Trade Flashcards
(26 cards)
What is protectionism
1 way for country to develop is through producing many products within country instead of relying on imports
To allow industries to develop and produce these goods, government create policies to protects them from foreign competition
These policies include
Quotas tariffs/duties and or subsidies and
What is a quota
Limit on the amount of a product that can be imported or exported
Setting a quota limits foreign competition because local businesses do not have to compete for every scale
What are tariffs and duties
Tax paid on imports or exports
This limits foreign competition by increasing the cost of foreign goods
What is a subsidy
Payment by government to producer
This means that the producer can sell their product more cheaply and can therefore compete and still make a profit
What is free trade
Emphasised the idea that their should be no protectionist policies
Idea a country should specialise it what it can produce efficiently and profit from that and import other products
Most efficient production systems would develop
What are trade blocks
Groups of countries like the EU who agree to trade freely within the bloc
They set up protectionist policies for trade outside the bloc
Therefore they work together to maximise trade between themselves and control trade between the block and foreign competition
What is fair trade
The importance of profit reach the actual producers of goods
Promoted by charities and non gov organisations
Fair trade labelling aims to give consumers a choice about whether to buy into helping producers more or not
What is the TEAR for global patterns of trade and investment
Value and volume of world trade increasing dramatically esp in last 50 years
Increases 115X from 1863-2013
No significant anomalies - doubles every 10 years use but can argue
2003-2013- world exports increase around $11,000 which is significantly higher than previously
R- factors of globalisation
Why is global trade increasing
Idea trade barriers should be reduced or removed so all countries can buy and/or sell goods or provide services which are good at producing and buy goods and services which they are not good at producing
Free trade should make this possible
But the problem with this is that
High tariffs ensure people buy goods manufactured in their country as it is good for eco
What is the aim of the WTO
Free trade
What is the WTO
International organisation run by UN which governs 87% of world trade
Why is the barrier to free trade
Some countries prefer protectionist policies
How much could world trade in goods worth
$35 trillion
How much could world trade in services be worth
$6 trillion p
Where will the fastest growth of world trade be
Pacific region
Explain the distribution of global trade
Unequal
37% top 5 exporting countries
0.6% poorest 49 countries
Unequal by type
HIC and NIC produce manufactured/consumer goods which add value to raw materials
LIC produce primary products which are low value and for which prices fluctuate
Global trade since 1963
Change in % trade between different parts of world with ‘global shift’ from HIC like USA to NIC in Asia esp India and china
LIC remain largely excluded from world trade
USA Dec 1963-2013 6%
Chiba inc “. “. 10%
Europe
1963-73 increase
1963-2013 decrease 10%
Link between trade and foreign direct investment
FDI and trade - positive correlation
As trade increases so does FDI
Data to support inc -14% in FDI trade in HIC compared to 23% increase in South Asia
Trading relationships and access to markets
Countries need to teach agreements and be able to trade with other countries - several ways they can do this
Bilateral agreements
Trading blocs
International agreements through WTO
Once an agreement has been reached, countries can usually trade with few if any restrictions - free trade
However reaching agreements time consuming and complex
Bilateral agreements
These are relationships that countries negotiate directly with one other country
The U.K. is currently looking to negotiate deals after brexit
Eg the PM visited China Feb 2018
Trading blocs
These are a group of countries which have agreed to allow free movement of certain foods and services between all members
The EU, NAFTA and ASEAN are all powerful trading blocs
Critics of trading blocs - not free trade as countries outside bloc have to pay tariffs - restricts developments of LIC- form of protectionism
International agreements through WTO
WTO sets and manages rule of global trade
Want free trade by negotiating global trade agreements
It has 160 countries (75% LIC) who run the WTO
TARIFFS ARE AFREED
Critics of WTO
Takes too long to teach global agreement and that core countries may refuse to make agreements which are at their disadvantage
Doha Talks 2001- aimed at reducing agricultural tariffs 30% and reducing subsidies paid to farmers in wealthy countries
This increased value of trade for LIC (many rely on export of primary products)
Problem - farmers in HIC - competition from LIC
2013- Doha talks collapsed w out agreement as HIC including USA and EI would not reduce farm subsidies sufficiently and emerging nations like China and India would not reduce tariffs in manufactured goods sufficiently
There was a stale mate
Consequence - LIC still find it difficult to sell some agricultural towers and HIC and difficult to sell manufactured in emerging markets - protectionism
Explain SDT
Special and differential treatment agreement
Promoted by WTO and designed to allow some poorest countries on planet (LDC) to have access to world trade markets to sell their products
Aim to give LDC (about 50 mostly in Africa) access to HIC markets for their primary products
In time they should enable development and poverty to be reduced
Eg SDT- EU ‘everything but arms’ agreement in which LDC were given tariff free access to EU markets for all products except arms and ammunition
This policy has had limited success as some IC do not participate for fear of cheap goods flooding their makers
