Visible and invisible imports and exports
visible: actual goods that are sold to other nations, e.g. agricultural goods,
extracted minerals, coal, oil and manufactured goods
invisible: services that are sold to their nations. e.g. banking and financial services,
insurance, education, tourism, transport, (tele)communication services,
construction, computer/info services, licences and royalties.
trade balance (balance of payments) difference between monetary value of
exports/imports of output of a country, measured in their currency. positive trade
balance is a trade surplus and involves exports > imports. negative balance is a
trade deficit. trade balance sometimes divided into goods and services balance.
trade surplus, flow of money into country and level of national income and
employment goes up. trade deficit, flow of money out of country. countries in
surplus able to build up their foreign exchange reserves.
factors affecting trade balance: cost to produce goods in importing country
compared with exporting. affected by costs of land, labour capital and taxes,
resource endowment, locational advantage, historical factors (including colonial
ties), currency exchange rates, trade agreements and tariff barriers, environmental
(health or safety standards), availability of foreign exchange to pay for imports
Global patterns and inequalities in trade flows
visible/invisible dominated by north America, west Europe and Asia. raised living
standards in LICs/MICs, hasn’t benefitted unskilled workers who’ve lost jobs and
had wage cuts. overall trade volume has grown (exception of 2008-09 recession)
visible trade: value of Asia’s manufactured goods exports expanded by 3% in 2012,
Europe -2%. Asia’s share in world exports of manufactured goods rose to 38%, 41%
for Europe. exception of commonwealth of independent states, group of ex-soviet
countries (+15%) and north America (+3%), all regions registered declines in
exports of agricultural products in 2012. Africa and middle east increases exports
of fuels and mining in 201 by 9% and 6%.
invisible trade: USA and Europe are net exporters of invisible trade; other areas net
importers. construction exports, 6% of exports of commonwealth of independent
states in 2012, double world average. receipts from royalties/licence fees, 18% of
north Americas commercial services exports in 2012. Europe, exports of financial
services accounted for 8% of its service exports. highest share of communications
services held by Africa (4.8%). computer and info services, 8.8% of services
exports of middle east and 7% of Europe’s services exports.
LICs and world trade: no longer providers of primary produce and recovers of
manufactured goods/services. more likely to specialise in manufacturing aspect, as
part of TNC. many LICs still primary product dependent, obtain foreign currency by
exporting small range of primary, at low prices compared with prices of
manufactured goods/services. prices of primary vary, manufactured goods prices
show steady rise, why LICs have high trade deficits and lack capital. deficits not
appear high, high when % of GDP. trade deficits have to be financed, borrowing
reduces investment. countries spend more on loan interest payments than vital
services.
Factors affecting global trade
resource endowment: middle east oil, plays significant part on trade balances. food
commodities, area where certain areas more favourable than others. New Zealand,
Swaziland, Ukraine, Canada and Kazakhstan all rely on export of agricultural.
controlled by climatic factors. some countries used their wealth from export of raw
to allow diversification to more balance economy. e.g. south Africa and brazil.
illustrates principle of comparative advantage, countries specialise in producing
commodities, trade these for other goods/services.
locational advantage: involves closeness to market/area of demand, ports with
large hinterland, strategic position on trade routes. E.g. Mediterranean tourist
resorts with warm climates and short airline flight times from cold densely
populated north Europe. ports, e.g. Rotterdam with large hinterland reached by
river barge and rail in Netherlands, Belgium, Luxemburg, Germany and France.
transhipment point, goods transferred from ocean to inland craft. cape town at
southern tip of Africa. Singapore at tip of Malay peninsula where shipping routes in
Indian and pacific oceans cross.
historical factors: link between EU countries and former colonies completely ended
by a wave of independence agreements 1945-70. prior to this period, trade
dominated by flow of primary goods from colonies and manufactured goods from
colonial power. relationship is exploitative, reason for low share of world trade that
poor African countries have. trading linking between former colonial powers and
colonies are strong. links established have declined in importance but still remain.
