Trade

Question 1

What is protectionism

Answer 1

1 way for country to develop is through producing many products within country instead of relying on imports

To allow industries to develop and produce these goods, government create policies to protects them from foreign competition

These policies include
Quotas tariffs/duties and or subsidies and

Question 2

What is a quota

Answer 2

Limit on the amount of a product that can be imported or exported

Setting a quota limits foreign competition because local businesses do not have to compete for every scale

Question 3

What are tariffs and duties

Answer 3

Tax paid on imports or exports

This limits foreign competition by increasing the cost of foreign goods

Question 4

What is a subsidy

Answer 4

Payment by government to producer

This means that the producer can sell their product more cheaply and can therefore compete and still make a profit

Question 5

What is free trade

Answer 5

Emphasised the idea that their should be no protectionist policies

Idea a country should specialise it what it can produce efficiently and profit from that and import other products

Most efficient production systems would develop

Question 6

What are trade blocks

Answer 6

Groups of countries like the EU who agree to trade freely within the bloc

They set up protectionist policies for trade outside the bloc

Therefore they work together to maximise trade between themselves and control trade between the block and foreign competition

Question 7

What is fair trade

Answer 7

The importance of profit reach the actual producers of goods

Promoted by charities and non gov organisations

Fair trade labelling aims to give consumers a choice about whether to buy into helping producers more or not

Question 8

What is the TEAR for global patterns of trade and investment

Answer 8

Value and volume of world trade increasing dramatically esp in last 50 years

Increases 115X from 1863-2013

No significant anomalies - doubles every 10 years use but can argue

2003-2013- world exports increase around $11,000 which is significantly higher than previously

R- factors of globalisation

Question 9

Why is global trade increasing

Answer 9

Idea trade barriers should be reduced or removed so all countries can buy and/or sell goods or provide services which are good at producing and buy goods and services which they are not good at producing

Free trade should make this possible

But the problem with this is that
High tariffs ensure people buy goods manufactured in their country as it is good for eco

Question 10

What is the aim of the WTO

Answer 10

Free trade

Question 11

What is the WTO

Answer 11

International organisation run by UN which governs 87% of world trade

Question 12

Why is the barrier to free trade

Answer 12

Some countries prefer protectionist policies

Question 13

How much could world trade in goods worth

Answer 13

$35 trillion

Question 14

How much could world trade in services be worth

Answer 14

$6 trillion p

Question 15

Where will the fastest growth of world trade be

Answer 15

Pacific region

Question 16

Explain the distribution of global trade

Answer 16

Unequal

37% top 5 exporting countries
0.6% poorest 49 countries

Unequal by type
HIC and NIC produce manufactured/consumer goods which add value to raw materials

LIC produce primary products which are low value and for which prices fluctuate

Question 17

Global trade since 1963

Answer 17

Change in % trade between different parts of world with ‘global shift’ from HIC like USA to NIC in Asia esp India and china

LIC remain largely excluded from world trade

USA Dec 1963-2013 6%
Chiba inc “. “. 10%

Europe
1963-73 increase
1963-2013 decrease 10%

Question 18

Link between trade and foreign direct investment

Answer 18

FDI and trade - positive correlation

As trade increases so does FDI

Data to support inc -14% in FDI trade in HIC compared to 23% increase in South Asia

Question 19

Trading relationships and access to markets

Answer 19

Countries need to teach agreements and be able to trade with other countries - several ways they can do this

Bilateral agreements

Trading blocs

International agreements through WTO

Once an agreement has been reached, countries can usually trade with few if any restrictions - free trade
However reaching agreements time consuming and complex

Question 20

Bilateral agreements

Answer 20

These are relationships that countries negotiate directly with one other country

The U.K. is currently looking to negotiate deals after brexit
Eg the PM visited China Feb 2018

Question 21

Trading blocs

Answer 21

These are a group of countries which have agreed to allow free movement of certain foods and services between all members

The EU, NAFTA and ASEAN are all powerful trading blocs

Critics of trading blocs - not free trade as countries outside bloc have to pay tariffs - restricts developments of LIC- form of protectionism

Question 22

International agreements through WTO

Answer 22

WTO sets and manages rule of global trade

Want free trade by negotiating global trade agreements

It has 160 countries (75% LIC) who run the WTO
TARIFFS ARE AFREED

Question 23

Critics of WTO

Answer 23

Takes too long to teach global agreement and that core countries may refuse to make agreements which are at their disadvantage

Doha Talks 2001- aimed at reducing agricultural tariffs 30% and reducing subsidies paid to farmers in wealthy countries

This increased value of trade for LIC (many rely on export of primary products)

Problem - farmers in HIC - competition from LIC

2013- Doha talks collapsed w out agreement as HIC including USA and EI would not reduce farm subsidies sufficiently and emerging nations like China and India would not reduce tariffs in manufactured goods sufficiently
There was a stale mate

Consequence - LIC still find it difficult to sell some agricultural towers and HIC and difficult to sell manufactured in emerging markets - protectionism

Question 24

Explain SDT

Answer 24

Special and differential treatment agreement

Promoted by WTO and designed to allow some poorest countries on planet (LDC) to have access to world trade markets to sell their products

Aim to give LDC (about 50 mostly in Africa) access to HIC markets for their primary products
In time they should enable development and poverty to be reduced

Eg SDT- EU ‘everything but arms’ agreement in which LDC were given tariff free access to EU markets for all products except arms and ammunition

This policy has had limited success as some IC do not participate for fear of cheap goods flooding their makers

Question 25

Advantages of trade

Answer 25

Inc employment - if goods sold outside home market - likely to increase demand and lead to more employment where goods produced

Economies of scale - if countries specialise in producing less goods which they are good at producing - large amounts at low United cost
Comparative advantage

Competition - greater choice of goods available - prices for consumers likely to fall

Protectionism combats deindustrialisation and urban decline

Transfer of technology (TOT) - new technology widely açai le and can bring down production cost and prices for consumers

Question 26

Disadvantage of trade

Answer 26

Over specialisation- if conditions change and demand for product falls for a product then countries have no fall back position if only make small range of goods

De skill - new technology results in loss of traditional skills and craft - skills not required to operate machines in factories

Worker exploitation- if goods are produced for export in a competitive trading environment then labour costs must be kept low. Can lead to exploitation by some TNCs who may threaten to relocate

Protectionism not fair

Product dumping - over production - products being sold at very low prices in foreign markets . Impacts negatively on local business