theme 4 Flashcards
globalisation
An expansion of world trade in goods and services leading to
greater international interdependence.
interdependence
When countries become reliant on each other. Their economies are closely linked through trade, production, finance and migration.
containerisation
Technology of massive ship containers to transport goods. A cause
of globalisation through lowering transport costs.
ICT
Information and Communications Technology (Internet) which has
reduced the cost of communication and to almost zero.
specialisation
When a person, firm or country concentrates on doing one thing.
absolute advantage
The ability to produce a good or service at a lower cost or with
fewer resources than your competitors.
comparative advantage
The ability to produce a good or service at a lower opportunity cost than your competitors.
terms of trade
The ratio of export prices to import prices.
(X price index / M price index)*100
balance of payments
A set of accounts showing the transactions between residents of a
country and the rest of the world – sets out exports, imports and flows
of money. The Balance of Payments has two parts – the Current
Account, and the Capital or Financial Account.
current account
a) the value imports and the value of exports of goods and services
b)
net income payments received from/paid to abroad and
c) government
transfers (international aid to developing countries or money we pay to
the EU).
financial/ capital account
Financial Account includes any trade of Foreign Exchange reserves as
well as the buying and selling of assets held in different countries. If
the current account is a deficit, the financial account will be a surplus.
balance of trade
Value of Exports minus the value of imports of physical goods as well as
invisible services.
global imbalances
The spread of trade balances is very unequal – Britain & the USA are
running huge current account deficits whilst China, Russia, Germany
and middle eastern oil states are running massive surpluses.
trading bloc
A group of countries who agree some level of Free Trade (international
trade without restrictions) between them.
free trade area
A group of countries who abolish tariffs and quotas to allow the free
movement of goods between them. The North American Free Trade
Area (NAFTA) is a good example – including the USA, Canada and
Mexico.
common (or single) market
A Free Trade Area which also has free movement of services and
factors of production (land, labour, capital, profits) between members,
using harmonised rules. Example: The EU.
custom union
A Free Trade area or Customs Union with a common external trade
policy – all the countries have the same tariffs against external
countries outside the bloc. Example: The EU.
single currency area
A trading bloc which adopts a single currency between nations in order
to encourage price transparency and increase trade.
the european union
The World’s largest trading bloc – a single market and customs Union
for 27 nations (including the UK till 2019). Also contains a large single
currency area.
the eurozone
The single currency area within the EU. Contains 18 countries.
world trade organisation
The World trade Organisation. International organisation founded in
1995 to encourage free trade between its members and handle trade
disputes between them.
GATT
General Agreement on Tariff and Trade. The predecessor to the WTO.
protectionism
When countries try to reduce the amount of imports they receive.
This could be to protect their own industries or workers. The main
methods are Tariffs, Quotas and regulations.
tariffs
indirect taxes on imports
quotas
a physical limit on the amount of imports allowed
regulations/
non tariff barriers
Rules and regulations which have been deigned to raise the cost of
imports or deter foreign firms from exporting to your country.
