International trade and access to markets (3.3)

Question 1

Why has global trade changed over time? (4)

Answer 1

1. The emergence of trading blocs e.g. NAFTA has led to trade creation and diversion.
2. Developed economies that have experienced deindustrialisation have shifted their flows of manufactured goods.
3. The collapse of communism which has opened markets up to more trade.
4. Emerging economies have taken up a larger share of world trade.

Question 2

Why does most trade take place between developed nations?

Answer 2

More than 1/2 of all trade in developed countries takes place with other developed countries. The large numbers of affluent consumers found in HICs increase the consumption of imports between them.

Question 3

What’s another reason for developed nations trading with developed nations?

Answer 3

Another reason for this is the greater political integration by improving trade relations.

Question 4

Why are investments now mainly concerned with HICs investing into LICs?

Answer 4

Developed economies invest in LICs as repatriated profits can be made from cheap labour costs.

Question 5

Explain one barrier of protectionism that is put in place to restrain the international flow of goods and services (4)

Answer 5

1. Protectionism refers to government policies that restrict international trade.
2. One barrier that could be used is an import quota.
3. This sets a physical limit on the number of imports into a country to protect domestic suppliers from the lower prices set by foreign competitors.
4. For example, the US may limit the number of Japanese car imports to 2 million/year, restraining the flow of this good.

Question 6

Give me 2 examples of regional trade agreements

Answer 6

NAFTA, EU

Question 7

Who are the MINTS

Answer 7

Mexico, Indonesia, Nigeria, Turkey, Saudi Arabia

Question 8

Define economic well-being

Answer 8

A measure of how strong the economy is, including job provision and the encouragement of free trade.

Question 9

Define societal well-being

Answer 9

The ability to participate and feel connected to a wider environment.

Question 10

What is access to markets about?

Answer 10

How easy it is for countries and companies to trade within the international market.

Question 11

What is access affected by? (3)

Answer 11

1. Wealth
2. Being a member of a trading bloc
3. Other agreements

Question 12

Explain how wealth causes differential access to markets (3)

Answer 12

1. In general, richer countries have greater market access.
2. Many LICs export low value primary products, and workers tend to receive lower wages.
3. By contrast, the same product can be refined in a developed country, adding value to the good. Workers also receive more competitive incomes that can be spent on the higher value domestic goods/services.

Question 13

Explain how trading agreements cause differential access to markets (3)

Answer 13

1. Being a part of a trading bloc increases the potential for trade and thus, improvements to economic and social well-being.
2. However, non-members are denied this access, so lose out on the benefits of free trade.
3. This can lead to trade diversion, where the flow of goods shifts from a more efficient to a less efficient global producer.

Question 14

What are Special Economic Zones (SEZs)?

Answer 14

Areas within a country that do not have the same trading regulations as the rest of the country.

Question 15

What are Special and Differential Treatment (SDT)?

Answer 15

SDTs are provisions put in place by the WTO to help specifically developing countries with poor market access.

Question 16

Why were SDTs put in place?

Answer 16

It was recognised that protectionist policies would exclude many developing countries from trading freely in the post war period, where there were a growing number of independent nations.

Question 17

Why were the least economically developed countries allowed to gain SDT agreements?

Answer 17

It was an acquired political right for growth and the diversification of their industries.

Question 18

Outline the benefits of SDTs to some of the world’s poorest countries (3)

Answer 18

1. SDTs act as incentives for developing countries to engage in world trade through export diversification and allow more stable export revenues.
2. This can promote faster flows of income and development to lift some of the population out of poverty.
3. By promoting sectors like tourism, they can tackle structural handicaps like only exporting low value primary products.

Question 19

Outline the limitations of SDTs (3)

Answer 19

1. Not all countries listed as the LDCs (least developed countries) are members of the WTO.
2. It can be time-consuming for countries to agree to SDTs, taking on average 8-10 years.
3. Countries could become over-reliant on the cheap imports into the country.

