What is global interdependence?
- describes the worldwide mutual dependence as individual nations rely on other countries to supply the goods + services they can not produce themselves
- this is achieved through trade
What is global trade?
- the buying + selling of capital, goods + services across international borders
- this is possible due to globalisation
- international trade occurs as countries do not have enough raw materials + manufactured goods, so they have to buy from elsewhere
What is visible trade?
Involves items that have physical existence + can actually be seen
What is invisible trade?
Trade in services that include travel + tourism, businesses + financial services
What has been the global pattern of trade flows?
- growth in the value of global trade in goods + services
- severe dip in trade during financial crisis 2008-09
Factors affecting world trade?
- resource endowment
- comparative advantage
- locational advantage
- investment
- historical factors
- terms of trade
- changes in global market
- trade agreements
What is resource endowment
Natural occurrence of resources in a country
How does resource endowment affect trade?
- impacts international trade patterns as countries that are endowed with a particular resource control + dominate world trade of that resource —> e.g. OPEC (Middle Eastern) regulate oil prices by controlling oil supply
- global trade inequalities as LICs are dependent on low value primary products which are vulnerable to price fluctuations —> e.g. 80% of Uganda’s exports are agricultural products + overproduction of coffee between 1995-2000 led to a 75% fall in their export prices = ability to earn foreign currency fell
What is comparative advantage?
Idea that countries will specialise in producing specific goods + services for which they are best endowed
How does comparative advantage affect trade?
- HICs often specialise in high value goods rather than primary goods —> e.g. Japan is a big producer of high tech + Germany cars
- some countries dominate the production of manufactured goods through trade blocs —> e.g. EU = charge high tariffs on imports outside the block = protecting HICs + creating an unfair advantage as businesses in NICs/LICs find it difficult to compete in the world market
What is locational advantage?
Location of market demand influences trade patterns
How does locational advantage affect trade?
- it is advantageous for an exporting country to be close to the market for which it produces = reduced transport costs —> e.g. France’s tourist industry benefits from large populations in neighbourhood countries which are also HICs + Canada benefits from proximity to US (70% of their exports went to US in 2016)
- strategic positioning of some countries on import trade routes —> e.g. Singapore is located on the main route between India + Pacific Ocean + Rotterdam is located near the mouth of the river Rhine (large ocean carriers)
What is investment?
Act of committing money or capital to an endeavour with the expectation of obtaining additional income or profit
How does investment affect trade?
- key for many countries to increase trade + growth
- the amount of money invested is dependent on the security of the investment = social, economic + political stability —> sub-Saharan African countries not attractive due political instability (conflicts) + poor infrastructure + no trade links due to land-locked nature
- more likely to invest in NICs = established infrastructure + low labour costs
How does historical factors affect trade?
- old colonial ties e.g. common wealth —> led to worldwide trade dependency with poorer tropical counties having limited share of the world trade
- UK still has strong trade links with other countries within the commonwealth —> historically they exploited LICs in the empire to boost England’s economy = LICs unable to develop economically like LICs outside of the empire
