International Trade & Access to Markets Flashcards
What is International Trade?
the exchange of goods and services across international borders. Inbound trade is described as “IMPORTS”. Outbound trade is described as “EXPORTS”
What are the flows of labour?
Labour markets are not as free flowing as financial markets because of restrictions on Immigration. Movement of migrants grossing international borders has increased in the last 25 years usually from LDE to HDE usually by educated people with financial means to seek better employment opportunities. Eg. Migrants from South Asia, Africa and Latin America to North America and Europe or the gulf states where the construction boom has provided work opportunities.
Between 2005-2010 5 million workers moved from South Asia to West Asia.
What is the flow of products
Raw materials to interm suppliers to manufacturers
to distributors to retailers to customers
What is the flow of services?
Any service that does not involve the production of goods:
High level services - services to businesses such as finance investment or advertising;
Low level services - services to consumers such as banking, travel and tourism or communication services
Why is information flow important?
It leads to the expansion of knowledge intensive goods and services which use highly skilled and educated labour such as the pharmaceutical industry, computer technology, international business, law and accounting industries.All these industries need the exchange of ideas and flow of expertise to flourish
What is containerisation?
Large standardised-size steel containers used to transport goods from lorries, to ships to warehouses ensuring safe and easy transportation of goods.
What is Protectionism?
Government policy which imposes restrictions on trade in goods and services with other countries usually in order to protect home-based industries from foreign competition.
What are Tariffs?
Taxes or duties placed on imported goods with the intention of making them more expensive for consumers so that they do not sell at a lower price than home-based goods.
The WTO encourages lower tarrifs to encourage cross-border trade
What are Footloose Services?
Any service that does not involve the production of goods:
High level services - services to businesses such as finance investment or advertising;
Low level services - services to consumers such as banking, travel and tourism or communication services
Where were the 3 traditional centres of global industrial and financial control?
London, New York, Tokyo
What financial institution is centred in Frankfurt?
The European Central Bank of the EU
What other financial centres have grown in the last 50 years?
Toronto, Zurich, Hong Kong, Singapore, Seoul and Shanghai
What are Trade Agreements?
Since the 1950s trade agreements have created free trade between certain member countries. For example European countries are members of the EU (European Union). UK was formerly a member of the EU but not the Eurozone where there is agreement to a common currency the Euro.
Since the 1950s trade agreements have created free trade between certain member countries. For example European countries are members of the EU (European Union). UK was formerly a member of the EU but not the Eurozone where there is agreement to a common currency the Euro.
On a global scale Trade Agreements :
- improve global peace and security and reduce conflict
- increase global trade and cooperation on trade issues
- help members develop their economies and standard of living
On a regional scale Trade Agreements :
- to compete on a global level with other trading entities;
- have bigger representation in world affairs
- to allow freedom of movement of trade
- to allow people seeking work to move between countries more easily
- to negotiate trade advantages
- the possibility of developing a common currency to prevent currency fluctuations
- to support particular sectors of a national economy such as agriculture within the EU
- to share technological advantages
- to raise standards in healthcare
- to spread democracy / human rights
What are the advantages of Trade Agreements?
On a global scale Trade Agreements :
1. improve global peace and security and reduce conflict
2. increase global trade and cooperation on trade issues
3. help members develop their economies and standard of living
On a regional scale Trade Agreements :
1. to compete on a global level with other trading entities;
2. have bigger representation in world affairs
3. to allow freedom of movement of trade
4. to allow people seeking work to move between countries more easily
5. to negotiate trade advantages
6. the possibility of developing a common currency to prevent currency fluctuations
7. to support particular sectors of a national economy such as agriculture within the EU
8. to share technological advantages
9. to raise standards in healthcare
10. to spread democracy / human rights
What are the disadvantages of Trade Agreements?
- Some loss of sovereignty as decisions centralised
- some loss of financial controls to a central authority such as a bank (eg the European Central Bank - which overseas monetary policy in the Eurozone)
- pressure to adopt central legislation (for example in Europe Bosman ruling on football transfers, food standards and labeling
- certain economic sectors are damaged by having to share resources (for example UK sharing fishing grounds)
Global Financial system is largely facilitated by two organisations - what are they and when were they established?
World Bank & International Monetary Fund (IMF)
World Bank promotes economic development in developing countries
Both were established at the end of the second World War to promote financial stability and steady the global economy
Have the World Bank, IMF and WTO improved stability and development of trade between developed and developing countries?
