International Trade/ Exports Flashcards
Why is international trade inevitable?
The global placing of materials and resources is unequal and unevenly distributed meaning that there’s a need for the movement of resources.
No SINGLE COUNTRY HAS EVERYTHING IT NEEDS
How is international trade problematic?
Countries can exert their political and economic power globally to ensure that the inequalities in resources and materials stay the way that they are
INTERDEPENDANCE means that if one market/ industry fails then it will have knock on effects for all those included and INTERLINKED
BUT
International Trade can be a barrier to the beginning of conflict and wars, increasing the risks and costs eg: some say WW3 would never take place due to the economic fallout.
What are the trends in International Trade over the last century?
Up until WW2 (since 1948) exports have increased EXPONENTIALLY
Within the 2000’s came the age of “mass consumption” where ideals such as the “throwaway culture” and TNC’s have cemented world trades growth.
What are the POSITIVES of International Trade?
COMPARATIVE ADVANTAGE- a country may specialise in making a specific product and therefore be able to make a product the fastest and cheapest eg: Umbrella City, China
ECONOMICS OF SCALE- producing a narrower range of goods and services means a country can create a greater VOLUME of products at a cheaper cost
PURCHASING POWER- if trade increases and many people buy a product then prices will be lowered for customers
TRANSFER OF TECHNOLOGY- incentivised as can help decrease costs and increase efficiency
INCREASED EMPLOYMENT= MULTIPLIER EFFECT
What are the NEGATIVES of International Trade?
OVER-SPECALISATION- specialised production cannot cope with a decrease in demand/ outsourcing- they need to be more diverse and changeable
PRODUCT DUMPING- if too much of a volume of products is created then products may have to be sold on the foreign market at a lower price
PROTECTIONISM AND TARRIFS- govs and countries may place protection on industries by imposing ADDITIONAL TAXES and TARRIFS
EXPLOIATION- the largest costs for businesses is LABOUR= wages may be decreased in order to maximise profits
Comparative Advantage CASE STUDY?
Songxia = “The Umbrella City” in China
-The Umbrella was originally exported via the “Silk Road” to Asia and then across Europe
-Makes around 1 billion umbrellas annually with 1,200 factories
-The support from local gov allowed the creation of “Songxia Umbrella Industrial Park”
C.ADV=
+Specialisation= focused on umbrellas making them the fastest and cheapest
+Access to International Markets= Shanghai (260km away)
Describe patterns of International Trade and Investment?
Only 0.6% of International Trade comes from the 50 poorest countries (LIC’s) in the world= PRIMARY PRODUCT DEPENDANCE
Raw material economies are vulnerable:
- Natural Disasters
- Market Fluctuations
- Landlocked around other LIC’s= no trading routes
NEE’s are where most International trade originates (BRICS)
Brazil, Russia, India, China, South Africa
What is the difference between North America (HIC) and China (NEE) in contribution to global trade?
1950= China= 0.9% of world trade
2013= China= 12.1% of world trade
2013= North America= 50% annual trade amount decrease
Which country is generally considered the largest component in FDI?
CHINA-“The amount of Capital Invested into Foreign Countries”
eg: In ANGOLIA in South Africa there are large oil reserves so China has invested capital into the region
What is the term to describe this action: “FDI dropped in Developed Countries by 14% since the 1950’s”
(European Central Bank)
A Transitional Economy
An economy moving from a centrally driven economy to a market driven economy.
Making “macroeconomic reforms”
What types of flows take place within International Trade?
Capital FDI Technology Manufactured Goods Raw Materials People (migration)
What are some reasons (AO2) for different flows of International Trade?
-Electronic waste generally moves from areas with high labour costs and strict environmental protection laws to areas (LIC’s) with LOW LABOUR COSTS and LAXER ENVIRNOMNETAL LAWS.
-Like all flows, electronics show an UNEQUAL power balance
Many would place this down to EXPOITATION FROM WEALITHER COUNTRIES.
- The dominance of NEE’s as the recipients of electronic waste is die to the fact that some EXPERTISE and INFACSTRUCTIRE is needed to mitigate waste and LIC’s don’t have this
- There’s a less definitive pattern of capital flows- after the 2008-2009 ECONOMIC CRISIS flows retracted back to the central countries but capital flows now show a less equal/ set pattern.
What are some reasons (AO2) for different flows of International Trade?
-Electronic waste generally moves from areas with high labour costs and strict environmental protection laws to areas (LIC’s) with LOW LABOUR COSTS and LAXER ENVIRNOMNETAL LAWS.
-Like all flows, electronics show an UNEQUAL power balance
Many would place this down to EXPOITATION FROM WEALITHER COUNTRIES.
- The dominance of NEE’s as the recipients of electronic waste is die to the fact that some EXPERTISE and INFACSTRUCTIRE is needed to mitigate waste and LIC’s don’t have this
- There’s a less definitive pattern of capital flows- after the 2008-2009 ECONOMIC CRISIS flows retracted back to the central countries but capital flows now show a less equal/ set pattern.
Define Trade Bloc?
Agreements between different governments that provide and manage trade
Give a general view of how trade blocs work?
- support free trade between member countries whilst excluding tariffs
- REGIONAL trading blocs make it easier for countries to trade with their neighbours
- INDUSTRY BASED trading blocs are based around specific industries- the main oil exporting countries eg: Saudi Arabia in OPEC
- SEZ- Special Economic Zones- increase the amount of trade within NEE’s and LIC’s
Give some examples of Global Trading Blocs?
NAFTA- North American Free Trade Agreement
OPEC- Organisation of Petroleum Exporting Countries
EU- European Union
Evaluate trade blocs?
