Unit 13 - Essays - Trade UPDATED Flashcards
Assess the effects of changes in the global market on the trade of
exporting countries.
- Global Trade Growth and Economic Expansion
Point: Global economic growth leads to an overall increase in international trade, benefiting many exporting countries.
Evidence:
Global export value rose from $6.2 trillion in 2000 to $24.9 trillion in 2022 (World Trade Organization, 2023).
Germany: Exports increased from $552 billion (2000) to $1.75 trillion (2022) due to demand for machinery, vehicles, and pharmaceuticals.
Brazil: Exports grew from $55 billion (2000) to $339 billion (2022), driven by demand for soybeans, beef, and coffee.
Analysis:
Industrialized nations with diverse industries (e.g., Germany) benefit more than primary commodity exporters (e.g., oil-dependent nations).
Spatial variation: Developed countries benefit more due to higher value-added goods, whereas LDCs remain vulnerable to price fluctuations.
Temporal variation: Short-term boom in trade can be followed by periods of downturn due to economic crises (e.g., 2008 financial crisis). - Increased Competition and the Decline of Traditional Markets
Point: Globalization and industrialization in new regions have increased competition, reducing export opportunities for some countries.
Evidence:
UK textile industry: Share of global textile exports fell from 3.5% (2000) to 1.1% (2020) due to competition from Vietnam, Bangladesh, and Indonesia.
African raw material exporters have lost markets as Asian countries develop their own manufacturing industries.
UK joining EEC (now EU) in 1973 led to a decline in Jamaican banana exports due to loss of trade agreements.
Analysis:
Spatial impact: Countries without competitive industries (e.g., LDCs) struggle, while NICs benefit from low-cost manufacturing.
Scale variation: Some regional industries collapse, but national economies may survive if they diversify.
Temporal impact: Industries that were strong decades ago (e.g., UK textiles) now struggle, while new competitors emerge. - Trade Protectionism and Market Restrictions
Point: Many countries introduce tariffs, quotas, and sanctions to protect domestic industries, affecting exporters.
Evidence:
2018-2021 U.S.-EU steel tariffs reduced steel exports for South Korea (-12%) and India (-9%).
European Union’s Common Agricultural Policy (CAP) gives subsidies to EU farmers, making it harder for Argentina and Australia to export their agricultural products.
Australia adapted by expanding beef exports to Southeast Asia, increasing sales by 22% (2015-2021) (Meat & Livestock Australia, 2022).
Analysis:
Spatial impact: Protectionism hurts specific industries (e.g., steel and agriculture), but others find alternative markets.
Scale variation: Trade restrictions affect both small producers and major exporters, depending on their ability to find new buyers.
Temporal impact: Policies change over time, meaning affected countries may recover if barriers are lifted. - Technological Advancements and Changing Trade Patterns
Point: Technology can create new export opportunities while reducing demand for traditional products.
Evidence:
Fiber-optic cables replacing copper wires have hurt copper-exporting nations like Chile and Peru. Chile’s copper exports fluctuate between $30-40 billion annually due to changing demand.
India’s IT sector has grown from $4 billion (2000) to $194 billion (2022) due to digital outsourcing (NASSCOM, 2023).
The rise of synthetic materials (e.g., synthetic rubber, lab-grown diamonds) has reduced demand for natural resources.
Analysis:
Spatial impact: Tech-focused economies (e.g., India) benefit, while resource-exporting countries (e.g., Chile, Zambia) suffer.
Scale variation: Large economies with diversified sectors (e.g., USA, India) adapt better than resource-dependent nations.
Temporal impact: Declining industries can collapse quickly, while new industries take decades to develop. - Finding New Markets and Economic Diversification
Point: Many countries respond to global trade changes by diversifying their economies and finding new markets.
Evidence:
Russia shifted oil exports toward Asia after 2008, increasing sales to China, India, and Japan from 18% (2008) to 47% (2022) (IEA, 2023).