Yes BUT as they are still controlled by the stronger developed countries who are concerned to steer and influence decisions in their favour there is still an in-balance of power which can lead to injustice and inequality against the developing countries
What is the positive effect of Globalisation? ie.
Why has globalisation caused more equality between average incomes globally but more inequality in income distribution within countries?
Positive:
At a Macro level:
1. Reduces poverty - Globalisation has a positive effect of decreasing differences between the home (developed) and host (developing) economies as capital and income transfers from rich to poor economies. Developing countries are closing the gap with their rich world counterparts. The fastest growing economies are in Asia.
- Encourages free trade, removing barriers such as tariffs and subsidies which arguably helps LDEs with exports (although hinders LDEs with imports)
- Safer place
Globalisation arguably leads to greater political stability - as conglomerates with interests in two countries push governments to work together towards a common interest. Thomas Friedman (a US writer on globalisation outlined his theory of “Golden Arches Theory of Conflict Prevention” ie. that no 2 countries who had each got McDonalds had fought a war since getting McDonalds. This has since been disproved but his point is valid about economic integration causing greater stability. - Competition between countries drives down the price
- Interconnected decision making benefits all (NGOs operate globally)
- Cultures are more widely shared creating increased tolerance and understanding.
- Environmental concerns are more effectively addressed as nations work together
- The internet has facilitated mass communication and supported economic development
- TNC investment in LDEs has led to improvements in infrastructure of LDEs
- TNCs create employment and alleviate poverty
10.
Negative:
- However, globalisation arguably has the effect of increasing class differences within countries as richer members of society cope better with the changes in jobs and technology. The measure used to indicate levels of inequality of income distribution within a country is the Gini Index - named after the Italian statistician Corrado Gini. It is based on the idea of a Lorenz Curve (see pg.298 of text book)
Disadvantages of globalisation?
- Inequality has increased - the richest 20% of the world’s population consume 86% of the world’s resources.
- Many barriers to trade still exist - eg 161 countries have VAT on imports
- Countries manipulate their currency to obtain a price advantage
- HDE governments exercise disproportionate influence in key international organisations like the IMF and World Bank and WTO
- Homogenisation and a global monoculture has led to dilution of local cultures (countered by glocalisation - Mc Burrito)
- Achieving consensus on climate change has been difficult. LDEs resent the imposition of restrictions as they consider they should have the right to grow their economies in the same way as HDEs
- The internet has been a medium to share extremist propaganda, xenophobic views and hatred
- TNCs have become global powers exploiting weaker governance in LDEs to their own advantage
- Jobs transferred from HDEs to LDEs has created unemployment in HDEs and exploitation in LDEs.
What factors aided globalisation?
- Development of technology and communication particularly the internet which has aided 24/7 communication (7 billion mobile phone subscribers and 3 billion internet users)
- English as the universal business language
- Transport - faster transport by air, road, rail & sea
- Growth of TNCs through mergers and expansion eg Sony Microsoft
- Capital investment - increasing capital mobility
- Global marketing - rise in “global brands” creating economies of scale
- Travel - increased business and personal travel making the world a smaller place
- Containerisation - vast quantities can be shipped globally at low cost
- Migration - ideas and information spread via movemet of people
- Trade - role of the WTO more free trade and trading groups like EU/ NAFTA (North American Free Trade Agreement)
What are “barriers to trade”?
- Tariffs - a tax on imports is the most common barrier
- Import licence
- Import quotas
- Subsidies
- Voluntary export restraints
- Embargoes
- Trade restrictions
what is one of the most important factors for economic growth?
Foreign direct investment (FDI)
Each year more than US$1 trillion in FDI flows into countries around the world.
Countries with the greatest share of FDI fall into 3 main groups - what are they?
- Countries known for natural resource development such as Mongolia, Liberia and the Congo Republic
- Countries known for financial business services - including Singapore Hong Kong and Luxembourg
- Countries with large and accessible consumer markets - like the US.
What is Fair Trade?
An organized social movement and market-based approach that aims to help producers in developing countries to obtain better trading conditions and promote sustainability.
Suppliers in developing countries often feel they fail to be offered a fair price for their produce by TNCs as the TNCs know the suppliers
- have little market influence and
- are extremely reliant on income from the goods
so this creates a very unequal bargaining position.
Fair trade ensures that suppliers are paid a fair price for the goods - the goods are marked with a “fair trade” label - the International Fair Trade Certification mark - so that ethical consumers know they are buying goods in which producers received a fair price.
