Unit 3 - Understanding the impact of the Global Economy Flashcards
What is a trading bloc?
A trading bloc is a group of countries that come together and form agreements to promote trade among themselves by removing or reducing barriers to trade
Give examples of trading blocs.
-European Union
-NAFTA
-SAFTA
-African Union
Describe the European Union.
The most integrated trading bloc. The EU27 have free trade and common regulations and are part of a customs union.
Describe NAFTA
North Atlantic Free Trade Association. A free trade area between Canada, US and Mexico
Describe SAFTA
South Asia free trade area based around the Indian subcontinent. Includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
Describe the African Union
55 countries of the continent of Africa. Created to forge closer political and economic ties. It has aspirations to become a free trade area.
What are the benefits of being part of a trading bloc? (5)
-Tariff removal leads to an increase in trade between member countries. This can lead to increased economic growth and decreased unemployment.
-No internal border checks/free movement of goods and services within the bloc. This means that there are fewer opportunities for delays for firms and reduced administration costs for governments
-A common external tariff can be applied to those outside the bloc.
-Member countries can negotiate trade deals as a bloc making them stronger. This leads to more favourable trade terms with outside members.
-A trading bloc can attract foreign direct investment as multinationals will want access to the larger free market.
What are some examples of developing countries?
Afghanistan
Cambodia
Chad
Liberia
Sierra Leone
Rwanda
What are the characteristics of developing countries? (13)
-High rates of unemployment and underemployment
-Unskilled, poorly educated labour force (low literacy rates)
-Lack of capital investment – subsistence economies with no surplus to invest
-Poor infrastructure and lack of investment in infrastructure
-Corruption of Government and officials
-Lack of foreign investment other than in mining and primary production
-Reliance on market price of one export, usually a primary product
-Weak tax base so little Government revenue
-Political instability and military conflicts divert resources
-Inadequate health services, high HIV rates, low life expectancy, high infant mortality
-Dependent population is high relative to the working population
-Low GDP per capita
-Dependency on agricultural products
What are the different types of aid given to developing countries by developed countries? (10)
-Food aid
-Emergency aid
-Medical aid
-Technical assistance
-Educational support
-Soft Loans
-Military Aid
-Assistance with Capital Projects
-Liberal trade policies
-Debt relief
What are developing economies?
They are countries that have an underdeveloped industrial base while others will link it to a low Human Development Index score.
What is emergency aid?
The supply of temporary shelters, water, food
What is medical aid?
The supply of vaccines, healthcare professionals
What is technical assistance?
This is giving advice on how best to run a government or on how firms and workers can become more efficient.
What is educational support?
This could focus on the training of teachers in order to improve the quality of education delivered
What are soft loans?
This is a loan with a low interest rate
What is military aid?
This could be in the form of a training team or military equipment
What is assistance with capital projects?
A donor country can provide aid to assist with capital projects such as building hospitals and transport infrastructure.
What are liberal trade policies?
This is the reduction of barriers to trade. This will allow exporters in developing countries the ability to sell their products without having to pay tariffs.
What is debt relief?
This is when part of a debt is written off or the amount owed is reduced.
On the one hand, debt relief will allow developing countries to use the money spent on paying back debt, or in some cases paying just the interest, to invest in education and healthcare that will create economic growth. However, if a country has its debt written off, then it might think it can build up debt again and it will be written off.
What are the different ways of giving aid?
Bilateral aid, Multilateral aid and tied aid.
What is bilateral aid?
the assistance from one country to another.
What is multilateral aid?
Multilateral aid is assistance provided by a group of countries, or an institution representing a group of countries such as the World Bank, the United Nations, or the International Monetary Fund (IMF) to one or more recipient countries.
What is tied aid?
the country receiving the aid must spend the money on goods and services from the country providing it.
