International Trade & Access to Markets

• Trade Liberalisation:

  • The removal or reduction of restrictions or barriers on the free exchange of goods between nations.
  • This includes the removal or reduction of both tariff and non-tariff obstacles.
  • Liberalisation can lead to a flood of cheap imports, which undermine domestic producers previously protected by tariffs or other government supports.       
• Changes to International Trade - Up to 1945:

  • International trade has increased
  • Technological advances triggered a period of markey growth in world trade.
  • Stopped during the war period
  • Since World War 2 international trade has increased again and trade expansion has been faster than ever before.
• Changes to International Trade - Post 1945 - Present:

  • Today, the sum of exports and imports across nations is higher than 50% of global production.
  • Transport and communication costs have decreased globally.
  • Preferential trade agreements have become more common,
  • Particularly among developing countries
  • Trade among developing nations more than tripled between 1980 to 2011.
• Changes to International Trade - Comparative Advantage:

  • Free international trade is often seen as desirable because it allows countries to specialise
  • In order to produce goods that they are relatively efficient at producing, while importing other goods. 
  • This is the essence of the comparative advantage argument supporting gains from trade. 
  • Exchange allows countries to “do what they do best, and import the rest”.
  • While trade does create economic growth typically, it also creates winners and losers within countries.
• Import License:

  • This is a license issued by a national government authorising the importation of goods from a specific source.
• Import quotas:

  • These set a physical limit on the quantity of goods that can be imported into the country.
• Subsidies:

  • Grants or allowances usually awarded to domestic producers to reduce their costs and make them more competitive against imported goods.
  • Export subsidies are also used by governments to encourage domestic producers to sell their goods abroad.
• Voluntary export restraints:

  • A diplomatic strategy offered by the exporting country to appease the importing country and deter it from imposing trade barriers.
• Embargoes:

  • An official ban on trade or other commercial activity with a particular country.
  • Usually put into place for political reasons rather than commercial.
• Trade restrictions:

  • Other import restrictions may be based on technical or regulatory obstacles such as quality standards of goods being imported or how they are produced.
• Example of Trade Restrictions:

  • The EU attempts to put restrictions on the import of goods knowingly produced using child labour.
• Example of Import Licenses:

  • Phytosanitary certificates or 'plant passports' are required to bring certain plants and seeds into the UK.
• Example of Embargoes:

  • Since Cuba elected a communist government in 1959, the US has severely restricted the flow of goods between the two countries.
• Example of Import Quotas:

  • New Zealand is allowed to import 230,000 tonnes of sheep and goat meat per year to the EU.
• Example of Voluntary Export Restraints:

  • In the 1980s, Japanese car-makers chose to limit the number of cars that they exported to the US market to 1.68 million in order to avoid import quotas.
• Example of Subsidies:

  • The Indian government pays domestic sugar producers in states including Tamil Nadu and Gujarat around 4000 rupees per tonne of raw sugar that they export to the global market.
• Current & Future Trade Relationships - USMCA:

  • United States, Mexico, Canada Agreement.
  • Formerly the North American Free Trade Agreement.
  • Signed in 1994.
  • Its main aims were to remove all trade barriers, increase investment opportunities and increase economic cooperation between the 3 countries.
• Current & Future Trade Relationships - USMCA Pros:

  • Trade between member countries has quadrupled.
  • Manufacturing grew in the US, creating 5 million jobs and increasing economic output.
  • FDI more than tripled, with Mexico benefitting in particular as TNCs locate production there to gain access to their trading partners' markets.
  • Consumer prices in the US lowered (Oil and Food).
  • Head of state met more frequently, reducing political tensions.
• Current & Future Trade Relationships - USMCA Cons:

  • Loss of 'Blue Collar' jobs in the US, particularly in the automotive sector, as manufacturers relocated to Mexican maquiladora plants near the border.
  • Job migration suppressed wages in US factories.
  • Many Mexican farmers went out of business as they couldn't compete with larger US agribusinesses or with US and Canadian subsidised food surpluses being 'dumped' in Mexico.
  • Unemployed Mexican farmers had to work in sub-standard non-unionised working conditions.
• Current & Future Trade Relationships - USMCA Environmental Cons:

  • US and Candian mining companies degraded the Mexican environment, taking advantage of its natural resources and lenient pollution laws.
  • Canada increased production of oil from the Alberta tar sands to supply US demand
• Maquiladora:

  • A manufacturing operation located in free trade zones in Mexico, usually near the US-Mexico border.
  • Initially established in the 1960s to reduce the flow of migrants.
  • Has become an important part of Mexico's industrialisation, especially in the automotive industry.
  • They import material for assembly and then export the final product back to the US.
• Current & Future Trade Relationships - EFTA:

  • European Free Trade Association
  • Iceland, Liechenstein, Switzerland, Norway.
• Current & Future Trade Relationships - EU:

  • European Union
  • Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany etc.
• Current & Future Trade Relationships - Pacific Alliance:

  • Chile, Colombia, Mexico, Peru
• Current & Future Trade Relationships - UEMOA:

  • West African Economic & Monetary Union
  • Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, Togo
• Current & Future Trade Relationships - SADC:

  • Southern African Development Community
  • Angola, Botswana, Comoros, Democratic Republic of Congo, Eswatini, Lesotho, Madagascar, Malawi etc.
• Current & Future Trade Relationships - ASEAN & AFTA:

  • Association of South East Asian Nations, ASEAN Free Trade Area
  • Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam
• Current & Future Trade Relationships - APEC:

  • Asia-Pacific Economic Cooperation
  • Australia, Brunei, Canada, Chile, China, Honk Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand etc.