World Trade (SQA National 5 Geography): Revision Note

World Trade Patterns: Globalisation

• Trade is the exchange of goods and services between countries

  • Goods and services sold to other countries are called exports

  • Goods and services bought from other countries are called imports

• Trade allows countries to get things they need but do not produce themselves

  • For example, the UK might import bananas from countries with warmer climates

• The volume of global trade has increased substantially over time

  • The fastest growth took place between 1980 and 2010

Globalisation

• The growth in global trade is caused by globalisation

• Globalisation is where the world has become more interconnected through the processes of economics, culture, politics, trade and tourism

  • It allows people, goods, money, services and information to move more quickly and easily around the world

• Globalisation is nothing new; trade between people, businesses and countries has always existed

• However, globalisation has accelerated since the 1980s, leading to a dramatic increase in the volume and speed of trade

  • In the past, trade would have taken weeks, months or even years

  • Now, modern transport and communications have made trading and interaction almost instantaneous

  • This is known as time-space compression

Reasons for globalisation

• The acceleration of globalisation is caused by:

  • An increase in the number of transnational corporations (TNCs)

    • Factories are set up in different countries around the world and products are sold globally

  • The growth of regional economies and trade blocs

    • Reduces tariffs and quotas

  • The development of modern transport networks

    • Enables faster and cheaper movement of goods and people

  • Advances in IT and communications, particularly the WWW and the internet

    • Makes communication faster and cheaper

Patterns of world trade

• World trade is dominated by TNCs, many of which are owned by developed countries such as the USA, Germany and the UK

  • Their decisions can have a significant impact on other parts of the world

  • This has led to a rise in global inequality

• Most global trade happens between developed countries

• Developed countries usually export a wide range of high-value goods and services

  • Services include IT consulting, financial management and legal services

  • Goods are mostly secondary commodities, such as cars and machinery

• Developing countries usually export low-value goods

  • These are mainly primary commodities, such as agricultural products and minerals

  • Developing countries often depend on a small number of exports, making them vulnerable to price changes

Change in world trade

• The pattern of global trade is changing

• Emerging countries like China, Bangladesh and Brazil are now playing a more significant role

  • As a result of globalisation, they have started to industrialise

    • Cheap labour costs and skilled workers attract investment from TNCs

    • Developments in transport and communications improve access to global markets

    • Rapid growth in industry enables countries to export manufactured goods

  • China is now the largest exporter of goods in the world, and while the USA remains the world’s largest importer of goods, China is in second place

Causes of Inequalities in World Trade

• Trade is often promoted as the key to economic development

  • It allows countries to sell resources and increase their wealth

  • The income can be used to invest in things to advance their development

    • Improved education and healthcare will lead to a more skilled and productive workforce

    • Machinery such as tractors and technology like computers can improve productivity

    • This results in countries being able to produce more goods to sell

• However, developing countries usually benefit less from global trade than developed countries for a variety of reasons:

Dependence on primary products

• Developing countries rely on exporting raw materials like coffee, cocoa and copper

  • These goods tend to have a lower value than manufactured goods

  • The prices of primary goods often fluctuate dramatically

  • They are also vulnerable to weather hazards, disease and pests, e.g. locust swarms can decimate crops

• This leads to low and unreliable income, limiting the capacity to invest in future development

Trade barriers

• Developed countries use tools like tariffs and quotas to protect their own industries

  • For example, they may put a tariff on imports of manufactured goods, while raw materials can be imported tariff-free

• This makes it harder for developing countries to compete

• As a result, they are often unable to develop manufacturing industries

Poor infrastructure

• Poor transport connections, like roads, railways and ports, make it more difficult and expensive to participate in global trade

• Less reliable electricity provision and internet connectivity make it harder to run factories and businesses efficiently

• Poorer quality of education results in a less skilled and productive workforce

• Poorer healthcare may mean more people suffer from ill health, so they are unable to work

Debt

• Many developing countries are heavily indebted

• This means that they have to spend money repaying their debts rather than investing in infrastructure, education and healthcare

• Usually, interest is charged on the debt, so countries end up owing far more than they borrowed

  • Countries become trapped in a cycle of poverty