+if you are a country within the bloc= no tariffs or quotas and have a protected market= protectionism of competitive advantages
+frictionless trade
–countries OUTSIDE the bloc have to pay an additional tariff to trade within the bloc
–some say that by offering unfair advantages to different countries the global economy developments are limited
WTO?
World Trade Organisation
=formed in 1993 and aims to cut trade barriers (tariffs, quotas and subsidies) that stop countries trading freely so goods can be traded easier
IMF?
International Monetary Fund
=The IMF has three main functions: overseeing economic development, lending, and capacity development.
=Can force countries to privatise (sell off) government assets and open up trade to in return get their debt refinanced.
World Bank
=Provides investment and loans to countries under certain conditions such as bankruptcies and economic debt
G8 Can Famous Green Italians Jump Round (the) UK and USA
=The Group of Eight
(CANADA , France, Germany, Italy, Japan, Russia, UK, USA )
Meets annually to discuss world trade (2005= G8+5)
(+G20)
OPEC?
Organisation of Petroleum Exporting Countries
=40% of the worlds oil- there to regulate the oil market
OCED?
Organisation of Economic Cooperation and Development
= A global body of experts for 30 of the wealthiest countries
CASE STUDY OF A TRADE BLOC: THE EU
The European Union was founded in the years following WW2
Allows regional governance and global economic governance
Legally binding treaties within the trade bloc govern the life of all 500 MILLION EU CITIZENS
CASE STUDY- TTIP
TRANSATLANTIC TRADE and Investment Partnership
TTIP
=a new trade deal that was attempted to be formalised between the EU and US that had the aim of liberalising “one third of global trade”
+boost economy
+increase trade between HIC’s in the EU and US
“+potential to boost US economy by 120 MILLION”
- criticised LACK OF TRANSPARANCY
- various media leaks undermined unity of the scheme
CASE STUDY: “Grexit”
- Greece was first denied access into the WTO in 1975
- 5 YEARS LATER (1980) Greece was granted their admission in a “Mediterranean Expansion”
-Greece came close to leaving the EU in the summer of 2015 as it got into debts of over 4 BILLION EUOROS
(borrowed too much money at too high interest rates)
Evaluate FOR and AGAINST “Grexit”?
AGAINST- any “Grexit” may have changed the equilibrium and cause bankruptcies
This would have increased the living wage and living costs for the population
FOR- may have allowed Greece to trade more freely, away from EU legislation
Make use of its locational and geographical standing
Return to “Drachma” currency= allowed them to set their own exchange rates
“Explain how trade agreements are a factor in globalisation” (4 MARKS)
-trade agreements allow and encourage frictionless trade and liberated trade with countries within a trade bloc eg: NAFTA
- trade agreements authorise FDI which allows connections between HIC’s/ NEE’s and LIC’s
eg: China’s investments into Angola for oil extraction
eg: Audi has built a factory in Mexico in order to gain access to other NAFTA countries - “bi- lateral agreements” allow trade between two countries and therefore enable a greater flow of goods and labour globally
- without trade agreements some countries wouldn’t trade with others so WTO helps to distil trade inequalities eg: WTO= “a forum of negotiations enabling trade across the UK”.
Define TNC?
Companies that produce, sell or are located in two or more countries
eg: SONY- manufacture in CHINA and JAPAN
sell in US and EU
Define “spatial organisation” and “The Hierarchal Model” of Organisation?
= to impose TOP DOWN decision making= branch plants are separate and are vulnerable to sudden JOB LOSSES or CLOSURES= due to the fact that spending reviews trickle down the hierarchy.
EG: UK steelwork closures by Tata Steel in 2015
Where do Research and Development Headquarters usually take place?
Developed Countries/ HIC’s
eg: BP Spatial Variation
BP has it’s HQ in London
Oil and Natural Gas Sites= the middle east and north Africa
Manufacturing= China= COMPARATIVE ADVANTAGE
What are primary, secondary and tertiary industries?
PRIMARY= extracting natural resources- SHELL extracts and sells oil and gas
SECONDARY= manufacturing= TOYOTA manufactures vehicles
TERTIARY= AVIVA provides insurance services
Define “MERGER”?
- 2 become 1
- When two companies (usually of smaller size) agree to become one bigger company= linked countries+ spatial variation
Define “AQUISITION” ?
- Buy and Take over
- When one company buys another eg: The US car company FORD bought the smaller Swedish company VOLVO
Define “Use of Sub Contractors”
When foreign companies can be used by TNC’s without actually owning the businesses eg: NIKE
Define “FDI”
When companies invest into another country to increase profits]
eg: if HSBC aquires a bank in India
Define Horizontal and Vertical Integration?
HORIZONTICAL= when a company merges with/ takes over another company
VERTICAL= when a company decides to own more of it’s SUPPLY CHIAN
What does “economies of scale” mean?
When a company makes the most value/ profits from the WHOLE of their supply chain
When TNC’s invest in supply chains in other countries= the MULTIPLIER EFFECT
Define “Intra-firm” Trading?
When one TNC trades with another part of their own TNC
What are the reasons for TNC growth?
CHEAP LABOUR- outsourcing
MERGERS and TAKE OVERS
FLEXIBLE WORKFORCE
FEWER environmental restrictions
GLOBALISED TRANSPORT NETWORK
GOV ENCORAGEMENT
CHEAP LAND- deindustrialised/ changes in land use eg: HONDA AND NISSAN built car plants on former air field sites
CASE STUDY OF TNC?
WAL-MART
A chain of discount department stores - ASDA IN THE UK
Began in 1962 when Sam Walton opened the first store in Arkansas
More stores opened through Acquisitions and Mergers
Divided labour across countries- CHINA= manufacturing of electronic goods
JAPAN = clothing produced
Starting to expand into “emerging economies”= Walmart and “Barti Enterprises” in India= opening new retail outlets
