Topic 1- Trade, financial flows and foreign investment Flashcards
Absolute advantage
Refers to the ability of a party to produce at a lower cost than others.
What is ASEAN?
A geopolitical and economic organisation of 10 countries located in Southeast Asia.
What is Asia Pacific Economic Cooperation?
A forum for 21 Pacific Region countries that seeks to promote free trade and economic cooperation throughout the Asia Pacific region.
What is the European Union?
An economic and political union of 27 member states which are located primarily in Europe. EU nations account for 14% of global trade and have a combined GDP of $16 trillion making it the 3rd largest economy.
Free Trade
A situation where governments don’t impose protective barriers to trade that restrict the free exchange of goods and services between countries with the aim of shielding domestic producers from foreign competitors.
Free trade agreement
A formal agreement underlying a trade bloc, in which a designated group of countries have agreed to eliminate tariffs, quotas, and preferences on most (if not all) goods and services traded between them.
What is the role of the IMF?
To oversee the global financial system and ensure its stability. The IMF monitors global economic conditions and the economic policies of its members and offers advice, warnings and forecasts. It provides financial assistance to countries experiencing temporary balance of payment difficulties.
International organisations
Composed of sovereign nations and aim to address common global problems including the promotion of growth, development, trade, financial stability, peace and security.
Monetary union
Where two or more states share the same currency, e.g., Eurozone. They share monetary policy but not fiscal policy.
NAFTA
An agreement signed by the governments of Canada, Mexico and the US, creating a trilateral trade bloc in North America (renamed as USMCA in 2018). The countries involved account for 17% of global GDP.
Theory of comparative advantages
States that trade can create value for both parties (e.g., maximising living standards), even when one can produce all goods with fewer resources than the other, if both countries specialise in the areas of production in which they have the lowest opportunity cost.
Trade bloc
Occurs when a number of countries join together in a formal preferential trading agreement, to the exclusion of other countries. Regional barriers to trade (tariffs and non-tariff barriers) are reduced or eliminated among the participating states.
What is the role of the World Bank?
A development bank that provides loans, grants and technical assistance to developing countries, funded by contributions from member countries and from its own borrowings from financial markets. The WB also helps support the 17 sustainable development goals. The main goals are to reduce the extreme rate of poverty to less than 3% by 2030 and reducing inequality by increasing incomes of the bottom 40%.
What is the role of the WTO?
To implement and advance global trade agreements and to resolve trade disputes between economies. Its reach extends beyond trade in goods to include trade in services (e.g., insurance and banking) and intellectual property (e.g., patents, copyright, electronic circuits). Countries can lodge complaints with the WTO.
