countries = 50% world trade
but many NEEs are becoming more important
increased share in world trade
- eg China, growth in manufacturing
now largest exporter
LICs - increasing role in last decade
eg south to south trade
LeastDCs - exports increased by 31% between 2019 and 2022
rise in fair trade, supports producers in LICs
more trading blocs mean more countries are involved in international trade as barriers are removed
how has the volume of trade changed?
globalisation has increased amount of international trade as countries more connected
rely on imports and exports
- manufacture abroad where cheaper and import goods
how has pattern of investment changed?
HICs used to invest in HICs
remain largest source of FDI but now invest in NEEs and LICs
- china 3rd largest recipient of FDI
but flows by NEEs increasing
- NEEs are investing more in LICs
eg China in African countries
LICs receiving FDI from HICs and more NEEs
how has volume of investment changed?
volume of FDI increased
- 4x between 1996 and 2006
why did most trade happen between developed countries?
(however NEEs such as china becoming more important in global trade)
- more likely to have trade agreements
- better infrastructure so quicker and easier
- specialise in high tech good, require money
- people weather so have higher disposable income
why are emerging economies becoming more important to global trade?
lower labour costs - cheaper manufacturing, attracts FDI
= increased exports
experiencing rapid economic growth, demand for more products as income rises
large and growing populations
= more imports
why are less developed countries less involved in international trade?
less likely to be well connected with god infrastructure to manufacture and transport goods
lower GDP, lack capital to invest in infrastructure
consumer markets smaller, less disposable income
more likely to suffer from political instability, deters FDI
what do each type of country export?
developed countries and emerging economies
- secondary commodities
- manufactured products (adds value)
eg cars
less developed countries
- primary commodities
- raw materials or natural resources (low value)
eg crude oil
how having trade relationships changed?
HICs often trade with HICs
- however increased trade with NEEs such as China (increased manufacturing)
LICs often trade raw materials - low value
NEEs have role in manufacturing goods
what is a trading bloc?
agreements between governments on trade
- remove barriers (such as quotas and tariffs) between members to promote and manage trade
- increases access to markets
aims
- promote economic integration between members by increasing trade and investment flows
- leads to increased economic growth and development
examples of trading blocs
EU
NAFTA
the EU
EU - 1956
objective to integrate economy of Europe
though trade and economic growth
make future conflict less likely
- euro adopted by most countries so trade easier
- free movement of people within allowed labour to move around
successes of the EU
free movement of people
encourages FDI, positive multiplier effect
encourages trade between EU countries
ensure food security in Europe
limitations of trading blocs (eg EU)
create dependance on economies
- crisis may affect larger area
eg Mexico suffered due to US as part of NAFTA
make it harder for non member countries to access markets
- face high tariffs and taxes
NAFTA
trading bloc which means Mexico can trade with the US
improve economic well being in Mexico
but suffered economically during a recession in the US due to reliance on exports to them
what is access to markets?
how easy it is more countries to trade with each other
HICs have greater access
what affects access to markets?
wealth
- HICs may put higher tariffs on goods from LICs - reduced access
- HICs can bypass LICs tariffs by opening factories in them - they have the money
trading blocs
- increase access as removes barriers between members
- but non-member countries have to pay higher tariffs - disadvantage
- can create dependance
economic impacts of differential access to markets
hard for countries with poor access to trade
- face high tariffs selling abroad
means they can only sell low value raw materials
- low gross national income
- less money to invest in industry - slow economic development
countries with good access - more economic growth
- trade more
- citizens wealthier
- can afford to develop industries
trading blocs increase dependance
- recession in one country effects others
social impacts of differential access to markets
better market access
- higher income from trade
- money to invest in healthcare and education
- higher pay so higher disposible income
= higher QoL
less access
- lower income from trade
- less money to invest in education and health
- lower pay so lower disposible income
= lower QoL
member of a trading block can increase jobs proving income and therefore better QoL
what is a Special Economic Zone?
areas with different trade and investment rules eg lower taxes
aims to increase volume of trade with NEEs and LICs
but keep barriers
what is special and differential treatment?
formed by WTO
gives LICs greater access to markets
- allows them to bypass HICs tariffs
- profits allow them to invest in new industries = economic growth
how does trade and market access affect peoples lives?
trade benefits HICs more - more profit - higher pay
trade and access means wide range of good available in HICs - increased standard of living
what is free trade?
when international trade left to natural course
without government imposing quotas (restrictions on numbers) or tariffs (taxes on imports)
how does differential access affect economic wellbeing?
trading bloc increases potential for trade (better access)
eg NAFTA mean Mexico and trade with US
however recession have knock on impacts of ember countries
eg Mexico
less access means less trade so less economic growth in a country
special and differential treatment aims to improve access
- promote income and growth through trade
What effects trading relationships
Location (distance)
Trade agreements
ways of increasing trade
trading blocs
special economic zones
special and differential treatment
what is the WTO?
set up to:
- increase trade
- settle trade disputes
increase economic growth and development = improve standards of living
rules:
- countries should promote free trade (removing barriers)
- act predictably, not increase tariffs suddenly
gives countries SDT
- allows LICs better access = economic growth
eg everything but arms - allows LICs to export all goods to EU without tariffs (but weapons)
example of SDT
Everything But Arms
allows LICs to export goods into EU without tariffs or quotas (except weapons)
= increased access to markets and therefore economic development in LICs
benefits of international trade
+ access to goods globally
eg bananas in UK
+ increased employment, more production for exports = multiplier effect
+ creates economies of scale - countries can specialise in narrower range of goods, can be made cheaper and in higher volumes = more efficient
+ increased stability - dependance on other countries for resources
issues with international trade
- environmental issues - increased transport needed = more pollution
- over-specialisation - if demand falls then need to shift to other products, but can be difficult as may not be able to diversify, due to specialising
- decline of local industries - goods imported from cheaper abroad, less demand within the country
- deindustrialisation in developed countries
- over reliance = knock on impacts of recessions
global supply chains
different parts of business in different countries
for TNCs
allows them economic of scale
take advantage of lower labour costs, environmental laws, resources available and local expertise
