Trade

Question 1

How much has international trade increased by in the last 30 years

Answer 1

Around 730%

Question 2

Significant changes in pattern of trade

Answer 2

Growth of trading blocs

Emergence of Middle Income Countries

Deindustrialisaiton

Question 3

The growth of trading blocs

Answer 3

A trading bloc - groups of countries that have signed an agreement to reduce tariffs, quotas or other protectionist barriers

Increased considerably in the last 40 years

Encourage greater free trade amongst members, whilst discouraging trade outside the bloc

Question 4

Emergence of MICs

Answer 4

Countries such as India and China have become significant global players in terms of all aspects of trade

Collapse of communism in Russia and Eastern bloc states has significantly opened up global markets

These new MICs: Import raw materials from developing countries and export manufactured goods to deindustrialised HICs

Question 5

deindustrialisation

Answer 5

Comparative advantage in manufacture has shifted to China, India

traditional western nations e.g. UK have deindustrialised

Manufacturing replaced with financial services and other tertiary markets

Question 6

What has happened to the nature of UK trade with the rest of the world in the last 30 years

Answer 6

Used to be a member of a trading bloc - the EU

Trade patterns now changing now we no longer in the EU

It has deindustrialised - imports most of its manufactured goods and services from middle income countries like BRIC economies

Trade deficit on primary and secondary sectors, surplus on tertiary sectors

Question 7

Gravity trade theory

Answer 7

Says that trade between two countries is usually

Greater when their economies are larger

Greater when they are closer together geographically

Cuts transport costs, time, cultural similarity
E.g.
UK trades a lot with Germany and France as they are both large economies and relatively close to the UK

Question 8

Trading blocs

Answer 8

When the governments of a group of countries agree to trade together freely

Countries normally grouped together geographically

Members make preferential economic and sometimes political arrangements to boost trade

Question 9

Types of trading blocs

Answer 9

Free trade areas - members agree to either reduce or eliminate trade barriers for all goods and services

Customs Unions - Members agree to the removal of trade barriers amongst themselves

Common markets

Monetary/Currency unions

Question 10

Customs Unions

Answer 10

Trade negotiations are conducted on behalf of all member states

EU is the biggest customs union in the world - 15.5% share of world trade

Key characteristics: Freedom of movement of goods, services, capital and labour

Question 11

Common markets

Answer 11

Markets agree to the removal of trade barriers as well as the freedom of movement of FOP within bloc

Often involves common economic policies

Question 12

Currency Unions

Answer 12

Comprises of the features of both a customs union and a common market, but also have a single currency

Question 13

Benefits of trading blocs

Answer 13

Free trade within the bloc encouraging specialisation and trade

Easier access to knowledge, workers and components

EOS

Take advantage of favourable differences between members e.g. labour costs

Question 14

Costs of trading blocs

Answer 14

may reduce trade with countries outside of the bloc

Not all members may have same power

May damage domestic industries

Question 15

Advantages of the EU

Answer 15

Trade creation

Competition - drives productive and dynamic efficiency

Access to markets

Freedom of movement - boost labour mobility

Question 16

Disadvantages of the EU

Answer 16

Trade diversion - tariffs diverts trade from EU

Monopolies e.g. gas, electricity

Unemployment in some countries - brain drain

Cost of membership

Question 17

Positive implications of EU enlargement

Answer 17

potential for EOS and free trade

Increased competition may drive down production costs leading to lower prices and increased choice

Businesses able to take advantage of relatively low wages

Question 18

EU enlargement

Answer 18

Grew from 6 to 28 member states from 1958

in 2016, UK voted to Leave, Croatia joined in 2013

Question 19

WTO

Answer 19

One of the main organisations involved in trade liberalisation established in 1995

Purpose is to promote free trade

Currently 160 members

Policies free trade agreements, settles trade disputes

Every member must abide by its rulings

Question 20

Conflicts between trading blocs and WTO

Answer 20

Distorts trade by creating barriers

Negatively impact on non-members

Allocate resources in inefficient manner

Lead to protectionist policies between trading blocs