trade Flashcards
what are commodities
a good or material (not a service) interchangeable through trade or commerce, such as raw material
what are terms of trade
value of a country’s exports relative to that of its imports.
this is measured as: average price of exports / average price of imports x 100
if exports rise relative to import prices, there is improvement in a country’s terms of trade
what is merchandise?
merchandise are goods, products or commodities available for sale
can be basic food products of low value through to high value goods such as cars or diamond rings
what are services?
tradeable activities which provide expertise based on skills, experience + knowledge.
producer services often include financial + legal services
consumer services include education or health care
what is capital?
accumulated wealth of any kind used in producing more wealth; this may include tangibles such as machinery, buildings, land, and intangibles such as money, investment, finance or company stocks
what is outsourcing
cost saving strategy where a company that has comparative advantage provides goods or services for another company even though they could be produced in house
what is a balance of payments?
difference between a country’s inflows and outflows of money, including al transactions with the rest of the world for goods and services, flows of FDI and migrant remittances, over a period of time
what is an AC?
countries that share a number of important economic characteristics, including well-developed financial markets, high degrees of financial intermediation and diversified economic structures with rapidly growing service sectors
what is an EDC?
countries that do not share all the economic development characteristics required to be advanced, and also are not eligible for the Poverty Reduction and Growth Trust, identified by the IMF
what is an MNC?
a firm with the power to coordinate and control operations in several countries
what are global supply chains?
flows of materials, products, information, services and finance in a network of supplies, manufacturers, distributors and customers around the wolrd
what is Foreign Direct Investment (FDI)
inward investment by a foreign company (usually a large TNC) in a country
what is comparative advantage?
the principle that countries or regions benefit from specialising in an economic activity in which they are relatively more efficient or skilled
what are economies of scale
internal economies of scale are savings in unit costs that arise from large scale production, derived from within a plant
external economies of scale are savings made by a firm that arise from outside the firm itself, such as benefits of proximity to other firms or infrastructure
what is an economic multiplier?
an economic factor that, when increased or changed, causes increases or changes in many other related economic variables
what are human rights norms?
established customary behaviour based on moral principles and ways of living inculcated into the culture of a country or area over a long period of time
what is the development gap?
difference in prosperity and well-being between rich and poor countries.
this could be measured, for example, by GDP per capita and HDI
what are some examples of inequalities regarding merchandise exports globally?
asia now has over fifteen times the value of merchandise exports than africa
moreover, values for Europe are over eleven times those of South and Central America
what are examples of inequalities regarding the COMPONENTS of merchandise exports between the regions
exports of agricultural products from Europe are more than ten times those of both Africa and the Commonwealth of Independent States, and more than thirty times those of the Middle East
Exports of manufactured goods from Asia are nearly 45 times greater than those of Africa
which region is the largest net exporter of commercial services?
europe
however, much of this type of trade in Europe is intra-regional, in particular between the countries of the EU
at the other extreme, African countries, especially sub-saharan, are overall net importers of commercial services, mainly through trade with ACs and EDCs
what are real assets
include physical or tangible items that are traded, such as commodities, minerals, land and real estate
what are financial assets
the so-called intangibles such as currency, stocks and bonds, which can be traded on the world’s financial markets
what is a significant feature of global capital flow regarding MNCs?
most capital flows are intrafirm, especially within the MNCs
in these very large enterprises, goods, materials and semi-finished products flow between parent companies and their subsidiaries through global supply chains. and the consequent financial transactions are often completed by accounting within the company
what is inward FDI in India due to?
inward FDI in India is mainly the response to active encouragement by the Indian government:
- treaties between India and Mauritius and Singapore enable companies located in these countries to avoid high taxation, for example, under the Double Tax Avoidance Agreement. The high value of investment from Mauritius, a relatively poor country, is explained by large companies based there which invest in business and services in India. These include Cairn UK Holdings, Oracle Global, TMI and Vodafone
- India needs FDI to help overhaul its infrastructure of ports, airports and highways. FDI norms including rules and constrictions regarding inward investment have been relaxed in sectors such as defence, oil refining, telecom etc
- The Foreign Investment Board has raised inward ceilings. This has increased FDI in the service sector for private insurance companies, financial investment companies and communication, business and computer services, mostly by outsourcing
- The Reserve Bank of India has facilitated transactions required for mergers, takeovers and new investment
what is inter-regional trade
the flow of international trade among major world regions such as Europe, North America and Asia
for example there is a long established transatlantic trade relationship between Europe and NA
what are the world’s largest trading partners by value of merchandise, services and capital?
the EU and the USA are the world’s largest trading partners by value of merchandise, services and capital
total trade between the two accounts for nearly a third of global trade flows
what is intra regional trade
the flow of international trade within one of the major world regions such as Europe or Asia
most international trade is intraregional
why is intra regional trade within the EU complex?
