Trade Relationships between developed, emerging and less developed economies

Question 1

General pattern of international trade

Answer 1

• The volume of global trade has increased dramatically since the 1980s, its value increased by nearly 8 times between 1980 and 2008.
• Developed countries remain the biggest traders, but some emerging economies are catching, China for example is the largest exporter of goods.
• Formation of trade blocs have meant countries have increasingly opened themselves up to trade.

Question 2

Rise in less developed countries

Answer 2

Less developed countries are becoming more involved in trade, in 1995 African countries accounted for around 2% of world trade, whereas in 2010 they accounted for just over 3%. The poorest 49 countries make up 10% of the worlds population, but still only account for 0.4% of world trade.

Question 3

Trade Blocs

Answer 3

These remove trade barriers between their members, while keeping common barriers to counties who arent part of the agreement.

They can be regional and make it easier to trade with neighbouring countries.
In 2016 German exports to other EU countries were 708BN EUROS compared to 501BN EUROS outside of the EU.

Question 4

SEZs

Answer 4

These are called Special Economic Zones and they aim to increase the volume of trade with emerging economies and less developed countries.

They have different trade rules to the rest of the country, they increase trade while keeping barriers for the rest of the country.

Question 5

Trade in developed countries

Answer 5

Most trade in the world takes place between developed countries, in 2013 imports and exports between the US and the EU accounted for over 30% of global product trade. Most of these products include machinery, medical equipment, cars and chemicals. Goods that need signifcant money and expertise to make.

Question 6

Trade in less developed countries

Answer 6

Most of these countries trade with emerging economies and developed countries.

FOR EXAMPLE Bangladesh mainly exports to the US and the EU and imports from China and India.

Question 7

Trade in emerging economies

Answer 7

Emerging economies such as China are becoming increasingly important for global trade, the manafacturing sector is growing rapidly and a highly educated population has grown in indias service sector.

Question 8

Trade between Less developed and Developed countries

Answer 8

Less developed countries mostly trade with developed countries, the EU is the largest trading partner of many countries in sub-Saharan Africa.

Less devloped countries export Food, tobacco and crude oil and recieve machienry and medicine.

Question 9

Trade between emerging and less developed countries

Answer 9

This flow is increasing as Chinas growing manfacturing sector is increasingly reliant on energy and crude oil. For example Angola.
In return for minerals and oil less developed countries recieve manafacured good.

Question 10

Trade between emerging and developed countries

Answer 10

China is currently the EUs second largest trading partner after the US, and the EU imports more goods from China than anywhere in the world. Mostly in the form of manafactured goods and clothes, Cars and chemicals go the other way.

Question 11

SDT agreements

Answer 11

The WTO forms special and differential treatment (SDT) agreements - these let the least developed countries bypass developed countries tariffs which gives them greater market access.
FOR EXAMPLE the EUs 2011 Everything but arms agreement allows the least developed countries to export some of their products to the EU without paying tariffs.
Profits made from SDT agreements allow less developed countries to diversify the range of industries they have, introduing manafacturing sectors for example.

BUT some peopl argue that SDT agreement have a negative impact on developed countries by allowing cheap imports into the country, they suggest that regional trade blocs which allow less developed countries to negotiate prices collectively are more effective at improving market access.

Question 12

US-CHINA trade war

Answer 12

The US imported a record $539.5bn in goods from China in 2018 and sold the Chinese $120.3bn in return. The difference between those two numbers is $419.2bn, this is the trade deficit. The trade deficit has been growing for years now and is very concerning as it leads to issues such as unemployment and problems in US manufacturing.

China has been gaining a growing reputation for intellectual property theft, Trump estimated China robs the US of “hundreds of billions” a year in ideas.

China was also accused of manipulating its currency “to gain unfair competitive advantage in international trade”.

Question 13

Trump Trade Policy

Answer 13

• President Trump signed a presidential memorandum to withdraw the U.S. from the TPP on 23 January 2017.
• The TPP is an agreement by 12 different nations that have coast lines to the pacific, this agreement was meant to reduce to 18,000 tariffs.
• Through his campaign he referred to it as a ‘horrible deal’. It was part of trumps America first policy, he believed leaving would positively effect the US economy.

Question 14

Advantages of the USMCA

Answer 14

• Decreased or eliminated tariffs reduce costs of production and trade, which ultimately lowers retail prices for consumers and increases profits for companies.
• The 40% automobile content clause is expected to divert vehicle production from cheap labour in Mexico. This will, in turn, create more jobs for U.S. autoworkers and reduce unemployment.

Question 15

Disadvantages of the USMCA

Answer 15

• The cons of USMCA involve reduced protections for certain industries, as well as general costs involved with stronger labour protections.
• Higher labour costs to produce automobiles can lead to higher vehicle costs.

Question 16

Implications of China - USA trade war

Answer 16

• Chinas economic growth has been slow down to levels unseen since 1992 due to billions of dollars on tariffs on Chinese goods.
• China cancelled orders from American farmers and agriculture industry felt a huge blow.
• China added more levies on US goods.
• A September 2019 study by Moody’s Analytics found that the trade war had already cost the U.S. economy nearly 300,000 jobs and an estimated 0.3% of real GDP.
• Companies primarily paid for U.S. tariffs, with the cost estimated at nearly $46 billion.
• The tariffs forced American companies to accept lower profit margins, cut wages and jobs for U.S. workers.

Question 17

What tariffs have been imposed so far?

Answer 17

The US imposed tariffs on $250bn worth of Chinese products last year. Beijing has retaliated with duties on $110bn worth of American products. Tariffs on $200bn worth of Chinese goods were due to rise to 25% from 10% at the start of this year, but this hike was delayed.

Question 18

Economic impacts of differential access to markets

Answer 18

• Its difficult for countries with poor market access to establish new industries, they face high tariffs when they try to sell abroad, making their products uncompetitive and they may be undercut in their domestic markets by TNCs producing similiar products more cheaply.

This makes them dependant on selling low value primary goods, these tend to fluctuate in price and therefore countries with poor market access often have low GNI, this means they have less money to invest in industry and their economic development is slow.

Countries with high levels of market access tend to see more economic growth because they can trade more, this means their citizens are wealthier, they can afford to import a range of products and they can develop high tech industries which boos their economy further.

Question 19

Social impacts of differrential access to markets

Answer 19

People in countries with better market access tend to have higher paid jobs, this gives them more disposable income, which increases their standard of living.

Countries with less market access have less money available for education and healthcare, so therefore quality of life if generally lower, better access to education in developed countries has created better access to jobs for women and thnic minorities.

Much dangerous, poorly paid work has moved from developed countries to less developed countries, for example sweatshops are crowded, factories are dangerous and people are paid little.