Trade Flows and Trading Patterns

Question 1

What are visible exports?

Answer 1

Actual goods which are sold to other nations

Question 2

give some examples of visible exports?

Answer 2

agricultural goods, extracted minerals, coal and oil

Question 3

what are invisible exports?

Answer 3

services which are sold to other nations

Question 4

give some examples of invisible exports?

Answer 4

Banking and financial services, insurance, education, tourism

Question 5

What is the trade balance?

Answer 5

the difference between the monetary value of the exports and imports of output of a country

Question 6

what is positive trade balance and what is it called?

Answer 6

when a country exports more than it imports. This is called a trade surplus

Question 7

what is a negative trade balance and what is it called?

Answer 7

when a country imports more than it exports. This is called a trade deficit

Question 8

what happens in the country when there is a trade surplus?

Answer 8

there is a flow of money into the country and employment and national income go up. Trade deficit is the opposite

Question 9

what are some of the factors that affect the balance of trade?

Answer 9

resource endowment 
locational advantages
historical advantages 
currency exchange rates 
trade agreement and tariff barriers

Question 10

what do Europe and Asia contribute to the global exports

Answer 10

Europe: 41%
Asia: 38%

Question 11

what areas of the world are net exporters of invisible trade and which are net importers?

Answer 11

North America and Europe are net exporters while the rest of the world are net importers

Question 12

How have LICs become better in recent years in terms of world trade?

Answer 12

they are far more likely to specialize in an aspect of manufacturing rather than just be the providers of primary resources

Question 13

why have LICs got little capital to develop their economies?

Answer 13

many are still primary product dependent so they have to charge a low price compared to manufactured goods.
The prices of primary products also vary massively each year while manufactured goods have risen steadily over time

Question 14

what are the factors which affect global trade?

Answer 14

Locational advantage
historical factors
resource endowment
Trade agreements and free trade

Question 15

how does resource endowment give countries a global trade advantage

Answer 15

countries such as Russia have been blessed with lots oil and gas which is in demand so they can charge high prices
some countries have used there resource endowment advantage to invest in making a more balanced economy rather than just being dependent on there resources

Question 16

how does a locational advantage give countries a global trade advantage?

Answer 16

• Close to the market or area of demand
• ports with a large hinterland eg. Rotterdam has access to France, Germany, Netherlands, Belgium etc within a short distance
• strategic position on trade routes eg. Singapore is located on the tip of the Malay peninsula where shipping routes in the Indian and Pacific oceans cross.

Question 17

how does historical advantages give countries a global trade advantage?

Answer 17

Trade links between the former colonial powers and the former colonies often remain strong eg. Uk and commonwealth

Question 18

how do trade agreements and free trade give countries a global trade advantage?

Answer 18

Trade Blocs such as the EU are groups of countries which have joined together to stimulate trade between them and has led to economic regionalism
Quotas and tariffs can protect countries own economies

Question 19

What have been the changes in the global market?

Answer 19

• TNCs have allowed many countries to increase their trade to GDP ratio
• BRIC countries are exporting more manufactured goods and a more affluent population means a growing domestic demand including for imported goods

Question 20

when was the World trade organisation started?

Answer 20

1995

Question 21

how many members does the WTO have?

Answer 21

159

Question 22

What does the WTO do?

Answer 22

• Provides the rules for trade in goods
• Seeks to reduce tariffs and other trade barriers
• A place where members settle trade disputes

Question 23

what are the WTO principles?

Answer 23

Non Discrimination
Openness
Stability, predictability and transparency
More competition

Question 24

what is fair trade?

Answer 24

a movement whose goal is to help producers in LICs achieve better access to markets and sustainability. Higher prices are paid to exporters

Question 25

what has been the impact of the fairtarde label?

Answer 25

global sales have rose from $230000 in 2000 to $2.4 billion in 2007

Question 26

what rules must suppliers comply to in fairtrade?

Answer 26

• employees must be paid fairly
• No forced or child labor
• employees may join unions and bargain collectively
• health and safety requirements are met

Question 27

what are the criticisms of fair trade?

Answer 27

• Fair trade coffee can be sold in the shop at any price so nearly all the extra price paid by customers is kept in the country
• Fairtrade certification brings extra costs to farmers
• Leads to lower prices for other farmers who cant afford fairtrade certification

Question 28

what are the problems with cocoa farming in the Ivory coast?

Answer 28

• Trees need to be replaced when they get disease such as black pod
• Outdated farming methods
• Fluctuating world prices

Question 29

what advantages has fairtrade brought to the cocoa farmers of the ivory coast?

Answer 29

• Discounts on pesticides, Machetes and rubber boots
• Guaranteed fairtrade prices help to balance price fluctuations
• in the village of Tiemokokro, 90 percent of the cooperative members have access to training on good agricultural practices

Question 30

how many people in Africa, Latin America and Asia benefit from fair trade?

Answer 30

over 7 million