3.2.1.3 International Trade and Access to markets

Protectionism

Restrict foreign competition and protect domestic industries

Barriers to trade

Tariffs, import quotas, subsidies, embargoes

Tariffs

Tax on imports, rose post 2016 for first time in decades due to US-China tension

Import quotas

Physical limit on quantity of imported goods

Subsidies

Grants for domestic producers to reduce costs and become competitive

Embargoes (e.g US and Cuba 1960)

Partial/complete prohibition of trade with a country (usually political)

Advantages of barriers to trade and protectionism

Tariffs increase government revenue, domestic producers benefit

Disadvantages of barriers to trade and protectionism

Higher price/reduced consumer choice, foreign exporters lose out, subsidy cost

Hyperglobilisation and why (Trend in trade volume)

World trade value rose by $10 trillion (1990-2008) due to containerisation, WTO introduction, China 2001 entry and TNC growth

Slowbilisation and why (Trend in trade volume)

Trade growth fell close to GDP growth ($33 trillion) due to protectionism, US-China tensions and regional trade blocs

Patterns of international trade

Previously dominated by US and G7 countries (nearly 50% of world trade) but China is now world’s largest exporter (15%) and the Trans-Pacific trade is faster than Trans-Atlantic

Trends in investment and why

FDI growth ($1.5 trillion annually) due to TNC interest in natural resources and large consumer markets. Still unequal as HICs attract majority (Africa <3% FDI)

Fair trade

Better trading conditions for marginalised (agricultural) producers

Fair trade strengths

Improves living conditions, sustainable/environment friendly practices

Fair trade weaknesses

High consumer price, inefficient/small scale

Major trading blocs/ HDEs

US (increasing protectionism), EU (common market reduces barriers and 60% intra-trade), China (global manufacturing and investment in Africa)

China investment in Africa features

Extract resources (copper from Zambia), loans for goods (cocoa in Ghana) where 90% of sub-Saharan exports are to China. In return ‘Belt and Road Initiative’ for Railway development between Mombasa and Nairobi

China investment in Africa evalaution

Multiplier effect from infrastructure growth (30,000 jobs from trainline), Economic development (Kenya role as Trade hub and integration with East Africa (Uganda etc). Environmental destruction (Nairobi national park), 1 million Chinese immigrants limits local employment, economic leakage, trade deficits (goods Africa imports more expensive than exportation)

Latin America trade agreemtns

MERCOSUR, Pacific Alliance

MERCOSUR and evaluation

Involves countries like Argentina/Brazil, Increase regional integration, limited global influence

Pacific Alliance and evaluation (growing faster than MERCOSUR so might merge)

Involves countries like Chile/Columbia, Encourages outward facing and bilateral trade, smaller population

Larger trade deal example

Trans-Pacific Partnership (TTP) and Transatlantic Trade and Investment Partnership (TTIP)

Trans-Pacific Partnership (TTP)

Designed to reduce Asia-Pacific barriers, US withdrew in 2017

Transatlantic Trade and Investment Partnership (TTIP)

EU-US agreement to reduce regulatory barriers, stalled due to regulatory differences, would have given power to TNCs over governments (sue if profits cut)

What does access to markets in a country depend on

Wealth (afford tariffs, FDI), Trade agreements, Physical Geography

Impact of access to markets on societal and economic well being

High access: GDP growth, Multiplier effect (infrastructure, income). Low access: Vulnerability to price fluctuations (75% income fall for Uganda coffee farmers when over-produced), exploitation to remain competitive (Rana Plaza)

Special and Differential Treatment (SDT) advantages - preferential treatment to developing countries

Market access (tariff exemptions such as EU ‘Everything But Arms’, longer transition periods to comply to WTO rules (protects local industries), diversification (less reliance on low value commodities from UN training)

Special and Differential Treatment (SDT) weaknesses

Self declaration of LDC (least Developed Country) means NEES can unfairly claim, Not all LDCs are members of WTO (length application), LDCs lack capacity to utilise provisions

TNCs and how much of global trade is linked

Companies operating in multiple countries, locating HQs and production strategically, 80% global trade linked

Why TNCs operate in several countries

Labour cost reduction, Resource access, Bypass tariffs by producing in trade bloc, risk spreading

Spatial organisation of TNCs

HQs in HDEs to access educated/skill workforce, manufacturing offshored for lower wages/environment regulations

Subcontracting and evaluation

Assembly partners reduce pension costs/sick pay, leaves vulnerable to labour issues

Lean operations

Minimum inventory to reduce warehousing costs/depreciation rates

Vertical integration and example

Company controls multiple stages of chain (such as Starbucks controlling bean to sale)

Horizontal integration and example

Diversifies operations and buys out rivals at same stage of production (e.g Kraft buying of Cadbury)

Advantages for Host country from TNCs

Employment/multiplier effect, FDI, skill/tech transfer, infrastructure development

Disadvantages for Host country from TNCs

Environmental exploitation, labour exploitation, local business closure, tax avoidance

Positive impact for TNCs of spreading

Profit maximisation, risk spreading, market/barrier access, economies of scale

Negative impact for TNCs of spreading

Brand image vulnerability, legal risks

Positive impacts on the country of origin when TNCs spread

High value service economy developed, intellectual property revenue, westernisation/spreading of values

Negative impacts on the country of origin when TNCs spread

Deindustrialisation, trade deficits

Containerization

Transporting goods in standardised, uniform metal containers that can be transferred seamlessly between ships, lorries, and trains.

International trade and market access impact on people in HDEs

Access to technology allows flows of ideas and ‘shrinking world’ effect, cheaper consumer technology (Apple assembled in China), reduces national resilience (PPE), deindustrialisation

International trade and market access impact on people in LDEs

Worker exploitation (Qatar World Cup), remittances send $831 billion, ‘tiger economies’ such as Singapore with electronics, value on raw materials to achieve growth (Copper in Zambia)