Kenya developed a strong flower export industry, reaching $1.1 billion annually, making it the fourth-largest flower exporter (UNCTAD, 2023).
Vietnam and Indonesia expanded into manufacturing, reducing dependence on agriculture.
Analysis:
Spatial impact: Some countries succeed in diversification, while others remain trapped in commodity exports.
Scale variation: National governments must invest in education, infrastructure, and trade policies to support diversification.
Temporal impact: Diversification takes time but provides long-term economic stability.
Conclusion
Overall judgement: The effects of global market changes on exporting countries are highly variable and depend on economic structure, level of industrialization, and ability to adapt.
Some countries benefit from growing trade and new markets, while others struggle with competition and trade barriers.
Countries that adapt through diversification and technology tend to perform better in the long term.
Final thought: The global trade system is constantly shifting, and exporting countries must remain flexible to succeed in a competitive and unpredictable market.
Assess the effects of trade agreements on global trade.
- Increased Trade Flows and Economic Growth
🔹 Point: Trade agreements remove barriers, making trade easier and increasing economic activity.
🔹 Evidence:
NAFTA/USMCA: Increased trade between the US, Mexico, and Canada from $290 billion in 1993 to $1.3 trillion in 2019.
EU Single Market: 64% of total trade in 2020 was within the EU due to free movement of goods and services.
Mexico’s GDP grew 1.3% annually due to NAFTA, as manufacturing exports increased.
🔹 Development:
Leads to specialization—countries focus on industries where they have an advantage.
Encourages foreign investment—companies set up factories in countries with better trade access.
However, not all sectors benefit—some industries struggle with competition (e.g., US job losses in manufacturing due to outsourcing to Mexico).
🔹 Spatial & Scale Variation:
Large economies (EU, US) benefit more than smaller or developing economies.
Some regions lose jobs due to increased competition (e.g., US manufacturing towns). - Trade Creation vs. Trade Diversion
🔹 Point: Trade agreements can lead to more efficient trade (trade creation) but can also shift trade away from cheaper global suppliers to less efficient regional ones (trade diversion).
🔹 Evidence:
Trade Creation: ASEAN Free Trade Area led to a 40% increase in intra-regional trade (2000–2019), making Southeast Asian countries more competitive.
Trade Diversion: The EU’s Common Agricultural Policy (CAP) subsidizes European farmers, making it harder for African farmers to export to Europe, despite lower costs.
African Continental Free Trade Area (AfCFTA) launched in 2021 aims to increase intra-African trade but could divert trade from more efficient global suppliers.
🔹 Development:
Trade creation is beneficial—it allows specialization and economic efficiency.
Trade diversion can be harmful—it can force countries to trade within agreements even when better suppliers exist elsewhere.
🔹 Spatial & Scale Variation:
Trade creation benefits regions that integrate well (e.g., ASEAN, EU).
Trade diversion can hurt developing countries dependent on exports to wealthier nations. - Impacts on Developing Countries (Opportunities vs. Challenges)
🔹 Point: Some agreements help developing countries grow, while others reinforce economic inequalities.
🔹 Evidence:
Fairtrade benefits: Ethiopian coffee farmers earn 10–15% more per kg under Fairtrade agreements.
Harm to developing countries:
Economic Partnership Agreements (EPAs) between the EU and African, Caribbean, and Pacific (ACP) countries allow European firms to dominate African markets, limiting local industry growth.
NAFTA harmed small Mexican farmers, as cheap US agricultural imports undercut their prices.
🔹 Development:
Fairtrade protects small farmers but covers only niche products.
Large trade agreements often favor richer countries—developing nations may struggle with competition from subsidized industries in wealthier nations.
🔹 Spatial & Scale Variation:
Developing countries often lack strong industries to compete in free trade agreements.
Larger developing nations (e.g., Mexico under NAFTA) may benefit in manufacturing but suffer in agriculture. - The Role of the WTO and Global Trade Liberalization
🔹 Point: The WTO promotes free trade globally, but regional trade agreements sometimes weaken its influence.
