Unit 3 - Global Trade

Question 1

Define global trade.

Answer 1

This is the import and export of foods and services across international boundaries.

Question 2

Who are the UK’s top 5 export trading partners?

Answer 2

USA, Ireland, Netherlands, France, Germany

Question 3

Who are the UK’s top 5 import trading partners?

Answer 3

USA, Germany, China, Netherlands, France

Question 4

What are the top 3 UK goods exports?

Answer 4

Road vehicles, power-generating machinery and equipment, medicinal and pharmaceutical products.

Question 5

What are the top 3 UK service exports?

Answer 5

Business services; financial; ICT services

Question 6

What are the top 3 UK service imports?

Answer 6

Business services, Travel, Financial

Question 7

What are the top 3 UK goods imports?

Answer 7

Gold, road vehicles, electrical machinery.

Question 8

What are the advantages of global trade to individuals? (5)

Answer 8

-Global trade offers consumers greater variety and choice in the types of goods and services = improved standard of living

-Goods could be cheaper than domestically produced goods. = improved standard of living

-Global trade provides competition for domestic firms, who have to ensure that they are efficient. This increase in world competition can reduce world prices for that good/service.

-Firms must also produce goods of at least the same quality as foreign produced goods=benefit from better quality and cheaper goods/services.

-Global trade allows countries to benefit from specialisation.

Question 9

What are the advantages of global trade to firms? (4)

Answer 9

-Firms now have access to a greater choice/variety of raw materials to make their goods with and potentially be able to get lower prices for raw materials. This will help reduce the costs of production and therefore increase supply or allow the firm to reduce their prices.

-Increased quality of raw materials can lead to improved overall quality of the goods which can lead to an increase in demand for their product leading to potential greater profits.

-Availability of new markets for firms to enter and export their product to.
Higher profits to exporting firms due to the increase in demand.

-Multinationals can take advantage of cheap labour/land/relaxed regulations in other countries helping to reduce the costs of production.

Question 10

What are the advantages of global trade to government?

Answer 10

-Global trade can augment (increase) home supplies which may be experiencing shortages

-Stimulates great efficiency in production which can lead to economic growth

-Trade can bring countries together politically

Question 11

What is a barrier to trade?

Answer 11

a government-imposed restraint on the flow of international goods or services.

Question 12

What are some different barriers to trade? (5)

Answer 12

Tariffs
Subsidies
Quotas
Embargoes
Strict Health and Safety Standards.

Question 13

What are tariffs?

Answer 13

This is a tax or duty to be paid on a particular product that is imported or exported. This will cause the foreign firm to supply less but at higher prices. This is because the tariff will increase their cost of production, shifting their supply curve to the left. This increase in the price of importing or exporting that good will reduce competitiveness in that market.

Question 14

What are subsidies?

Answer 14

This is money given to domestic firms by the UK government to reduce their costs of production. This means that the firm can supply more or the same but at a cheaper price. These can be put in place by governments to protect infant industries so they can grow and compete with larger multinational companies.

Question 15

What are quotas?

Answer 15

A quota is a limit on the quantity of a good that can be imported into a country in a given period of time.Therefore once the limit is reached no more are available and therefore consumers must buy domestic alternatives.

Question 16

What are strict health and safety standards?

Answer 16

These are rules designed to ensure the safety of products, activities or processes. These will prevent unsafe products from entering the UK.

Question 17

What are embargoes?

Answer 17

An official ban on imports and trade with a particular country. This might be retaliation for a country putting an embargo on our goods. Since the product is no longer available consumers must buy domestic alternatives.

Question 18

Why might a country impose barriers to trade? (6)

Answer 18

-Countries may impose trade restrictions to protect their own domestic industries from foreign competition

-Countries may impose trade restrictions to try and correct a significant deficit on the Balance on the Current Account.

-Countries may impose trade restrictions because they may wish to protect infant industries from foreign competition. This would give the new industries time to become established.

-Countries may impose trade restrictions because they wish to preserve health and safety within their country.

-To punish countries for bad behaviour e.g. violations of human rights

-Retaliation to countries that put trade barriers in place against a country

Question 19

What are reasons against barriers to trade? (5)

Answer 19

-Reduces free trade, so consumers have less choice.

-Imported goods with tariffs are likely to be more expensive for consumers

-Increased prices of goods being imported can lead to inflation which may result in standards of living deteriorating.

-Less competition for domestic firms, who may therefore not seek efficiency which may result in goods/services of poorer quality.

-Reduces demand for products in developing countries which can lead to increased unemployment in those countries.