4.1.3 patterns in trade

Main 4 factors influencing patterns of trade

1. Changes in comparative advantage
2. Emerging economies
3. Trading Blocs and bilateral trading agreements
4. Relative exchange rates

comparative advantage

• countries trade where there is CA— so a change affects trade pattern
• recent growth in Manila turned goods from developing to developed countries as developing countries have low labour costs
• deindustrialisation of UK and other countries meant manufacturing sector declined—> production of manufactured goods shifted to other countries like china whilst UK focuses on services like finance
• CA may change as result of factors like changing labour skills and productivity

Emerging economies

Growth of emerging economies like China means they have become large exporters

• CHINA CONTRIBUTES TO 20% OF LDC ECONOMIES COMPARED TO 8% OF US ECONOMY
• collapse of communism meant more emerging economies are participating in world trade

Trading blocs and bilateral trade agreements

• increase level of trade between certain countries so influence patterns of trade as trade increases and decreases between certain countries- removal or addition of protectionist barriers
• EU meant UK traded w more European countries than previously thought and less countries outside the EU

Real exchange rates

• affect relative price of goods between countries
• prices are important factor when determining weather consumers buy goods so a change in price will effect patterns of trade
• can be argued UK TRADE DEFICIT WITH EUROPE is due to strength of £
• CHINA KEPT CURRENCY WEAK TO INCREASE TRADE SURPLUS AND MAKE CURRENCY MORE COMPETITEIVE