Global Patterns of Trade and Changing Patterns of

Global Patterns of Trade and Changing Patterns of Global Trade

Economies by size of merchandise trade (goods/visible trade) in 2015 (Source: The World Trade Organization, CC)

Economies by size of merchandise trade (goods/visible trade) in 2015 Name all the countries whose merchandise trade exceeded $500 billion in 2015 (Source: The World Trade Organization, CC) Name all the countries whose merchandise trade was between $250 and $500 billion in 2015 Describe the global patterns for merchandise trade shown by the map above

Economies by size of trade in commercial services (invisible trade) in 2015 (Source: The World Trade Organization, CC)

Economies by size of trade in commercial services (invisible trade) in 2015 Name all the countries whose commercial services trade exceeded $50 billion in 2015 (Source: The World Trade Organization, CC) Name all the countries whose commercial services trade was between $25 and $50 billion in 2015 Compare the global patterns for trade in commercial services with the trade in merchandise (goods) shown by the maps on slides 2 & 4. Comment on the relationships and/or issues that emerge

Share of Global Trade by World Region in 2013 (Source: The World Trade Organization, CC) Compare the regional share of global trade indicated by the map above

Global Total for Exports of Goods & Services (current US$) since 1960 (Source: The World Bank, CC)

Global Trade Flows and Trading Patterns: Key terms and Factors Resources: Textbook & Individual Research. Some useful Internet Sites… www. cia. gov/library/publications/resources/the-world-factbook/ http: //data. worldbank. org/country http: //atlas. cid. harvard. edu/explore/tree_map/export/chn/all/show/2014/ 1. Define the following terms: a) Balance of Trade (Bo. T) and Balance of Payments (Bo. P) b) Trade Surplus and Trade Deficit c) Visible Trade and Invisible Trade d) Tariffs and Quotas e) Free Trade Agreement (FTA) f) Trade Bloc, Free Trade Area and Customs Union g) Zero Internal Tariff (ZIT) and Common External Tariff (CET) 2. Find out the trade figures in a recent year (value of exports and imports) for the following countries, and calculate the size of their trade surplus or deficit: a) China b) USA c) Germany d) South Korea e) Russia f) UK g) India

Global Trade Flows and Trading Patterns: Key terms and Factors Resources: Textbook and Individual Research 3. Outline the role and importance of each of the following factors on global trade: a) Resource Endowment b) Location c) Historical Factors and Colonial Ties d) Free Trade Agreements and Trade Blocs e) Advanced Countries/Economies (HICs) f) Changes in the Global Market…Emerging Markets/Economies (NICs/MICs) g) Low Income Countries (LICs) 4. Use the above to explain: a) Why some countries have large trade surpluses and others have large trade deficits b) Why some countries engage in a lot of trade and others engage in very little trade c) The growing importance of the Pacific Rim countries in global trade

Following Slides… Answers to Definitions (Q 1), Additional Resources & Information on Trade Figures (Q 2)

Balance of Trade: Difference in value between a country’s imports and exports of goods (visible trade/visibles) and services (invisible trade/invisibles). It is the largest component in a country’s balance of payments. Balance of Payments: Record of the financial transactions made between consumers, businesses and the government in one country with other countries. It shows the inflows and outflows of money, categorised into different sections. The largest component is the balance of trade. In addition, inflows and outflows of capital are included, such as from foreign direct investment, portfolio investment (shares) and reserve assets of gold and foreign exchange. Trade Surplus: The amount by which the value of a country’s exports exceeds the value of its imports Trade Deficit: The amount by which the value of a country’s imports exceeds the value of its exports Visible Trade: Actual goods which are sold to other nations e. g. agricultural products, minerals and manufactured goods Invisible Trade: Services which are sold to other nations e. g. financial services, insurance, education, tourism, transport, IT services, licences and royalties

