International Trade Agreements

Page on international trade agreements such as trade blocs (e.g the EU), trade diversion, role of the World Trade Organisation and advantages and disadvantages of free trade.

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  • Created on: 15-03-14 15:03
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How do international trade agreements influence global patterns of production?
The World Trade Organisation (WTO)
WTO deals with the rules of trade between nations at a global nation
Promotion of free trade ­ removal of tariffs and quotas
Global forum for negotiating trade agreements
Member governments discuss trade problems
Helps to liberalise trade
WTO can also maintain trade barriers
How the WTO influences distribution of raw materials
In 2012, the issue that China was restricting the export of raw materials arose
China was doing this in order to protect its domestic industry from competition from the US
and the EU
China imposed quotas, saying it had to conserve resources of magnesium and other exports.
this left non-Chinese manufacturers with shortages of the necessary metals for manufacture
­ decreased production
China is a rich source of certain raw materials
WTO appealed against China and won the appeal so China can no longer place quotas on
export of raw materials
How has China benefited from joining the WTO?
Positive multiplier effect
Economy has expanded
Advantages of free trade
More consumer choice
Imports are used as materials, components and equipment for local production ­ increased
The success of an imported product or service on the domestic market can also encourage
new local producers to compete, increasing the choice of brands available to consumers as
well as increasing the range of goods and services produced locally.
The EU Commission calculates that the creation of its Single Market means that there are
somewhere in the range of 300,000­900,000 more jobs than there would be without the
Single Market.
Reduced costs of production (because imports used in production are cheaper) and reduced
prices of finished goods and services, and ultimately a lower cost of living.
Solves trade conflicts ­ prevents retaliation
Free trade enables countries to specialise in the production of those commodities in which
they have a comparative advantage ­ goods are produced efficiently
Positive multiplier effect

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Disadvantages of free trade
Developing or new industries may find it difficult to become established in a competitive
environment with no short-term protection policies by governments, according to the infant
industries argument. It is difficult to develop economies of scale in the face of competition
from large foreign TNCs.
How do TNCs dominate global trade and its patterns?
Due to free trade, TNCs may operate over many countries such as Nike and Toyota...…read more

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Dumping' of sugar
Subsidising of production in the EU ­ some farmers in the UK, France and Germany gewq an
excess of beat (3.…read more


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