International trade and access to markets Flashcards
What is the theory behind comparative advantage?
It suggests that countries should specialise in proving goods and services that they excel at producing, which they can then trade for things they aren’t as good at producing
What limits comparative advantage?
Trade barriers - transport costs
What should comparative advantage allow?
Theoretically, production should increase nationally and globally through free trade between countries
What is a trade barrier?
Self-imposed government restraint on the flow of international goods or services
What is an import license?
This is a license issued by a national government authorising the importation of food from a specific source
What is an Import quota?
These set a physical limit on the quantity of goods than can be imported into the country
What is a subsidy?
These are grants or allowances usually awarded to domestic producers (producers within countries) to reduce their costs and make them more competitive against imported goods
What different forms can tariffs take?
Tariff form, or free trade
What is a tariff?
Tax on imports
What is free trade?
Eroded protectionism
What are the barriers to trade?
Import licenses
Import quota
Subsidies
What are voluntary export restraints?
Diplomatic strategy
Offered by exporting countries to appease the importing country
Why are voluntary export restraints applied?
To deter the importing country from using trade barriers
What are embargoes?
Partial or complete prohibitions of commerce and trade with a particular country
Why do people enforce embargoes?
For political reasons, usually to damage another countries economy by restricting the goods they re allowed
What are trade restrictions?
Types of import restrictions, can be technical or regulatory
Why are trade restrictions enforced?
To ensure the products are of a certain quality or standard
What is an example of a trade restriction?
The EU does not import goods that are knowingly produced using child labour
What happened at the end of the 20th century?
The emergence of free markets
What did the emergence of free markets intend?
Push for the removal of trade barriers
What is the GATT?
Global trade framework was strengthened by the
General agreement on tariffs and trade in 1947
Established after ww2, to set regulations on trade around the world
What was the GATT replaced by in 1995?
The WTO
What is the aim of the WTO?
Create free trade across the world
How successful has the WTO been in comparison to the GATT?
Average trade tariffs have shrunk to a 10th of there level when the GATT began operating in 1947
How much trade does the USA, Germany and Japan account for?
25% of global trade
How much trade does the rest of the G7 group account for? (UK, Canada, Italy and France)
Nearly 50% of global trade
What is taking place more recently which opposes threat on the dominance the G7 countries?
NEE - account for a growing share as trade alliances are growing (China especially)
Which country accounts for the largest growth of global trade?
China
What is the 2020 forecast for world trade goods?
$35 trillion
What is the 2020 forecast for world trade services?
$6 trillion
What is the 2020 forecast for inter-regional trade within Europe?
$7 trillion
What is the 2020 forecast for inter-regional trade within Asia?
$5 trillion
Which country will be the most important market in relation to the Sub Saharas exports?
Europe (they will be the consumers for exports from Africa)
What is FDI?
An important source of funding in all countries especially LIC - other countries injecting money into another country - important for economic growth
How much FDI flows in countries all around the world?
More than $1 trillion - not equally shared
Who are the top recipients of FDI?
USA China Belgium Hong Kong Brazil Australia Singapore Russia France Canada
What factors influence the amount of FDI a country will get?
The natural resources they have - eg forest, oil and water
Population size
Size of economic market
Why does Brazil get a lot of FDI?
They have the Amazon Rainforest
Why does Canada get a lot of FDI?
Has a lot of wood
Why does China get a lot of FDI?
Large population - large workforce is attractive
What is the goal of fair trade?
Help producers in developing countries achieve better trading conditions and promote sustainability
Help producers not be taken advantage of
Help smaller agricultural farmers gain more influence and power to negotiate better deals with bigger companies
What is fair trade usually related too?
Agricultural based products like coffee, handcraft and valuable minerals like diamonds and gold found in LIC
What is the difference between fair trade and free trade?
Free trade is the removal of trade barriers, whereas fair trade is a process of helping small scale producers gain fair trading conditions and sustainability
What is ethical investment?
Type of ethical consumerism - respecting human rights when buying things
What does ethical investment involve?
Investor making a choice based on companies activities
How popular are bananas?
One of the five most consumed fruits on the planet.
Who dominates the export of Bananas?
Mainly Latin America but also Caribbean countries
How much Banans do Latin America export and the Caribbean countries export?
13 million tonnes
Who are the leading producers of Bananas?
Ecuador
How much Bananas do Ecuador export?
6 million tonnes
How much of the price paid for Bananas stays in the ‘richer’ north?
90%
Who are the leading importers of banana?
The USA
How much bananas do the USA import?
4 million tonnes
Who are the leading ‘munchers’ of bananas?
India
How much bananas do the India ‘munch’?
27 million
In the past, how much of the banana trade was dominated by just four large TNCs?
80%
What are the four large TNCs that used to dominate banana trade?
Del Monte, Chiquita, Fyffes, Dole
How have the organisations of banana trade changed in recent years?
TNCs have freed themselves of direct ownership of plantations, in favour of guaranteed supply contracts with medium and large scale producers
How is banana trade increasing for the worst?
Retailers in the grocery sector in importing countries are increasingly dominating the supply chain - suppliers have little option but to accept conditions such as low prices, discounts and delayed payments or otherwise risk being taken from the supplier list.
How is the banana trade bad for the environment?
