International Trade Topic 4.1

notes from school work book and also an econplusdal video

key features of a developing economy

low GDP
low HDI
high poverty
high unemployment
more primary sector exports than imports

key features of an emerging economy

medium GDP per capita
high rate of volatile economic growth
average HDI
economic focus is specifically manufacturing

key features of a developed economy

high gdp per capita
more imports than exports
current account deficit
economic speciality is in the tertiary sector

advantages of international trade for all 3 types of economies

higher exports—> high AD—> AD shifts rights—> high economic growth

extra adv of international trade for developed economies

don’t have as much adv as they have a high current account deficit and they focus on tertiary sector production which doesn’t have much global export demand—> however, international trade increases consumer choice due to cheaper primary sector imports, leading to more consumer choice which means higher household utility

disadvantages of international trade for developing economies

-reliant on primary sector exports like agriculture which can be volatile, especially with increasingly unpredictable weather and political aliments like the war in Iran

disadv of international trade for emerging economies

-economy can be at risk of shocks and potential collapse due to extreme reliance on trade, shocks like the 2008 finical global crash or Trump’s 2024 tariffs

disadv of international trade for developed economies

-loss of manufacturing jobs in that country
-may worsen a current account defecit, e.g. UK is a developed economy that does more imports than exports and it has the 2nd biggest defecit in the

general developmental adv of international trade

-developing economies can exploit their comparative advantage if they have big access to natural resources—> increase exports—> increase AD—> increase growth
-production will be more competitive, meaning that consumers will not only have more choice but potentially lower prices too.
-chance for greater political relations to be fostered as trade ties are fostered too—> like China and African countries and their close relationship

define international trade

this is the exchange of goods and services across international borders

define emerging markets

economies which are making the transition from a low income economy to a high income economy
e.g. china, india, brazil
often have high rates of economic growth

vulnerability of emerging economies

can be more vulnerable to crisis of confidence due to misaligned exchange rates and a heavy economic reliance on exports/production

define a developing economy

country with low HDI relative to other countries
low GDP per capita
low standards of living
export more primary goods than manufactured

weakness of developing economy

primary product dependency
export prices may be volatile due to the weather or

define developed economy

country with high level of economic growth
standard of living is high
high GDP per capita
high HDI
export more services and maufactured goods than primary goods
therefore, a higher proportion of exports are higher added value

India’s real gdp annual % change in 2026

6.9%

what sector is brazil predicted to grow in 2027?

renewable energy→ green energy is attracting FDI
tech

what sector is UAE predicted to grow in 2027?

5.1% of projected 2027 growth.
in non oil segments
AI and digital infastructure will help drive this expansion

what can deter FDI

political instability
volatile exchange rates can impact return for foreign investors

what is the ongoing us iran war doing to the 2026 economy

dragging down global economic growth by driving up inflation, distrupting energy and industrial supply chain
threatens recessionary risks across several major countries

the Uk’s forecasted economic growth in 2027

between 1.3% and 1.6%

what are the forecasted top performing sectors

construction
manufacturing

what is the human development index

HDI
measures the social and economic welfare of countries over time
it has a value between 0 and 1
the higher the value, the more developed a country is

how is HDI a better measure of living standards than GDP per capita?

it considers knowledge and health

what are the indicators of HDI

life expectancy at birth
expected years of schooling
GNI per capita at purchasing power parity

why is GNI used instead of GDP

it accounts for remmitances and foreign aid as it reflects the average income per person

what are the cons of using HDI as a measure for development?

does not consider people’s human rights, equality, etc
does not take the environment into account
could be argued that this should be included to consider the distribution of income

a country could have high HDI but still be very unequal
might mean many people oculd still be in absolute or relative poverty

how has global trade changed since ww2

it has increased significantly

why has global trade increased?

rising number of trading blocs (e.g. EU, ASEAN)
rise of emerging markets (e.g. china and india)

what has the deindustrialisation of countries such as the uk led to

manufacturing sector declining
manufactured goods production has shifted to other countries, such as china, while uk focuses on services
industrilisation of china and india

which country has the greatest share of world exports

china

how much world exports did the uk trade in 2020

2%

where does the greatest volume of trade occur

between developed rich countries
e.g. usa, uk, germany

who dominate world exports

trading blocks like the EU

what will the us driven global trade war do to growth in 2/3 of developing economies this year

depress growth
according to the world bank

what has globalisation done to per capita gdp in developing countries?

quadrupled it
lifted more than 1bn people out of extreme poverty

what will happen to per capita gdp in developing countries due to the us iran war

6% lower by 2027

what are the 3 shocks being caused to developing economies due to the us iran war

spikes in global energy costs
shortage of argiculture fertilizers
reduced GDP growth

4 key reasons for changing patterns of global trade

cost advantages
growth of trading blocs
growth of emerging economies
changes in relative exchange rates

why does cost advantages lead to changing patterns in trade

some countries have them in the production of some goods and services
can then produce at lower costs
export at lower costs

why does growth of emerging economies lead to changing patterns in trade

major exporters of manufactured goods
dominate world trade share
also increase demand for goods and services (imports?)

why does growth of trading blocs lead to changing patterns in trade

groups of countries that form agreements to promote trade among themselves
free trade in them
therefore more trade
depends on type, if economic union (?) may require restrictions

why does changes in relative exchange rates lead to changing patterns in trade

determine the prices of countries’ exports and imports
Can affect competitiveness of exports