Trade And TNCs Flashcards
(54 cards)
Define international trade?
The import and export of goods and services between countries.
What is barriers to trade?
A barrier to trade is a government-imposed restraint on the flow of international goods or
services.
Most common barrier to trade is a tariff – a tax on imports.
What are some barriers to trade?
Import license – issued by a national government authorising the import of goods from a specific source.
Import quotas – set a physical limit on the quantity of goods that can be imported into the
country.
Subsidies – grants or allowances usually awarded to domestic producers to reduce costs and make them more competitive against imported goods.
Trade restrictions – other import restrictions may be based on obstacles such as the quality standards of goods being imported or how they are produced.
E.g. the EU attempts to put restrictions on the import of goods knowingly produced using child labour
Embargoes - partial or complete forbiddance of commerce and trade with a country. Usually for political rather than commercial reasons
Voluntary export restraints - strategy offered by exporting country to make peace with importing country and deter it from imposing trade barriers
Does international trade and investment make the world a safer place?
Deaths from war have fallen since WW2, but in the same time volume of global trade has increased.
Global systems may provide greater opportunities for international conflict, might also offer security
In global war, increased risk and cost
make international trade difficult. Components and raw materials may become in short supply.
many businesses relying on international trade would not survive.
Business may not support regional or international war and risk losing businesses.
causes of conflict do not always follow logic / reason.
What are the advantages of international trade?
Comparative advantage
Economies of scale
Purchasing power
Fewer domestic monopolies
Transfer of technology
Increased employment
What are the disadvantages of international trade?
Over-specialisation
Product dumping
Stunted growth or decline of local and emerging industries
Protectionism and tarrifs
De-skilling
Exploitative and labour-intensive industries
Why is comparative advantage an advantage of international trade?
A country specialises in producing only those goods that can be produced efficiently and at the lowest opportunity cost
Why is economies of scale an advantage of international trade?
Producing a narrower range of goods and
services means that a country can produce
in higher volumes and at a cheaper cost per item / unit.
Why is purchasing power an advantage of international trade?
Increasing trade results in increased competition that lowers prices and allows consumers to be able to buy more for their money
Why is fewer domestic monopolies an advantage of international trade?
Domestic prices may be kept high when a single firm controls a large proportion of the domestic market as there is less competition.
Imports from overseas competitors help to lessen this effect
Why is transfer of technology an advantage of international trade?
Application of new technologies is incentivised, as this may lead to design improvements and cost savings as well as supporting innovation and enterprise
Why is increased employment an advantage of international trade?
Increased production for export likely to result in increased employment. As a result of multiplier effect, more jobs will be created across the whole economy
Why is over-specialisation a disadvantage of international trade?
If demand falls or if same goods can be
produced more cheaply overseas, then
production needs to shift to other products.
Specialised production centres tend to be less flexible and less able to diversify.
Why is product dumping a disadvantage of international trade?
Profit lines can be dangerously tight, to the point where goods are sold at a
potential loss.
Dumping refers to exporting
at a price that is lower in the foreign market than the price charged domestically.
Why is stunted growth or decline of local emerging industries a disadvantage of international trade?
New home-grown industries may find it difficult to grow and become established when faced with existing foreign competition, where costs are lower
Why is protectionism and tarrifs a disadvantage of international trade?
A country / government may protect important domestic industries by imposing additional taxes and tariffs on imported goods and / or encouraging exports.
Why is de-skilling a disadvantage of international trade?
Traditional skills and crafts may be lost
when production technology replaces
manpower. So ‘screwdriver jobs’
may dominate.
Why is exploitative and labour intensive industries a disadvantage of international trade?
The biggest cost for most industries is
labour; this is true for consumer manufacturing industries.
By squeezing this cost, even if working conditions are compromised, profits can be maximised.
What has happened to the pattern of volume of trade?
Volume of global trade has increased dramatically since 1980s
The value has increased 8 times between 1980 and 2008
The trade in goods has exceeded pre-pandemic levels
But the manufactured goods exports fell to 63% in 2022 due to high energy prises limiting demand
What is the World Trade Organisation (WTO) and its rules?
The WTO was set up to increase trade and help resolve trade disputes between member
countries.
It sets rules about how countries should trade with each other:
Countries can’t give another country special access to their market without doing the
same for every other country in the world. However, there are exceptions e.g. countries
can give special access to members of their trade bloc.
Countries should promote free trade e.g. by removing as many barriers to trade as
possible,
Countries should act predictably in their trading e.g. by not raising tariffs on particular
products once a deal has been reached.
There should be fair competition – one company or country shouldn’t get an unfair
advantage over rivals.
How is the pattern of international trade changing?
Developed countries remain the biggest global traders. The G7 countries (USA, German,
Japan, UK, Canada, Italy, France) account for nearly 50% of global trade.
Less developed countries are becoming bigger traders, but growth is slow. Between 1993
and 2013, the share of BRICS countries’ exports in world trade increased.
The increase in world trade during the last decade was largely driven by the rise of
trade between developing countries (South to South).
What is the role of the BRIC countries in trade?
The four large economies of Brazil, Russia, India and China are key players in world trade.
All have an extensive land area, are mineral-rich and have a large potential home-market in terms of population numbers
What is the role of the MINT countries?
The four fast-growing economies of Mexico, Indonesia, Nigeria and Turkey are all important manufacturing hubs.
Nigeria is additionally a major exporter of oil and also trades globally in low-budget films (the “Nollywood” film industry).
What is foreign direct investment (FDI)?
when a person, company or other group spends money in another country in order to generate profit, e.g. by opening a new branch of their business or investing in local infrastructure. is an important source of funding for development in all countries, especially for the least developed economies wanting to catch up.