Tariffs: Taxes/customs duties imposed on imported goods and services. Tariffs are a type of trade restriction which protect a nation’s own companies from foreign competition. Quotas: Another type of trade restriction that limits the number, or monetary value, of goods or services that can be imported during a particular time period. Free Trade Agreement: An agreement between at least two countries to reduce trade barriers (quotas and tariffs), to increase the trade of goods and services with each other. Trade Bloc: A grouping of countries, usually within a geographical region, that have agreed to reduce or eliminate barriers to trade (quotas and tariffs) between member countries. Free Trade Area: The region encompassing a trade bloc whose member countries have signed a free trade agreement. Customs Union: A type of trade bloc which is composed of a free trade area with a common external tariff on imported goods and services from non-member countries. Zero Internal Tariff: Where no tariffs are charged on goods and services moving between member states in a trade bloc. Common External Tariff: Where member states in a trade bloc (i. e. customs union) charge the same tariff on imported goods and services from non-member countries.

High, Middle & Low Income Countries

GDP (current US$) since 1960 for Selected Countries (Source: The World Bank, CC)

Exports of Goods & Services (current US$) since 1960 for Selected Countries (Source: The World Bank, CC)

Imports of Goods & Services (current US$) since 1960 for Selected Countries (Source: The World Bank, CC)

Balance of Payments (current US$) since 1960 for Selected Countries (Source: The World Bank, CC)

China (Upper Middle Income) Exports: $2. 43 trillion (2015) Imports: $2. 05 trillion (2015) Trade Surplus/Deficit: $380 billion GDP: $11. 07 trillion (2015) Imports (Source: The Atlas of Economic Complexity, CC) Exports

USA (High Income) Exports: $2. 26 trillion (2015) Imports: $2. 79 trillion (2015) Trade Surplus/Deficit: $530 billion GDP: $18. 04 trillion (2015) Exports (Source: The Atlas of Economic Complexity, CC)

Germany (High Income) Exports: $1. 57 trillion (2015) Imports: $1. 32 trillion (2015) Trade Surplus/Deficit: $250 billion GDP: $3. 36 trillion (2015) Exports (Source: The Atlas of Economic Complexity, CC)

South Korea (High Income) Exports: $632 billion (2015) Imports: $537 billion (2015) Trade Surplus/Deficit: $95 billion GDP: $1. 38 trillion (2015) Imports (Source: The Atlas of Economic Complexity, CC) Exports

Russia (High Income) Exports: $392 billion (2015) Imports: $281 billion (2015) Trade Surplus/Deficit: $111 billion GDP: $1. 37 trillion (2015) All Graphs Show Exports (Source: The Atlas of Economic Complexity, CC)

UK (High Income) Exports : $791 billion (2015) Imports: $836 billion (2015) Trade Surplus/Deficit: $45 billion GDP: $2. 86 trillion (2015) Exports (Source: The Atlas of Economic Complexity, CC)

India (Lower Middle Income) Exports: $417 billion (2015) Imports: $465 billion (2015) Trade Surplus/Deficit: $48 billion GDP: $2. 09 trillion (2015) All Graphs Show Exports (Source: The Atlas of Economic Complexity, CC)

Other Important Terms Linked to Trade Advanced Economies: Term used by the International Monetary Fund (IMF) to describe more economically developed countries. Advanced economies have a high level of GDP per capita, score highly on the Human Development Index (HDI), and have a very significant degree of industrialisation. BRICS: An acronym that refers to the countries of Brazil, Russia, India, China and South Africa, which are viewed as having the growth potential to reach an advanced stage of economic development in the first half of the 21 st century. In addition, there are increasing indications that the BRICS are serious about creating a close ‘alliance’, in order to wrestle economic and political power away from the world’s advanced economies. Business Process Outsourcing (BPO): The practice of companies hiring overseas companies to handle back-office functions such as human resources, finance and accounting, and frontoffice functions such as customer call centres. Comparative /Competitive Advantages: Factors that enables a country or region to produce particular goods or services at a lower marginal and opportunity cost than other places. Deindustrialisation: The long-term absolute decline in the manufacturing sector, leading to a weakening of the contribution of manufacturing industry to a country’s economy. Dumping: The practice that occurs when manufacturers export a product to another country at a price below the price charged in its home market, or below its cost of production.

