TRADE PATTERNS

Question 1

WHAT AFFECTS PATTERNS OF TRADE?

Answer 1

1. CHANGES IN COMPARATIVE ADVANTAGE
2. GROWTH OF BRIC COUNTRIES
3. CREATION OF TRADING BLOCS AND BILATERAL AGREEMENTS
   4 CHANGES IN RELATIVE EXCHANGE RATES

Question 2

HOW DO CHANGES IN COMPARATIVE ADVANTAGE AFFECT PATTERNS OF TRADE?

Answer 2

UK USED TO HAVE A COMPARATIVE ADVANTAGE IN MANUFACTURED GOODS BUT GLOBALISATION HAS LED TO OUTSOURCING TO DEVELOPING COUNTIRES WITH LOWER WAGES, MEANING THE UK NOW SPECIALISES IN SERVICES - UK NOW SELLS DIFFERENT GOODS TO DIFFERENT COUNTRIES.

Question 3

HOW DOES GROWTH OF BRICs AFFECT THE PATTERN OF TRADE?

Answer 3

GROWTH OF BRICs MEANS THEY NOW MAKE UP A LARGER % OF WORLD TRADE. THEIR EXPORT-LED GROWTH STRATEGY HAS LED TO THE CREATION OF LARGE CURRENT ACCOUNT SURPLUSES FOR THEM - DIVERSIFIES THEIR PATTERNS OF TRADE

BUT CURRENT ACCOUNT DEFICITS FOR COUNTRIES LIKE THE US AND UK.

Question 4

HOW HAS THE CREATION OF TRADING BLOCS AND BILATERAL AGREEMENTS AFFECTED THE PATTERNS OF TRADE?

Answer 4

TRADING BLOCS CAUSE TRADE DIVERSION WHERE COMMON EXTERNAL TARIFFS ENCOURAGE GREATER TRADING WITHIN THE BLOC AT THE EXPENSEOF TRADING OUTSIDE THE BLOC.

Question 5

HOW DO CHANGES IN RELATIVE EXCHANGE RATES AFFECT THE PATTERNS OF TRADE?

Answer 5

A WEAKER EXCHANGE RATE WILL (ASSUMING PRICE ELASTIC DEMAND) DAUSE GREATER EXPORTS AND LOWER IMPORTS. A STRONGER ER WILL (ASSUMING THE SAME AGAIN) CAUSE GREATER IMPORTS AND LOWER EXPORTS.
SPICED AND WPIDEC

Question 6

WHO R THE UK’S MAIN TRADING PARTNERS?

Answer 6

USA
GERMANY
NETHERLANDS
IRELAND

Question 7

WHAT ARE BRIC COUNTRIES?

Answer 7

BRICS is an intergovernmental organization of major developing economies designed to challenge Western economic influence.

Originally, Brazil, Russia, India, China, became BRICS in 2010 with South Africa and expanded in 2024 to include Egypt, Ethiopia, Iran and the UAE.