🔹 Evidence:
WTO’s GATT (General Agreement on Tariffs and Trade) reduced tariffs by 80% (1947–1994).
WTO’s Trade Facilitation Agreement (TFA) (2017) projected to reduce global trade costs by 14.3% and increase exports from developing countries by $730 billion annually.
Doha Development Round (WTO’s attempt to help developing nations) stalled due to resistance from wealthier countries.
Rise of Regional Trade Agreements:
CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) has replaced some WTO rules, reducing its global role.
🔹 Development:
WTO is good for fair trade rules but struggles to enforce them.
Richer nations control negotiations, making it harder for poorer countries to benefit equally.
🔹 Temporal Variation:
20th century: WTO-led global trade liberalization was dominant.
21st century: Rise of regional trade deals (EU, CPTPP, USMCA) reducing reliance on WTO. - Environmental and Social Effects of Trade Agreements
🔹 Point: Increased trade can lead to environmental damage and social inequality.
🔹 Evidence:
NAFTA & Transport Pollution: Cross-border trade increased 24%, leading to higher carbon emissions.
EU-Mercosur Trade Deal (2019): Could lead to more deforestation in the Amazon due to increased Brazilian soy and beef exports.
Bangladesh’s Textile Industry (linked to WTO trade liberalization):
Helped the economy grow but led to poor wages and unsafe working conditions.
2013 Rana Plaza factory collapse killed 1,100 workers.
🔹 Development:
Environmental impact: More trade means more transport, deforestation, and carbon emissions.
Social impact: Some agreements lead to worker exploitation due to lack of strong labor protections.
🔹 Spatial Variation:
Developing nations often face the worst environmental and social effects.
Wealthier countries benefit from cheaper imports but do not experience the same level of damage.
Conclusion
Overall assessment: Trade agreements increase trade and economic growth, but their benefits are not evenly spread.
Winners:
Large economies (EU, US) gain from increased exports.
Some developing nations (Mexico, ASEAN) benefit from manufacturing growth.
Losers:
Small farmers in developing countries often struggle (e.g., Mexican farmers post-NAFTA).
Poorer nations face trade diversion, making global trade less efficient.
Environmental and social costs (pollution, deforestation, poor working conditions) can outweigh economic gains.
Final judgement: Trade agreements are beneficial but need fairer policies to support weaker economies and prevent environmental harm.
Evaluate the Impacts of Trade on Exporting Countries
Paragraph 1: Trade Promotes Economic Growth and Specialization
Point: Trade allows countries to focus on industries where they have an advantage, leading to economic growth.
Development:
Comparative advantage: Countries specialize in goods they can produce efficiently.
Economies of scale: Producing more of a good reduces costs and increases profits.
Investment and infrastructure: Successful export industries attract foreign investment, leading to better roads, ports, and technology.
Examples & Evidence:
Germany’s automobile industry: Germany exports high-quality cars (Volkswagen, BMW, Mercedes-Benz), with €229 billion in car exports in 2022 (Statista, 2023).
Vietnam’s electronics industry: Samsung accounts for 25% of Vietnam’s total exports (Vietnam Ministry of Industry and Trade, 2021).
Counterpoint: Dependence on a single industry is risky. Venezuela relied on oil (98% of exports in 2014), and when oil prices crashed, the economy collapsed.
Spatial/Temporal Considerations:
Benefits are long-term if countries diversify (e.g., South Korea transitioning to high-tech exports).
Not all regions benefit equally—industrial hubs see more growth than rural areas.
Paragraph 2: Trade Creates Jobs but Can Also Be Unstable
Point: Export industries create employment, improving wages and living standards, but these jobs are often insecure.
Development:
Job creation: Trade leads to more factories and businesses, reducing unemployment.
Higher wages: Export-driven industries can push up average incomes.
Job insecurity: Demand for exports fluctuates, and industries may move to cheaper locations.
