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International trade and access to markets (Trade Organisations - attempt…
International trade and access to markets
International trade
advantages of international trade
comparative advantage - a country specialising in producing certain goods therefore produce them efficiently and at the lowest cost
economies of scale - producing a narrower range of goods and services means that a country can produce in higher volumes and at a cheaper cost
purchasing power - increasing trade results in increased competition that lowers prices and allows consumers to be able to buy more for their money
fewer domestic monopolies - domestic prices may be kept high when a single firm controls are large proportion of a market, this is lessened buy foreign imports from overseas competitors
transfer of technology- using new tech is incentivised which leads to design improvements supporting innovation
increased employment -increased produce for export. multiplier effect means will increase employment across whole economy
disadvantages of international trade
over specialisation - if demand falls or if the same goods can be bought more cheaply elsewhere
stunted growth or decline of local industries - local businesses face competition with foreign businesses charging much less, eg influx of TNC's into an area
product dumping - profit lines can be soooo tight even where goods are sold as a loss, selling goods as cheaper in foreign currency than the domestically charged price
protectionism and tariffs - a country or a government may protect important domestic industries by imposing additional taxes and tariffs and imported goods
de-skilling - when production becomes mechanised people will lose jobs, screwdriver jobs will dominate
exploitative and labour intensive industries - conditions compromised, profits maximised. outsourcing of labour due to less stringent legislation
patterns of international trade and investment
manufactured consumer goods trade is dominated by North America, Europe and East Asia
FDI foreign direct investment
the amount of capital invested in foreign countries.
China investing 18 billion in to hinkley point makes them indispensible to the uk
trade agreements and access to markets
Major trade blocs
ASEAN - Association of South East Asian Nations
OPEC - Organisation of the Petroleum Exporting countries
NAFTA- North American Free Trade Agreement
EU - European Union
MERCOSUR -Mercado Comun del Sur
trade blocs support free trade between member countries, countries outside the bloc have to pay an additional fee/tariff to trade with the country. opposing arguments are that they stop the creation and development of global economies
Trade Organisations - attempt to govern and set rules of trade
World Trade Organisation (WTO) - formed in 1993, it aims to cut trade barriers, so goods can flow more easily
Organisation for Economic Cooperation and Development (OECD) - think tank of the worlds 30 wealthiest nations
Organisation for Petroleum Exporting Countries - 11 states who supply 40% of world's oil, tries to manage oil price so stays low
G8 - Canada, France, Russia, Italy, Germany, UK, USA, Japan - discuss world economy and development, formed G12 to include China, India, Brazil, Mexico and South Africa
G20 - all of G12 and <south Korea, Australia, Turkey, Saudi Arabia, Argentina, Indonesia and the leader of the EU, discuss methods to encourage economic growth
World Bank - promote global investment and provide loans for countries under certain countries
International monetary fund - promote financial stability and growth of international trade
TNC's - transnational corporations
has operations in two or more countries
spatial organisation
research and development - in HIC's near universities and hospitals
production - primarily in LIC's where there is less stringent legislation
HQ's - HIC's, the country where the TNC is based, however some TNC's have regional HQ's abroad
horizontal integration - TNC owns all firms in the same stage of production
vertical integration - TNC owns all stages of production/produces everything themselves
vertical disintegration - bypass production completely by sourcing products from suppliers, often in LIC's where there are fewer laws, worse conditions and lower wage bills (Naomi Klein)
impacts of TNC's
Host country
favourable
increase employment and living standard
improves skills and expertise
encourage transfer of technology
unfavourable
many jobs are low skill in LIC
majority of profits are sent back to home country
managerial positions are brought in rather than developed locally
country of origin
favourable
development of higher order jobs in research
overseas investment improves economy
wider share ownership
unfavourable
workforce may need to relocate
tax is not always fully paid
reasons for the growth of TNC's
cheap labour - lower wage demands from LIC's and also unemployed HIC's
flexible workforce
availability of finance to fund expansion
fewer environmental restrictions
globalised transport network
technological developments
cheap land
Fair trade: Bananas
Most popular fruit in the world
Grown in tropical conditions
HICs reliant on imports
Bananas cheaper than apples in the UK
Loss leaders in supermarkets
TNCs can buy in bulk, cheaply and keep costs low
Fairtrade bananas have recently taken off – 1 in 3 sold in UK is now
fairtrade
More expensive but still sell well – change in consumer attitudes?
Guarantees farmers a fair price for their
products, offers fair terms of trade and
includes a development premium for
reinvestment in the local community
Bananas commonly grown on
plantations – TNC involvement, poor
working conditions, natural habitats
removed, high pesticide use
Usually as a plantation monoculture, run
by a TNC that owns all aspects of the
business – vertical and horizontal
integration
TNCs still highly powerful