International trade and access to markets

Question 1

4 statistics related to trade and investment

Answer 1

• volume of global trade has increased nearly 8 times between 1980 and 2008
• the poorest 49 countries make up 10% of the population but 0.4% of world trade
• volume of FDI rose from $400 billion in 1996 to $15 billion in 2016
• since the 1980s developing countries have begun investing more in emerging and developing countries
• 45.9% of global trade is done by China, the USE and the EU
• china is known as the exporting power house of the world
• UK has left the list of the worlds top 10 exporters

-5% of global exports are cars
3% of global exports are petrol

Question 2

define trade

Answer 2

the exchange of goods, capitol and services between countries known as imports and exports

Question 3

name the 6 major trading blocs

Answer 3

NAFTA: North American Free Trade Agreement

Mercosur: South American

EU: European Union

AU: African Union

EAEU: Eurasian Economic Union

ASEAN: Association of South East Asian Nations

Question 4

what are trading blocs

Answer 4

associations between different governments that promote and manage trade

-they are typically regional however industry specific trade blocs also exist

Question 5

what impacts access to markets

Answer 5

• wealth: developed countries impose tariffs on goods imported form developing countries
• developed countries have money to invest which enables them to avoid developing countries tariffs by building factories in said countries
• less developed countries may rely on loans that depend on them removing tariffs
• being a member of a trade bloc as a developed country with other developed countries gives access to wealthy buyers
• developing countries outside the trade bloc may have to pay high tariffs to gain access to these buyers

Question 6

define TNCs

Answer 6

Transnational corporations that produce, sell or are located in 2 or more countries

-in 2013 80% of all global trade was related to TNCs

Question 7

4 ways TNCs make links between countries and corporations to expand

Answer 7

• mergers: when 2 companies agree to become a single bigger company
• acquisitions: when one company buys another company
• using subcontractors: using foreign companies to manufacture products which the company doesn’t own
• FDI: foreign direct investment can include all of the above

Question 8

2 ways TNCs expand their control over the market

Answer 8

vertical integration: when a company takes over other parts of its supply chain
-e.g. shell owns every part of its supply chain

• horizontal integration; when a company takes over other companies at the same stage of production
• e.g. Disney took over Pixar in 2006

Question 9

what is the comparative advantage theory

Answer 9

countries should focus on producing goods they are best and trading them for goods they do not produce well instead of attempting to produce all goods they need

Question 10

benefits of international trade

Answer 10

• International trade opens new markets and exposes countries to goods and services unavailable in their domestic economies.
• Countries that export often develop companies that know how to achieve a competitive advantage in the world market.
• Trade agreements may boost exports and economic growth
• lowered operational cost
• Stronger Regulatory Knowledge
• International Talent

Question 11

downfalls of international trade

Answer 11

• competition brought is often damaging to small, domestic industries.
• job outsourcing, which is when companies relocate call centers, technology offices, and manufacturing to countries with a lower cost of living.
• set up cost: the cost of EU membership in total amounts to £83bn gross
• cultural barriers
• risk of compliance
• managing oversees employees

Question 12

social impacts of differential access

Answer 12

• people in countries with better market access tend to have higher paying jobs allowing for a disposable income which increases standards of living
• countries with less market access have less money available for the development of education and healthcare
• dangerous work has moved from developed countries to less developed countries
  e. g. sweatshops, children are employed in some

Question 13

economic impacts of differential access

Answer 13

• hard for countries with poor access to establish new industries due to high tariffs and TNCs producing the same thing for less
• these countries become dependent on exporting low value primary good which fluctuate in price producing a low GNI. this means there is less money to invest so economic development is slow
• countries with higher access more economic growth as they can trade more so their citizens are wealthier
• these countries can afford to import a range of products and develop high tech industries