International trade and access to markets Flashcards
What has happened to world trade?
It has been steadily increasing with the only exception being in the Global Financial Crisis and during Covid.
World exports of manufactured goods increased by $3trillion over a 10 year period
What has happened to global investment?
Global investment has risen significantly with a $1.1 trillion over a 20 year period
How are patterns of trade changing?
Trade and investments used to be heavily concentrated within the most developed countries, however, globalisation, developments in technology, communication and transport, and offshoring has led to trade on a more globalised scale.
HICs and emerging economies are now investing into LICs.
HICs are the largest exporters at 58% of all exports.
NEEs are also becoming large exporters with 41% of global exports.
LICs are trading more but growth is slow and don’t even make up 1% of global exports.
What are the 3 factors affecting access to markets?
Trade agreements
Other agreements
Wealth
How are trade agreements a factor impacting access to markets?
Countries within a trade agreement have improved access to trade between each other due to a lack of tariffs.
Countries within a trade agreement are less able to trade with other countries outside of the trade agreement.
Countries left out of trade agreements must pay tariffs to trade with those within a trade agreement
How are other agreements a factor impacting access to markets?
Special economic zones are areas within a country that don’t have the same trading regulations as the country they are located in.
Therefore they often have lower tariffs and improved access to markets.
Special and Differential Treatment agreements are put in place by the WTO to help developing markets who have poor access to markets.
How is wealth a factor impacting access to markets?
HICs can afford to pay for higher tariffs on exports and imports, increasing access to
markets
HICs also increase their access to markets through FDI into foreign markets
LICs may struggle to pay for high tariffs, and cannot save money through offshoring and outsourcing as they do not have the funds
How are TNCs spatially located?
Headquarters often located in HICs where big decisions such as investments are made
Research and development often also happens within the country the TNC operates from.
Manufacturing is mainly concentrated in LICs where lower labour costs, lower material costs and lower taxes allow TNCs to have higher profits
How do TNCs use global productions to maximise profits?
Economies of scale - Upscaling production to buy and produce in bulk, in turn lowering average costs
Global supply chains - HQ and R&D occurs in HICs whereas production occurs in lower income countries where production costs are cheaper. This can be split across many countries in whatever way reduces costs the most.
Outsourcing - TNCs can outsource tasks to other companies to save money and time if the job doesn’t need to be done by them.
Offshoring - Process of moving production offshore to lower income countries due to lower labour costs and regulations.
How do TNCs create links between countries and firms?
FDI - TNCs create links with other countries by investing in them which creates jobs and boosts the economy
Mergers - TNCs join to form one larger company which creates foreign links between host countries
Acquisitions - A TNC buys another company in order to expand
Vertical and Horizontal integration
