13.1 Global Interdependence: Trade flows and trading patterns.

1. CAMBRIDGE A2
GEOGRAPHY REVISION
GLOBAL INTERDEPENDENCE
13.1 TRADE FLOWS AND
TRADING PATTERNS

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.

4. 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.

6. 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.

8. 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.

10. 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.

12. 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.

13. 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.

14. 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?

15. SUGGESTEDWEBSITES
www.wto.org
www.worldbank.org
www.ec.europa.eu
www.oecd.org
www.intracen.org