links between UK and commonwealth countries still significant. strong links
between France and former colonies. colonies considered to be overseas
departments of France (5 remain today). upon independence, currency of many
was tied to the French franc and since 1999, to the €. France relationship with
former arcane colonies has been called francafrique. term first used in a
complimentary sense but now criticised as representing a neo-colonial relationship.
trade agreements and free trade: international trade tariff is tax on
imports/exports. free trade is trade without taxes. import quota is limit on the
quantity of a commodity/service that can be produced abroad and sold
domestically. controlled by licences issued to importers. use tariffs/quotas to
protect economies. quotas raise domestic price above world price so domestic
sellers better off, consumers worse off. licence holders make profit from buying at
world price and sell higher at domestic price. all countries are members of trade
bloc, join together to stimulate trade, growing economic regionalism. development
of blocs is part of tension in development of world trade, work to advantage of
member states and disadvantage of non-member. debateable which direction
trade will go. blocs have varying degrees of economic integration. free trade area
e.g. NAFTA, no tariffs or quotas between members, common market, free trade of
goods and services and free movement of labour and capital. economic union, e.g.
EU, common economic policies. customs union, e.g. Mercosur, common external
tariff on non-members. NAFTA (north American free trade agreement) signed by
Canada USA and Mexico in 1994 but phasing in over time. debate about success,
difficult to operate effects from other influences. Issues; concerns about
environmental impact regarding different regulations, agriculture, takeover of
companies by foreign investors, increased mobility of labour, loss of jobs in USA, rapid growth of non-border metropolitan areas in Mexico, Mexico’s agricultural
exports increased, Mexico is now second largest importer of USA agricultural
products, increased trade between countries, USAs trade deficit with the other two
has increased, NAFTA allows corporation to sue Mexico Canada or USA for
compensation for actions taken by their governments
historic trade between New Zealand and UK. had a special trade agreement and UK
took 90% of new Zealand’s meat and dairy produce. new trading agreements have
been less favourable to New Zealand and more exports now go to Asia and pacific
rim. EU is still trading partner for produce
changes in global market: FDI has changed the global market. involves investment
by TNCs and Chinese state-controlled enterprises. allows many countries (brazil,
Mexico) to increase their trade to GDP ratio. in many African countries, ratio has
decreased. rapidly expanding economies of BRIC and MINT countries. change is
reflected in volume of trade of these countries. countries are exporting more
manufactured goods/services and more affluent pop means growing domestic
demand, including for imported goods. emerging markets are also shown by the
location of the worlds foreign exchange (forex) reserves. international trade that
goes on within TNCs, e.g. motor vehicle industry.
World trade organisation
started in 1995, replacing the general agreement on tariffs and trade, multilateral
agreement regulating international trade which began in 1948. made of member
governments, each of which have one vote. Laos and Tajikistan joined in 2013,
membership now at 159. major decisions are made by the membership as a whole,
either by ministers or ambassadors or delegates. secretariat in Geneva employs
over 600 staff including lawyers economists and statisticians.
promotes free trade by the following measures: provides the rules for trade in
goods, in services, inventions and designs. trade agreements are negotiated and
signed by the member trading nations which bind governments to keep their trade
policies within the agreed limits. trade agreements are constantly renegotiated.
many now being negotiated under Doha development agenda 2001. promotes
trade, seeking to reduce tariffs and other trade barriers to the mutual advantage of
members. against protectionism but sometimes it supports maintaining barriers.
place where members settle trade disputes. bring them if they think their rights
are being infringed. judgements by specially appointed independent experts are
based on interpretations of agreements and commitments.
non-discrimination: shouldn’t discriminate between its trading partners or foreign
products, services or nationals
openness: lowering trade barriers encourages trade. barriers include tariffs import
bans and quotas
stability, predictability and transparency: foreign companies, investors and govs
should be confident the barriers won’t be raised arbitrarily. should encourage
investment, job creation, consumer choice and lower prices. agreements require
governments to make their trade policies transparent by notifying about laws in
force and measures adopted. various councils and committees seek to ensure
requirements are followed and agreements are implemented. members must
undergo periodic scrutiny of policies and practices.