Question 20

Explain how differential access to markets can impact economic well-being (4)

Answer 20

1. Being in a trading bloc increases the potential for trade.
2. For example, NAFTA enables more trade between Mexico and the US.
3. This improves the economic well-being of Mexico, where thousands of jobs are generated in the car industry.
4. However, not all countries have access to trading blocs which can limit their growth opportunities as they face greater barriers to trade.

Question 21

Explain how differential access to markets can impact social well-being (4)

Answer 21

1. Social well-being is about the ability to participate and feel connected in a wider environment.
2. Non-members of a trading bloc with restricted market access gain less investment into education and healthcare projects.
3. This can decrease the quality of life of the citizens.
4. Contrastingly, members of a trading bloc, e.g., the US in NAFTA, tend to have higher paying jobs, giving people more disposable incomes to increase their standard of living.

Question 22

What is an import license?

Answer 22

A license issued by a national government authorising the importation of goods from a specific source.

Question 23

What are Voluntary Export Restraints?

Answer 23

A VER is a self imposed trade restriction limiting the quantity of exports, typically at the request of the importing country.

Question 24

What are embargoes?

Answer 24

A partial or complete prohibition of commerce and trade with a particular country

Question 25

Define Fair trade

Answer 25

A social movement that aims to achieve better trading conditions for producers, promoting sustainability.

Question 26

What is the main focus of Fair trade?

Answer 26

To create opportunities for groups that have marginalised access to trade.

Question 27

Explain the growth in ethical investment (3)

Answer 27

1. Ethical investment occurs when the investor’s ethical values are the primary objective, above good returns.
2. Most investors make their decisions based on environmental or social concerns.
3. Ethical investment has grown since the 1990s.

Question 28

Define a TNC

Answer 28

A company which operates in more than one country.

Question 29

In 2013, what % of global trade was linked to TNCs?

Answer 29

80%

Question 30

State 4 reasons why TNCs operate in different countries

Answer 30

1. They are footloose firms that can relocate to escape trade tariffs.
2. To find the lowest cost for production.
3. To reach a wider foreign market.
4. To exploit resources.

Question 31

Explain the role of TNCs in the world economy (4)

Answer 31

1. TNCs are companies that operate in more than one country.
2. They are one of the main drivers of globalisation due to the economic, political and cultural interactions that occur between countries where they operate, with 80% of global trade linked to TNCs in 2013.
3. They play a significant role in attracting investment and spreading new technologies within a country.
4. For example, Apple has over 450 retail stores in 16 countries, bringing more investment as the 2nd largest mobile phone manufacturer in 2024.

Question 32

Define spatial organisation

Answer 32

Spatial organisation is about where the jobs are linked to the TNCs operating

Question 33

Where are headquarters and R&D mainly located and why?

Answer 33

Country of origin and science parks/universities due to the concentration of highly skilled workers

Question 34

Where do production/assembly and resource extraction typically take place and why?

Answer 34

Host countries, LICs and NEEs due to cheaper production costs and economies of scale.

Question 35

Explain the benefits of vertical integration (2)

Answer 35

1. Vertical integration occurs when the entire production line, from the raw materials to the finished product, is owned by the TNC.
2. This gives them control to prevent supply side shocks, and reduces costs via economies of scale.

Question 36

Explain what horizontal integration is (2)

Answer 36

1. Horizontal integration occurs when a TNC diversifies its operations through mergers or acquisitions.
2. This can either be complimentary or competitive, such as the Kraft Foods takeover of Cadbury’s in 2010.

Question 37

What are two reasons to encourage the growth of a TNC?

Answer 37

1. It allows large businesses to expand their market share and create more employment opportunities.
2. TNCs promote a flexible workforce where workers are willing to travel overseas.

Question 38

How do TNCs expand their operations?

Answer 38

Vertical and horizontal integration