4.1.3 - pattern of trade Flashcards
what is the pattern of trade
the patterns seen when countries trade with each other
how does countries having comparative advantages influence the pattern of trade
Countries will trade where there is a comparative advantage to trading. A change in the comparative advantage will affect the trade pattern. There has been a recent growth in the exports of manufactured goods from developing countries to developed countries. This is because developing countries have gained an advantage in the production of manufactured goods, due to their lower labour costs, so production shifted abroad. The deindustrialisation of countries such as the UK has meant the manufacturing sector has declined. This means that production of manufactured goods has shifted to other countries, such as China, whilst the UK now focuses more on services, such as finance. This has led to the industrialisation of China and India. Their share of world trade has risen and the volume of manufactured goods that they export has increased. However, since China’s population is now ageing, their wage competitiveness has fallen. This is also due to the rise of the middle class in China, who demand higher wages and consume more.
how do emerging economies affect the pattern of trade
Emerging economies: Countries grow at different rates and when they grow, they are likely to need to import more goods and services than before as well as exporting more to pay for this. Emerging economies shift the trade pattern by taking up a larger proportion of a country’s imports and exports than they had previously
how do trading blocs and bilateral agreements affect the pattern of trade
● Trading blocs and bilateral trading agreements: These increase the level of trade between certain countries and so influence the pattern of trade because trade increases between these countries and decreases between others. Joining the EU meant that the UK traded a lot more with European countries than previously, and less with countries outside the EU.
how do exchange rates affect the pattern of trade
Relative exchange rates: The exchange rate affects the relative prices of goods between countries. Prices are an important factor in determining whether consumers buy goods and so a change in price will affect the pattern of trade. It can be argued that the UK’s trade deficit with Europe is due to the strength of the pound. China have kept their currency weak in order to increase their trade surplus by making exports more competitive.