more competition: aims to discourage unfair practices, such as export subsidies
and dumping products at below normal value to gain market share
more benefit for LICs: 3/4 of members are developing counties and those in
transition to become market economies. giving more time to adjust, flexibility and
privileges is intended to help them develop. agreements contain provision for
developing countries, including longer time periods to implement agreements and
commitments, measures to increase trading opportunities and support to help
build trading capacity, to handle disputes and implement technical standards
protection for environment: agreements permit members to take measures to
protect the environment and public animal and plant health.
Nature and role of fair-trade
fair trade is a movement whose goal is to help producers in LICs achieve better
access to markets and sustainability. higher prices paid to exports and
social/environmental standards imposed. movement focuses on goods which are
exported from LICs to HICs.
ideas have a long history. movement has undergone many changes but always
been seen as a way of addressing the way that markets fail producers or
consumers. today its more focused on the way producers in LICs don’t have fair or
equal access to world markets.
restructured recently and formed partnerships with mainstream businesses in an
effort to be more efficient and broaden its appeal. sales took off with the labelling
initiatives. movement of taking fair trade out of small specialist shops and into
mainstream supermarkets. 1988, first fair-trade label. boosted sales, $230,000 in
2000 to $2.4b in 2007 and customers could see the products were benefitting the
producers in LICs.
fair trade international: standards setting and producer support unit, non-profit
making organisation, 25 members and associate member organisations
flo-cert: inspects and certifies producer organisations and audits traders.
certification marks on many foods.
certification standards imposed by flo-cert include: democratic decision making
within the fair, systems in place for capacity building and economic strengthening
of the organisation, employees must receive decent wages, employees may join
unions and bargain collectively, no forced or child labour, health and safety
requirements are met
criticisms: coffee can be sold in shops at any price so nearly all extra price paid is
kept in countries where coffee is sold, certification brings extra costs to farmers but
little research on effect of membership on income of farmers, failure to enforce
standards with cooperatives, importers and packers profiting by evading them, in
order to join fair-trade, cooperatives must meet standards which means they must
be relatively skilful educated and rich. not the poorest farmers who will get lower
prices, paying a guaranteed price leads to overproduction and lower prices for
other farmers, political values are being imposed on people
Case study: fair-trade cocoa in cote d’ivoire, west Africa
world leading producer and exporter of cocoa beans, overtook Ghana in 1978 and
produces 40% of world pop. large chocolate producers (Cadbury, Hershey’s and
nestle) buy from here. production is unusual as mostly produced on small family
farms in areas of mixed woodland, competes for land with other agricultural
production and logging.
problems of: replacing ageing and diseased cocoa trees, main disease is black pod,
poor leached soils, outdated farming methods, fluctuating world prices
farmers benefit through fair-trade membership by following mechanisms, usually
delivered through local co-operatives.
guaranteed prices: 2010-15, world price rose in response to high demand and
shortage of supply. farmers haven’t benefitted enough from this and remain in
poverty as incomes fail to keep up with increased production costs and household
expenses. guaranteed fair-trade prices help to balance price fluctuations. on
average, farmers are only able to sell around 13% of cocoa on fair-trade terms so
only get fair-trade benefits for this %, even though 100% is grown and certified to
fair-trade standards.
Fairtrade premium: additional sum of money that goes into communal fund for
workers to improve their social economic and environmental conditions. producers
determine whether they will spend premium on education, healthcare, improving
business or building infrastructure. e.g. village of tiemkokro, school only had 1
volunteer teacher, communal fund, school rebuilt and now has a principal 2
teachers and 3 volunteers teaching 200 students.
subsidised goods: access to subsidised pesticides, machetes and rubber boots
greatly improved productivity and working conditions
access to training: in village, 90% of co-operative’s members have had access to
training on good agricultural practices