Patterns of Trade

Question 1

State the reasons why the pattern of world trade changes over time?

Answer 1

1) Changes in comparative advantage
2) Emerging and developing economies
3) Trading blocs and bilateral trading agreements
4) Changes in relative exchange rates

Question 2

How do changes in the comparative advantage explain why the pattern of world trade changes over time?

Answer 2

Different countries can produce a 🚘 for a lower opportunity cost and this changes over ⏰
Due to: labour skills, productivity, discovery of new natural resources⛽️, adopting new technology and infrastructure improvements

Question 3

How do emerging and developing economies explain why the pattern of world trade changes over time?

Answer 3

Growth of emerging and developing economies e.g. 🇨🇳- now major manufacturer
⬆️ exports coming from developing economies globally
ALSO ⬆️ trade between developing economies themselves

Question 4

How do trading blocs and bilateral trading agreements explain why the pattern of world trade changes over time?

Answer 4

Since WW2- significant growth in number and size of trading blocs (group of countries that trade freely BUT protect themselves from imports from non-members)
Free trade between member countries allowed for ⬆️ trade in specific areas of 🌎 whilst causing ⬇️ in trade in areas where common external tariffs applied (customs unions)
Bilateral trade agreements (between 2 countries) ALSO important

Question 5

How do changes in relative exchange rates explain why the pattern of world trade changes over time?

Answer 5

Chnage in exchange rates- affects competitiveness of country’s 🚘 and 🧹… influences trading patterns
E.g. depreciation makes country’s 🚘 and 🧹 cheaper … ⬆️ competitive-> ⬆️ exports and ⬇️ imports (now ⬆️ expensive) relative to other countries