13.1 Trade flows and trading patterns

• Globalisation


  Process through which an increasingly free flow of ideas, people, goods and services and capital leads to the integrations of economies and societies.
• Impacts of Globalisation

  Communication Technology-internet allows for transactions, skype, facetime, allows people to live abroad and work for another firm, research and development is instant through internet, electronic currencies.Transport Developments and Routes-speed and efficiency increased, transfer people, access remote areas, transport is more affordable, geopolitics now easier.Containerisation-opens markets to young businesses, allows for economies of scale, susceptible to shocks e.g COVID.International Population Flows-different communities build up, diaspora, brings in new ideas, social mosaic, historical links.
• Trade

  Action of buying and selling goods and services
• Trade Balance/Balance of Payments


  Difference between money entering and money leaving a country and a record of all financial transactions.
• Visible Trade


  Exchange of physically tangible goods between countries.
• Invisible Trade


  International transactions that do not include the exchange of tangible goods.
• What is Generally Traded Globally?

  -Goods (primary/secondary), but lower in value.

  -Services, but price is more stable.

  -Results in a trade balance (surplus=exports>imports, deficit=imports>exports).
• Why Countries Trade

  -Comparative advantage (lower opportunity cost), helps to maximise production and efficiency, which leads to profits and economic growth.
• General Trade Barriers

  Anything that hinders trade;

  -Policies (tariffs, quotas etc)

  -Natural barriers (landlocked country etc)
• Trading Bloc


  Group of countries which engage in international trade together, can involve protectionist measures, which cuts off other nations.
• World Trade-where is it moving and heading to?

  2021

  -Trade value was at record high ($28.5 trillion)

  -Trade imbalances grown

  -Leading service exporters was USA

  -Merchandise exports increased strongly (26.5%)

  -Fuel exports increased sharply

  -Africa imported 3x more manufactured goods than exported

  -Rise in value of intellectual property.
• General Trade Losers

  -Africa in 2021, imported 3x more manufactured goods than exported.

  -Those areas with lower concentrations of exports.

  -Lack of mobility means people can't move from shocks etc.

  -Those countries that are geographically isolated (32 developing nations are landlocked).

  -Places with only one main export (external shocks)

  -Countries that lack a good education system.
• General Trade Winners

  Merchandise-China and US (bilateral trading partners)

  -Jobs in US and Brazil due to Chinese import competition.

  -Many developing nations are now entering trading blocs.

  -Comparison of trade between HIC + LIC now driven by comparative advantage.

  -HIC's or fast developing nations are those who are dominating trading markets.

  -Countries with good relationships
• USA Trade Deficit-Reasons Why ?

  -Consumes more than it can produce (imports>exports).-Been in a deficit since WW22019-export of merchandise=$1.65t, import of merchandise=$2.52t.-USA has borrowed a lot of money, and China "bought" the USA loans, which they now have to pay back.-Had to change it's macroeconomic policies to earn money and reduce fiscal deficit.However isn't a big issue because;-has trade relationships-resource endowment-has the ability to pay it back-huge investments elsewhere-can make money domestically through taxes and savings etc.
• World Trade Leaders

  Coffee-Brazil ($5 trillion)

  Financial Services-UK (£173.5 billion)

  Cars-Germany ($142.3 billion)

  Tourism-Maldives $5.5 billion)

  Crude Oil-Saudi Arabia

  Iron Ore-Australia
• Who is Struggling to Gain Access to World Trading Markets ?

  Geographically isolated through being landlocked-32 developing nations landlocked.

  -Countries not in trading blocs/agreements but some buck this trend, e,g Iceland.

  -Places with only one main export as susceptible to external shocks, e.g tourism in Maldives.

  -Conflict, e.g Syria

  -If they lack education systems that are accessible.
• How Does the USA's Geographical Location Allow for Trade ?

  -3 coastlines

  -Trade relations with over 200 countries

  -360 shipping ports

  -13,513 airports

  -160,000 miles of train tracks

  -Political stability

  -6.58 million km of road

  -Able to run an effective trade deficit
• How Does Uganda's Geographical Location Hinder its Trade ?

  -Landlocked country

  -Surrounded by developing countries

  -80% of total exports from agriculture (heavily reliant)

  -Only 5 paved runways

  -Very mountainous (hard to move goods)

  -0 shipping ports

  -Location of the capital is very central
• Trade Comparison-USA vs Uganda

  USA-in a trade deficit, is exporting and importing goods (e.g petroleum) due to profit.