Examples & Evidence:
Bangladesh’s garment industry: Employs 4.5 million workers, making up 84% of total exports (Bangladesh Garment Manufacturers and Exporters Association, 2023).
Rising wages: Garment workers’ salaries increased by 77% from 2010 to 2020.
Challenges: The Rana Plaza disaster (2013) exposed unsafe working conditions.
India’s cotton farmers: 100,000 farmers left the industry between 2010 and 2020 due to competition from cheaper imports.
Spatial/Temporal Considerations:
Job creation is strongest in urban manufacturing centers but weaker in rural farming communities.
In the short term, trade boosts employment, but long-term automation and competition can reduce jobs.
Paragraph 3: Trade Increases National Wealth but Worsens Inequality
Point: Trade brings wealth to exporting countries, but the benefits are not evenly shared.
Development:
Export earnings increase GDP, leading to better public services and infrastructure.
Regional inequality: Wealth is concentrated in industrial hubs, leaving rural areas behind.
Income inequality: Large companies and wealthy business owners benefit more than small producers and workers.
Examples & Evidence:
Brazil’s soybean exports: Earned $50 billion in 2022, boosting agribusiness (World Bank, 2023).
Unequal distribution: Growth benefits industrial farming regions (e.g., Mato Grosso), but the Amazon region remains poor.
Ghana’s cocoa exports: Cocoa makes up 20% of GDP, but small farmers get low prices due to corporate price controls.
Spatial/Temporal Considerations:
Wealth concentration in cities: Ports and factories receive more investment than rural areas.
Long-term issue: Without fair distribution policies, trade may widen economic inequality over time.
Paragraph 4: Trade Makes Economies Vulnerable to Market Fluctuations
Point: Exporting countries are at risk from price changes, economic crises, and global events.
Development:
Commodity price changes: Natural resources and raw materials experience extreme price swings.
Economic crises: A slowdown in one country can hurt its trade partners.
COVID-19 impact: Trade disruptions caused massive losses in tourism and exports.
Examples & Evidence:
Thailand’s tourism collapse (COVID-19):
39 million visitors in 2019 → 6.7 million in 2021.
Economy shrank by 6.1% (IMF, 2022).
Nigeria’s oil dependence:
Oil price fell from $115 per barrel (2014) to $30 (2016), causing a financial crisis.
Adaptation strategy: South Korea moved from exporting raw materials to high-tech goods, reducing its dependence on unstable markets.
Spatial/Temporal Considerations:
Short-term crises (e.g., pandemics) hit tourism and exports suddenly.
Long-term solution: Countries that diversify (like South Korea) become more resilient.
Paragraph 5: Trade Barriers and Protectionism Limit Export Opportunities
Point: Exporting countries face challenges from tariffs, quotas, and unfair trade rules.
Development:
Tariffs and quotas: Governments impose taxes or limits on foreign goods to protect local industries.
Subsidies: Some countries support their own industries, making it hard for foreign competitors.
Trade agreements: Countries join free trade blocs to reduce barriers.
Examples & Evidence:
US steel tariffs (2018):
25% tariff on European steel led to a 25% drop in EU steel exports to the US (European Commission, 2021).
African agriculture struggles:
European subsidies make African farm products less competitive.
Solution: African nations signed the African Continental Free Trade Area (AfCFTA) in 2021 to boost regional trade.
Spatial/Temporal Considerations:
Global impact: Trade barriers hurt developing countries the most.
Long-term: Free trade agreements can help overcome barriers but take years to negotiate.
Conclusion
Trade brings many benefits to exporting countries, such as economic growth, job creation, and increased national income. However, it also presents major risks, including dependence on specific industries, income inequality, and vulnerability to price fluctuations.
Some countries, like South Korea, have successfully adapted by diversifying their exports, while others, like Venezuela, have struggled due to reliance on a single industry.
Overall, the impact of trade depends on how well a country manages its economy. Countries that invest in infrastructure, education, and trade agreements tend to gain the most from global trade.
