T1. International Trade and Access to markets Flashcards
what is trade
the movement of goods and services from producers to customers, spanning many sectors of industry.
what is a comparative advantage?
countries/regions that specialise in the specific production of goods as they are more efficient or skilled e.g. Songxia (umbrella city) – 70% of all umbrellas made here.
what is an agglomerate?
a group of factories
Protectionism vs free trade
Free trade encourages trade with little barriers to trade and relocation of industry.
- Pro – more choice for consumers, cheaper labour + products
- Cons – job loss (deindustrialisation)
Protectionism discourages foreign trade in own country through tariffs
- Pro – local industries thrive – domestic jobs.
- Cons – products more expensive + labour costs are higher
What are some barriers to trade?
Tariffs, import licences (authorization), sanctions, quotas (limit quantities), embargo.
Trade trends and patterns:
Decreased in recent years to COVID-19
Geopolitics determine who trades with who.
Intra = within, inter = between regions
USA recently under trump have been a protectionist economy
EU are a customs union and allow free trade within but makes it difficult inter regionally.
China responsible for 20% of all global trade
Mercosur main trade bloc in South America formed in 1991 and in 2016 Venezuela were suspended due to breach of regulations – try to imitate EU.
Sub Saharan Africa have large Chinese investment and the AfCFTA set up to increase intra-regional trade
Commodity Coffee Case Study:
-Second traded item behind oil globally
- In 2020 the coffee industry was valued at 466million. Driven by demands from the western world. Second most popular drink after water
- The area where conditions are best to grow coffee is called the bean belt and is 30degrees north and south from the equator.
- Price of coffee is decided in New York (ICA) where less developed nations are unrepresented by 40:1 to the EU, this means EU + powerful nations can set price
- Its unfair as the rich countries can subsidies’ their farmers but countries like Ethiopia can’t. – not fair trade, this has caused Ethiopian farmers to grow Khat instead
A) What is Offshoring
B) What is outsourcing
A) setting up abroad
B) contracts with other company for specific purpose e.g. production
TNC Case Study: Apple
- Headquarters are in California and is the largest global brand by value
- Products designed in USA then mostly outsourced to Foxconn a Chinese company for production – low costs
- Employees 90,000 people in the USA
- EU headquarters are in Cork.
- Located in Cork in 1980 when unemployment was high, low corporation tax at 12.5%
-Made cork a cosmopolitan city with only 60% workers being Irish.