  Uganda-exports more goods than services, lot of exports are manufactures components, majority tangible goods
• Jans' and 'Stans'

  -Group of central Asian countries that have recorded very high economic growth rates over the past decade and are attracting significant levels of FDI.

  -Kazakhstan, Azerbaijan, Uzbekistan, Turkmenistan, Kyrgyzstan, Tajikistan.
• MINT' Countries


  Mexico, Indonesia, Nigeria, Turkey

  -Each has a large, youthful population capable of delivering a demographic dividend.
• Why Does it Matter if a Country's Trading Product are Primary Products

  • Price varies massively from year to year.
  • Manufactured goods and services have shown a fairly steady rise in price over time (stability).
  • Why many LIC's have high trade deficits and lack the capital to develop their economies.
  • In Africa, primary goods accounted for 77% of merchandise imports (2021)
  • Although some nations may have high resource endowment it depends on global demand, which varies.
• Evidence that Global Trade is Unequal

  • Inequality continues to worsen with developing countries.
  • Brazil, top 1% accounts for 25% of national income.
  • Lack of redistribution through taxes, e.g US
  • Growing import competition from China caused declines in employment and wages.
  • Increase in offshoring and dumping
  • LIC's account for less than 2% of world GDP and 1% of global trade.
  • COVID had a huge impact, estimated global drop in exports of $50 billion.
  • Fall in commodity prices (37% in 2020) and reduction in demand for exports restricts LIC growth.
• What Can Produce Inequalities Within a Country

  Social-robots putting people out of work, rich are lot richer, hazardous living conditions, high skill jobs only left.Economic-globalisation made rich richer, rise in protectionist policies, some nations can't enter global markets.Environmental-pollution increased, LIC's can't afford new technology for greener energy, developing nations focus on other goals.Political-reduced influence unions and tax policies, 873m still live in poverty, workers without skills left behind, countries closed to trade experience more inequality.
• G20

  • 85% of global GDP
  • 2/3rds of global population
  • Only 4/20 have reduced income inequality in the last 20 years
  • In South Africa, 1 million people pushed into poverty.
• Causes of Inequality in World Trade-Resource Endowment

  • Type and volume of natural resources within a country/region.
  • Resources can influence trade flows.
  • OPEC, has meant some natural resources are being heavily controlled.
  • Primary product dependency not good as susceptive to price shocks and fluctuations.
  • Greater number of resource endowment means more diversification.
• Resource Rich-Africa

  Nigeria - energy

  Ethiopia - food

  Kenya, Tanzania - tourism

  DRC - rare earth metals

  However;

  • reliance on FDI fo infrastructure
  • lack of skilled workforce
  • lots of landlocked countries
  • climate change had big impact
• Causes of Inequality in World Trade-Locational Advantage

  • Closeness to the market or area of demand
  • Ports with large hinterland
  • Strategic position on trade routes
  • Climate in an area for e.g, tourism
• Locational Advantage-Examples

  USA - 95,471 miles of coastline, 926 ports serve a gateway for 99% of overseas trade, close to S.America for trade. Uganda-landlocked, small so hard to develop, close to South Sudan and DRC which is in war, has goods to trade but can't ship them easily. Vietnam - rapidly developing nation, central proximity to Asia, open borders allow for free trade, 3,200km of coastline, 114 sea ports.
• Causes of Inequality in World Trade-Historical Factors

  • Legacy left behind
  • Languages, businesses, cultures, trade ties etc.
  • Geopolitics, if a negative relationship may impact trade and development
  • Borders may have change
  • May be tied with another nations currency.
• Historical Factors-Example

  Namibia-1884 was colonised by Germany, after WW1 league of nations gave South Africa a mandate to administer territory, 1966 UN ended mandate, 1990 gained independence, mass genocide killed 80,000 (1904-1908).Trade today-SA is 2nd largest trading partner, 50 minerals found in the country.
• Causes of Inequality in World Trade-Change in the Global Market


  • Change in demand impact key players
  • Growing economies of emerging nations has increased competitiveness.
  • Shocks threaten supply chains
  • Growing economies have a comparative advantage and cheaper labour
  • Nations making more conscious choices (greener)
• Causes of Inequality in World Trade-Political Isolation