the complexity is the outcome of changing patterns and trends of trade flows in many diverse merchandise, services and capital products between 27 member states
what is trade like between germany and its EU trading partners?
in 2018 Germany maintained its position as the third largest exporter. this was largely due to its trade with the EU (59.1% of German exports), and represented an increase in German-EU trade from 2017
at 57.2%, the EU was also the largest source of German imports, which was also a slight increase on 2017
the high value of german trade within the EU is a result of the free trade agreement that exists between EU members which makes trade between member nations more attractive compared to non EU regions, where trade may be open to tariffs
what are economic factors influencing contemporary patterns of international trade?
physical infrastructure including transport
technology including communications
transport costs
cost of production
FDI
speed of border formalities, eg documentation/use of ICT
what are social factors influencing patterns of international trade?
demographic factors which affect labour force and import demand including age structure and migration
stage in demographic transition
female empowerment/ women in the labour force
levels of education
what are political factors influencing contemporary patterns of international trade?
supranational organisations
regional trading blocs
national government policy
trade agreements/ market integration
tariff/non-tariff barriers
free trade/ free trade areas
governance/transparency of customs authorities
what are environmental factors influencing contemporary patterns of international trade?
distribution of natural resources including oil and mineral ores
climate/soils/water scarcity (affecting food and agricultural products in international trade)
deep water ports
natural hazards
what is the relationship between value of exports and HDI?
positive relationship
however, china’s HDI is lower than might be expected for a country with such high value of exports, but overall value of exports is high for more developed and lower for less developed countries
what is the Aid for Trade initiative?
The WTO launched the Aid for Trade Initiative in 2005 to help developing countries expand in their trade
in 2013, this was reinforced the Bali Ministerial Conference
This has been designed to assist the least developed countries integrate better into a multilateral free trading system
how can international trade promote stability?
trade encourages states to co-operate; multilateral trade agreements can contribute to economic and political stability
some bilateral agreements extend beyond trade to assistance in political issues such as strengthening democratic processes and human rights, which create a more stable environment for foreign investors
how can international trade promote economic growth
trade stimulates production, contributes to GDP growth and further investment, including FDI
employment opportunities are created, incomes are raised and poverty levels reduced
the economic multiplier can be enhanced by international trade at national, regional and local scales
how can international trade promote development?
removal of tariffs and other obstacles to LIDC trade help generate foreign exchange which can be invested to reduce internal inequalities in poverty, health, education, infrastructure and transport
corporate responsibility of MNCs can be of economic and social benefit
membership of trade and political unions with a common purpose can help socioeconomic development
why are flows of people important factors in economic growth and development at all scales?
the flow of people is an important channel for circulation of ideas and information, especially within NA and Europe, and it is also significant for many EDCs
For example, migrant scientists and engineers from China and India employed in Silicon Valley, California, share info on tech development with colleagues in their native countries
also, the ‘brain drain’ from LIDCs has an effect on flows of origin and disseminate acquired knowledge
how has technology helped to improve trade?
speed of movement of merchandise through customs has been significantly increased, and corruption has been reduced under border controls which benefit from electronic messaging and data storage and retrieval systems
exporting has been made simpler, quicker and cheaper by the use of online currency trading platforms which allow financial balances to be held in many different currencies
the logistics of tracking of products is easier using cloud based platforms which are capable of monitoring incidents in supply chains around the world
improved cyber security helps to protect info systems from theft or disruption
the prevalence of mobile phones has allowed the increasing trend for online money transfers
how does technology reinforce global inequalities in international trade?
access to tech is unequal across the world
for example, the huge investment in new technologies for handling large-scale shipping at ports in rich countries, and the limited access to these facilities for poorer countries, reinforce global inequalities in international trade
why is international trade spatially uneven?
inequalities, conflicts and injustices are related to unequal flows of people, money, ideas and technology associated with the global trade system
how does international trade cause inequalities?
many LIDCs have limited access to global markets; this widens the development gap
skilled workers, especially men, tend to benefit the most from employment opportunities created by trade
in many LIDCs internal equalities are exacerbated by trade activity, often spatially concentrated in ports
how does international trade cause conflicts
trade disputes can arise over tariffs, prices of commodities and changes in trade agreements
border and customs authorities can be subject to corruption and breaches of security
port development, mining and deforestation linked to trade create environmental conflicts
how does international trade cause injustices?
displacement of communities can result from land grabbing by investments in industry and agri business
use of child labour and other forms of modern slavery in attempts to secure cheap labour
unequal power relations, unfair trade rules such as tariffs and other trade barriers and opening up to free trade can adversely affect businesses such as small scale farmers or fishermen in LIDCs
what is land grabbing
a process whereby rich countries acquire land in poorer countries