The Banana industry has the largest agrochemical input into the environment
How much waste does the Banana trade produce?
For every one tonne of bananas produced there are tow tonnes of waste
What are the four main things affected because of the Banana trade?
Deforestation, waste, soil fertility, and loss of biodiversity (especially aquatic life as pollutants run into water courses)
How can we use bananas to explain trade wars?
Bananas were the subject of one of the longest trade disputes, lasting 20 years
Where did the trade war of Banana begin?
1975 the EU countries negotiated a trade agreement called the Lomé Convention with 71 African, Caribbean and Pacific countries, many of whom were banana producers.
What was the Lome convention?
The banana producers were given SDT’s with preferential tariff-free import quotas to supply EU markets – aim to develop independently without having overseas aid, but also protect the smaller, family-run farms in the Caribbean and Africa from large Latin American producers, whose bananas were produced more cheaply on mechanised plantations
How much of the Eu banana market comes from Latin America?
75%
What happened in 1992 in relation to the trade war?
The US and several Latin American countries filed a complain to WTO that the EU practice was unfair
Why was the EU trade agreement deemed unfair by Latin America?
The EU were still putting tariffs and taxes on their imports, reducing their access to one of the world’s biggest market for bananas
When did the WTO finally rule against the Lome Convention?
1997
Did the war continue after 1997?
Yes
Why did the trade war continue even after the WTO ruled against the Lome Convention?
The Eu proposals did no satisfy the larger, Latin American producers.
What happened as the trade war continued?
The US government retaliated under pressure from the TNCS (mainly Chiquita) and imposed WTO- approved sanctions on a range of EU products.
When was a compromise of the banana trade war reached?
In 2009 when the EU agreed to gradually reduce tariffs of Latin American bananas
What is Apple Inc?
A transnational corporation
Where are Apple’s headquarters?
In Northern California
When did Apple Inc start up?
In 1976
By value, how successful is Apple?
Number one global brand by value - US$145 billion
How many employees does Apple have?
98,000
How many retail stores does Apple have?
453
How many of Apple’s 453 stores are in Europe and the Middle East?
110
How many of Apple’s 453 stores are in China?
25
In 2014, what was Apple?
Eleventh largest TNC with a total global assets of US$207 billion
Why is apple so successful?
Stylish and well-designed products Slick marketing and branding Innovative products Focus on highly bible devices Selling ancillary products via the internet
Where are Apple’s data centres?
x4 in Califorina (including their headquarters and research and design centre), x1 North Carolina,
Where are Apple’s European headquarters?
In Cork
Where does the assembly of Apple’s main products take place?
Outsourced to Foxconn - main production base is in Foxconn City - Shenzhen
Why did Apple choose to base the production in China?
Large source of highly skilled, hard-working but low paid workers
What is an example of a free trade agreement?
NAFTA - The North American Trade Agreement
What are NAFTA’s main aims?
Gradual elimination of all trade barriers
Promotion of economic competition between members
Increased investment opportunities
When did trade between member countries triple (NAFTA)?
1993-2007
What grew in the USA as a result of NAFTA?
USA
What has Mexico become since NAFTA?
America’s second largest market for exports
How many jobs has NAFTA produced in manufacturing?
8 million
What has closed as a result of NAFTA?
Canadian companies
Why have some Canadian companies closed as a result of NAFTA?
Competition from lower-cost firms
What has the move of US firms to Mexico resulted in?
Job losses
Why has Mexico got the potential to be exploited?
It’s natural resources and less stringent pollution laws
What is the main goal of free trade?
Increase nations’ economic growth
What is the main goal of fair-trade?
Empower marginalised people and improve the quality of their lives
What does free trade focus on?
Trade policies between countries
What does free trade focus on?
Commerce among individuals and businesses
Who does free trade primarily benefits?
MNCs
Who does fair trade primarily benefits?
Vulnerable farmers
What are the critics of free trade?
Free trade is punishing marginalised people and environment
What are the critics of fair-trade?
Interfere with free market, too small scale for impact
What are the major actions of free trade?
Countries lower tariffs, quotas, labour and environmental standards
What are the major actions of fair trade?
Businesses offer producers favourable financing, long-term relationships, minimum prices and higher labour standards
Who are the key advocate organisations in fair trade?
Fairtrade labelling organisations International
World Fair Trade Organisations
Who are the key advocate organisations in free trade?
WTO
WB
IMF
What are the economic impacts of globalisation?
Free movement of labour - pressure on housing and social services
Increased investment
Free trade can harm developing countries as they cannot compete with developed nations
Free trade - lower price for consumers
What are the socio-cultural impacts of globalisation?
Global products are standardised - less diversity
Greater share of ideas, lifestyles and traditions
Increased awareness of global news - climate change
What are the environmental impacts of globalisation?
Transport of goods - greenhouse has
TNCs outsource where environmental standards are less strict
Greater movement leads to the spread of invasive species
What is an example of offshoring?
Dyson
How has Dyson offshored?
He used to make all the products in the UK, but had to move to Malaysia because their company couldn’t compete with cheap labour markets
What did Dyson say?
“It’s been an agonising decision”
How much is office rent in the uk?
£114 per square metre per year
How much is office rent in Malaysia?
£38 per square metre per year
