International Trade Flashcards
Protectionism
Policies to protect businesses and workers in a country by restricting/regulating trade with foreign nations.
Trade Barrier
A barrier to free trade that restricts it or makes it harder.
Tariff
A tax imposed on imports
Quota
a limit on the quantity of a good a country allows into the country.
Subsidy
Financial assistance to a domestic business by government to make it more competitive against foreign competition (or to save it from collapse).
Free trade
A policy where a government does not interfere with trade (imports or exports) by using tarrifs, subsidies or quotas.
Foreign Direct Investment
Investment by a foreign business into a foreign enterprise.
Trans National Corporation
A company that operates beyond just one national border.
How has free trade facilitated globalisation?
- More TNC’s invest and trade and so become more interconnected
- government take away barriers that make it much more difficult and costly
- Astride barriers are removed, trade becomes cheaper, causing more trade between nations, especially TNC’s.
- The TNC’s trade and FDI will also help the economy develop, increasing their demand for foreign products.
Background details of World Trade Organisation (WTO)
- Established in 1995
- 162 member nations
- Based in Geneva, Switzerland.
what is the WTO?
An organisation which supports the removal of trade barriers, has drawn up rules for international trade, and it intends to remove government interference in international trade.
What does the WTO ask of countries?
to remove tariffs/taxes on foreign imports and subsidies on domestic products so that trade is free and without barriers.
what must a country do to receive international loans (WTO)?
Must agree to the rules of WTO
Disadvantages of international trade?
- exposes home grown products to foreign competition
- If foreign goods are cheaper and of high quality, local firms go out of business.
- this reduced local employment.
e. g. Ghana with Italian tomatoes and India with American rice.
what is the World Bank
The world bank lends money on a global scale and its headquarters are based in the US.
- in the 1970s and 80s the world bank developed a bad reputation for funding environmentally damaging projects and lending money to countries who could not pay back.
example of world bank loan
in 2014, a US$470M loan was granted to the philippines for a poverty reduction programme.
does the world bank impose conditions on its loans and grants
yes.
controversial fact about WB
all presidents have been American.
what is the voting system based in in the World Bank?
How much money each country has been contributed. The USA has 16% of the votes and power lies within the hand of the wealthiest nations.
What is the IMF?
The IMF is a fund that could be loaned out to help countries in debt, thus helping stabilize their currencies and economies with the intention of preventing communism.
how is the voting system
Like the World Bank e.g. USA has 17% voting rights
the EU combined has 25.7%
Africa = 1%
Advantages of free trade
- lower prices for consumers
- free trade can help increase global economic growth
- increases competition e.g. domestic monopoly may now face competition from foreign firms
Disadvantages of WTO
- Often criticised for ignoring the plight of the developing world
- it is argued the benefits of free trade occur mostly to the developing world.
World Trade Organisation
Deal
