International trade and access to markets Flashcards
Describe the history of production
- 1954, 95% of manufacturing was concentrated in Western Europe, North America and Japan
- Over time decentralisation occurred due to FDI from TNCs
- This abled developing countries to take on manufacturing task at a competitive cost; lower land and labour costs and government incentives.
Define global shift
The filtering down of the manufacturing industry from developed countries to lower wage economies.
What are the consequences of global shift?
- Deindustrialisation in richer countries
- Loss of jobs in manufacturing sector
What other factors have caused a decline in manufacturing in developed countries?
- Outdated production methods
- Poor management
Give some factors which affect the location choice of manufacturing companies:
- availability of skilled and educated workers
- government incentives (e.g. tax breaks, enterprise zones)
- access to larger markets without tariff barriers; trade agreements
What is a free trade area?
Trade barriers reduced and trade of goods increased
What is a customs union?
- Countries group together to apply the same tariffs
- Once goods have cleared customs they can freely trade within the union
What is a common market?
A group of countries imposing few or no duties on trade with each other and a common tariff on other countries
What are the global advantages of nations joining together as trading entities?
- Improves world peace and reduce conflict
- Improved global trade
- Helps members develop their economies
What are the regional advantages of nations joining together as trading entities?
- To compete on a global level
- Bigger representations in global affairs
- People seeking work can easily move between countries
- To share technological advances
What is CAP and what was its aims?
Common Agricultural Policy
- High quality food
- Affordable food
- Safe food
Give some disadvantages of trade agreements:
- Loss of sovereignty (decisions are centralised)
- Loss of financial controls
- Pressure to adopt central legislation
What is expected to happen as distribution and consumption shifts to the Eastern countries in the future?
- India and China will become a strong trade route
- More of Asia’s exports will be to other Asian countries
- Western countries can benefit from the expansion of financial services in Asian countries
What is meant by a comparative advantage?
Countries should specialise in providing goods and services they excel at
Give some trade restraint examples:
- Import license, authorising imports from a specific source
- Import quotas, physical limit of the quantity of goods imported
- Subsidies, grants given to domestic producers to reduce their costs against imported goods
What is FDI and who does it help?
Foreign Direct Investment
Important source of funding for developing countries, making it easier to start economic growth
What are the benefits of trade agreements?
- Reduces costs of trading for businesses
- Everyone trades fairly, no bans can be implemented
- Variety of goods for the receiving country
What are the disadvantages of trade agreements?
- Reduces jobs as competition from abroad overrules manufacturing/services providers
- Small economic benefit
- Secret negotiations
What is the TPP?
Trans-Pacific Partnership
Who’s involved in the TPP?
12 countries including;
Canada, Chile, Japan, USA, Mexico, Singapore
Why has the TPP been criticised?
Negotiations lack transparency despite holding the status of being one of the most important trade agreements globally
What does the TPP intent to negotiate?
As well as traditional trade matters; investments, copyright, patents
What countries compromise Mercosur?
Brazil
Argentina
Uruguay
Paraguay
Whats the aims of Mercosur?
To allow free movement of labour between the members
Allows trade globally
What countries compromise the PA ?
+ What is the PA?
- The Pacific Alliance Chile Peru Columbia Mexico
Whats the aims of the PA?
Open to making bilateral agreements with other nations
What is SDT ?
Special and differential Treatment
What was the reason for imposing SDT?
Protectionist policies excluding many developing countries from trading freely with more developed nations
What are the aims of providing SDT:
- Tackle the structural difficulties that characterise LDC’S (low level of income, vulnerability to export prices)
- Engage in world trade (providing incentives)
- Promoting faster income growth and development
Give some benefits of trade in developing countries:
- Allows workers to diversify their economies
- Achieve economic takeoff
- Lift population out of poverty
Why may TNC’s operate in more than one country + examples ?
- Escape trade tariffs (Nissan produce cars in Sunderland)
- To find lowest cost location (Hewlett-Packard in Malaysia)
- To reach foreign markets (McDonalds)
- To exploit minerals and resources (BP in Azerbaijan)
Give some common characteristics seen in TNC’s:
- Sourcing materials and components at the lowest cost
- Branding products to make them recognisable
- Controlling key suppliers
- Outsourcing of production
Where do company headquarters choose to locate?
Traditionally in the home country, with sub-headquarters in each continent. TNC’s engage in research and development activities, meaning they locate to centres of higher education (e.g. University research facilities)
Where do TNC’s involved in the primary sector often locate?
Wherever there are unexploited resources, usually in developing countries
Where do TNC’s involved in the secondary sector often locate and why?
Manufacturing regions in developing countries because:
- Labour cost are lower
- Investment in education making it easier to train workers
- Work ethic means people are willing to work longer for less
- Governmental incentives; such as tax free breaks, low business rates
Where do TNC’s involved in the tertiary sector often locate?
- Where there are low labour costs
- Good education
- Proximity to their markets
Define agglomeration
When companies in similar industries locate near to each other to gain benefits such as sharing ideas and resources
What are the two main categories of agglomeration + explain them:
- Urbanisation economies refers to the benefits that different industries receive from population and infrastructure clusters (e.g a shopping mall)
- Localisation economics refers to the benefits that firms in the same industry receive by being located close to each other.
Define the multiplier effect
Where an initial injection of investment capital into an economy creates additional income by; increasing employment, spending and tax revenues.
What are the two types of integration + explain them:
- Vertical integration: When the supply chain of the company is owned entirely by the company, giving the TNC control over its supplies and reduces costs.
- Horizontal integration: When a company diversifies its operation by merging or taking over similar companies at the same stage of production.
What is integration?
A method used by TNC’s to expand their market by investments, takeovers and merges.
Give some benefits of TNC’s for the host country:
- Creates jobs and income
- Brings new technology
- Gives workers new skills
Give some benefits for the TNC locating in a developing country:
- Lower labour costs
- Greater access to resources
- Fewer controls/legislation
Give some benefits of TNC’s for the home country:
- Cheaper goods
- Can specialise in financial services and R&D
Give some problems of TNC’s for the host country:
- Poor working conditions
- Exploitation of resources
- Negative impacts on the environment
Give some problems for the TNC locating in a developing country:
- Ethical issues can damage reputation
- Social and environmental conscience
Give some problems of TNC’s for the home country:
- Loss of manufacturing jobs
- De-industrialisation
- Structural unemployment
What is the TTIP and who does it include?
Transatlantic Trade and Investement Partnership
A bilateral trade agreement between the EU and the USA
What are the aims of TTIP?
- To reduce regulatory trade barriers for big businesses; including food safety laws, environmental legislation and banking regulations
What’s the main concerns of TTIP?
That it will give more power to TNC’s and threaten public services (e.g. the NHS)
What is the G20 group and what countries does it consist of?
International forum for the governments and central banks
What factors pull investment into a country?
- Plentiful natural resources
- Large and accessible markets
- Financial services
Describe international trade and its current figures
World exports of manufactured goods have increased
Describe the patterns of international trade
- Trading and investments used to be heavily concentrated within HIC’s
- Investments: HIC’s and emerging economies invest in LIC’s
- Trade: HIC’s largest exporters
NEE’S becoming large exporters (accounting for 41%
What are SEZs?
Special Economic Zones
Areas within a country that do not have the same trading regulations as the rest of the nation
What factors affect a countries access to markets?
Agreements (SEZs and SDT)
Wealth
How does wealth impact a countries access to markets?
HICs can afford to pay for higher tariffs on exports and imports - allowing them to make profit and receive products
