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13.1 Global Interdependence: Trade flows and trading patterns

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13.1 Global Interdependence: Trade flows and trading patterns.

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13.1 Global Interdependence: Trade flows and trading patterns

  1. 1. CAMBRIDGE A2 GEOGRAPHY REVISION GLOBAL INTERDEPENDENCE 13.1 TRADE FLOWS AND TRADING PATTERNS
  2. 2. KEYTERMSANDDEFINITIONS Imports are goods and services purchased from other countries. Exports are goods and services sold to other countries. Balance of trade is the difference between the value of a country’s imports and exports. Trade deficit is when the value of a country’s imports exceeds the value of its exports. Trade surplus is when the value of a country’s exports exceeds the value of its imports. Visible trade involves items that have a physical existence and can actually be seen. Invisible trade is trade in services, which includes travel and tourism, and business and financial services.
  3. 3. KEYTERMSANDDEFINITIONS Primary product dependence is when countries rely on one or a small number of primary products for the bulk of their export earnings. Trade dependency is when a developing country is so reliant on its advanced trading partner(s) that any changes in their economic policy or economic condition could have a severe effect on the developing country’s economy. The terms of trade refer to the price of a country’s exports relative to the price of its imports, and the changes that take place over time. Fair Trade is a movement that aims to create direct long-term trading links with producers in developing countries, and to ensure that they receive a guaranteed price for their product, on favourable financial terms.
  4. 4. KEYTERMSANDDEFINITIONS Trade bloc is a group of countries that share trade agreements between each other. Free trade is a hypothetical situation whereby producers have free and unhindered access to markets everywhere. While trade is freer today than in the past, governments still impose significant barriers to trade and often subsidise their own industries in order to give them a competitive advantage. Protectionism is the institution of policies (tariffs, quotas, regulations) that protect a country’s industries against competition from cheap imports.
  5. 5. TOPICSUMMARY Trade refers to the exchange of goods and services for money. The origin and continuing basis of global interdependence is trade. Trade results from the uneven distribution of resources over the Earth’s surface. Goods and services purchased from other countries are termed ‘imports’. In contrast, goods and services sold to other countries are called ‘exports’. Visible trade involves items that have a physical existence and can actually be seen. Invisible trade is trade in services. The share of developing economies in world merchandise trade set new records in 2008, with exports rising to 38% of the world total and imports increasing to 34%. Germany was the largest exporter of merchandise in 2008 with 9.1% of the global share. However, the USA dominates imports by a huge margin, taking over 13% of the world total.
  6. 6. TOPICSUMMARY A range of factors influence the volume, nature and direction of global trade, including resource endowment, locational advantage, historical factors such as colonial ties, trade agreements and changes in the global market. Resource endowment is a very significant factor in world trade. For example, the Middle East countries dominate the export of oil. The concept of comparative advantage is an important part of classical theory on international trade. The location of market demand influences trade patterns. Some countries and cities are strategically located along important trade routes, giving them important advantages in international trade.
  7. 7. TOPICSUMMARY Investment in a country is the key to it increasing its trade. The most vital element in the trade of any country is the terms on which it takes place. The terms of trade for many developing countries are worse now than they were two decades ago. Thus, it is not surprising that so many nations are struggling to get out of poverty. The rapid growth of newly industrialised countries has brought about major changes in the economic strength of countries and their ability to trade. The World Trade Organisation (WTO) exists to promote free trade. Most countries in the world are members and most who are not want to join. Many non-governmental organisations (NGOs) are major critics of the way the present trading system operates.
  8. 8. TOPICSUMMARY The removal of tariffs can have a significant impact on a nation’s domestic industries. For example, India has been very concerned about the impact of opening its markets to foreign imports. Many supermarkets and other large stores in Britain and other MEDCs now stock some ‘fairly traded’ products. Most are agricultural products such as bananas, orange juice, nuts, coffee and tea, but the market in non-food goods such as textiles and handicrafts is also increasing.
  9. 9. ADDITIONALWORKS • Look at a the food products and b the manufactured goods in your home. How many of these products are imported and where do they come from? • Produce a summary of the trade in merchandise and commercial services for the country in which you live. • Look at the World Trade Organization website (www.wto.org) to find out what is currently happening with world trade negotiations. • Find out which Fair Trade products are on offer in your local shopping centre. Has the range of Fair Trade products expanded in recent years?
  10. 10. SUGGESTEDWEBSITES www.wto.org www.worldbank.org www.ec.europa.eu www.oecd.org www.intracen.org

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