  • Fallouts, e.g Russia/Ukraine.
  • Taxes/tariffs imposed on nations (coal in Australia)
  • Practices, e.g dumping of cheap products.
• Causes of Inequality in World Trade-Trade Agreements/Free Trade

  • Specialist, so do what you are best at.
  • Lower tariffs
  • Bargaining power
  • Geopolitics

  However;

  • countries may not agree on rules
  • domestic industries may struggle
  • fallout/disagreements/time lag
  • tied currencies (votality of exchange rates)
• Trade Agreements-USMCA (NAFTA)

  United States-Mexico-Canada Agreement (substitute for NAFTA). Protectionist Agreement!

  -agreement aimed at creating more balance, reciprocal trade supporting high-paying jobs for Americans.

  -create more level playing field for American workers

  -new protections for US intellectual property

  Impacts;

  -increased trade flows

  -improved channels for investors

  -in 2021, 75% of Canadian and Mexican imports came from US.
• Trade Agreements-The Custom Union (N.Ireland Protocol)


  -Since leaving EU, the UK has been in dispute about it's border between Ireland and UK.

  -Checks now required for goods coming into NI from UK.

  -Meant to enable lorry drivers to deliver goods without paperwork between ROI and NI.

  -Very sensitive due to conflict.
• Trade Agreements-Trans Pacific Partnership Proposal


  -Trade agreement between 12 pacific rim countries-Makes up 40% of global economyMake Up of Agreement;-Japan reduced barriers to auto market-Canada allowed more access to dairy market-Brunei, Vietnam and Malaysia to return labour rules-Establish consistent rules for global investment.Benefits;-small and medium sized businesses benefit the most-98% total tariff reduction for TPP members-protection from discrimination and liberalisation of restrictions at borders-opens markets to FDI-Brunei and Vietnam benefit the mostUSA Involvement-Biden would join agreement if more labour and environmental provisions provided.
• China-One Belt, One Road


  -Aim and initiative by China to connect itself better with the world and grow it's economic and political power.-Includes 149 countries-Cost $4 trillion-Stimulates countries inner, non-coastal regions (landlocked).The Belt;-revitalised series of ancient overland trading routes-Kazakhstan and it's position is the most vital element-High speed railway from Nairobi to MombasaThe Road;-new sea infrastructure along 'Marco Polo' route-involves fuelling stations, ports and bridges-Pakistan location is important-99 year lease to China for a port in Sri LankaHowever;-developing nations could find themselves in a lot of debt and at risk to exploitation from China, when they buy debt.
• Factors Affecting Trade-Vietnam (MIC)


  Resource Endowment-agricultural lands are fertile and profitable in South, exports coal and oil, 3rd largest reserves of bauxite in the world.Locational Advantage-close to many international shipping ports, long coastline, 326 industrial zones, in North large supply of qualified labour.Historical Factors-French colonisation designed the South for agriculture, used to be a N/S divide, 1990s 30,000 private businesses created.Trade Agreements-2015 bi-lateral agreement with South Korea, 2016 free trade agreement with EU, RCEP member.Changes in Global Markets-hindered by Vietnam war as had to rebuild, hit hard by C-19 but showed resilience, 3rd largest market in SE Asia.Other-WTO member in 2007, going through population change, 20% of government budget goes to education.
• Factors Affecting Trade-Namibia (MIC)

  Resource Endowment-service sector makes up 1/2 of GDP, fisheries worth $6.5 billion, mining a backbone for the economy, confirmed resource of 1.3 trillion cubic feet of gas.Locational Advantage-west coast makes in gateway for West Africa, major port is in Walvis Bay, close to 'Cape of Good Hope', large land mass.Historical Factors-active resistance against foreign domination, gained independence in 1980, ties to South African rand.Trade Agreements-large share of exports with USA and Europe, foreign ownership of small retail operations, 'African Growth and Opportunities Act' which allows access to US markets for more than 6400 products.Changes in Global Markets-economy bounced back strongly after 2008 financial crash, steps taken to ease infrastructure bottle necks, 2013 growth hampered by global uncertainty leading to reduced trade flows.Other-small population and domestic market, member of WTO since 1995, government has priorities to accelerate economic growth, increase employment and reduce poverty.