Emerging Economies/Markets: Countries that have enjoyed a period of economic growth and industrialisation, giving them some of the characteristics of the advanced economies. They have increasingly important roles in the international stage, and may one day become the major players, but have not yet arrived at that level. Foreign Direct Investment (FDI): Investment from one country into another, normally by companies rather than governments, that involves establishing operations or acquiring assets, including stakes in other businesses. Global Brands: Brand names of products that have worldwide recognition. A global brand has the advantage of economies of scale in terms of production, recognition and packaging. Global Financial Crisis: The global financial crisis of 2007/2008 was the largest and most severe financial event since the Great Depression. It resulted in the near or total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. Housing markets also suffered, and unemployment levels rose. The crisis played a significant role in the failure of key businesses, declines in consumer wealth, and a downturn in economic activity leading to the 2008– 2012 global recession. Globalisation: The increasing interconnectedness of the world, with people’s lives being shaped by events that occur, and decisions that are made, in distant places. This can be illustrated by the increasing interdependence of countries through international trade, investment, capital and co-operative relationships. The key feature of globalisation is the declining significance of geographical distance and territorial borders between nation-states. Global Shift: Movement of economic activities, especially manufacturing, from HICs to MICs and LICs. TNCs have been the main drivers of global shift.

Gross Domestic Product (GDP): The monetary value of all the finished goods and services produced within a country's borders in a specific time period, usually calculated on an annual basis. It includes all private and public consumption, government expenditure, investments, and exports less imports. International Monetary Fund (IMF): Global international organisation that works to foster global growth and economic stability. The IMF has 188 member countries. It promotes international monetary cooperation and exchange rate stability, facilitates the balanced growth of international trade, and provides financing and advice to help members with balance of payments or other economic difficulties, as well as assisting with poverty reduction. Market Economy: An economy in which goods are bought and sold and prices are determined by the free market, with a minimum of external government control. A market economy is the basis of the capitalist system. It is also known as a free market economy. Newly Industrialised Countries (NICs): Countries with growing industrial economies, and developing trade status in the global economy. Their level of economic development ranks them somewhere between the LEDCs (less economically developed countries) and MEDCs (more economically developed countries). Offshoring: Relocation by a company of a business activity from the country of origin to another country. Offshoring of manufacturing, technical and administrative services is part of the process of globalisation. Outsourcing: Contracting out of internal business processes to a third-party, such as another company that specialises in the outsourced activity.

Special Economic Zones (SEZs): Geographical regions that have economic and other laws that are more free market orientated than a country’s typical or national law. Sovereign wealth funds: State-owned investment funds investing in real and financial assets such as property, precious metals, bonds and stocks, or in alternative investments such as private equity funds or hedge funds. Sovereign wealth funds invest globally. Most are funded by revenues from commodity exports, or from forex reserves held by the central bank. Sustainability: Ensuring desirable conditions for future generations - economic, political, cultural and ecological. It occurs when living conditions and resource-use meet human needs, without undermining the sustainability of natural systems and the environment. Transnational Corporations (TNCs): Companies that own or control production or services facilities in one or more countries, other than the home country. They play an important role in the process of globalisation. Underground Economy: Economic activity that is illegal, either because the good or service being traded is itself illegal (e. g. drugs) or because the transaction does not comply with government reporting requirements (e. g. smuggling goods to avoid duties). The underground economy is also known as the black market, shadow economy or informal economy. World Trade Organisation (WTO): Global international organisation dealing with the rules of trade between nations. The WTO has about 150 members, accounting for about 95% of world trade. At the heart of the system, known as the multilateral trading system, are the WTO’s agreements, negotiated and signed by a large majority of the world’s trading nations, and ratified in their parliaments. These agreements are the legal ground-rules for international commerce.