Trade

Global Interdependence:

Trade flows and trading patterns:

  • Trade refers to the exchange of goods and services for money

* Refer to TRADE FLOWS AND TRADING PATTERNS notes *

Visible and invisible trade:

Imports and exports:

  • Exports are the movement of goods or commodities out of the country.

  • Imports are the movement of goods or commodities into the country.

Visible trade:

  • Visible trade involves trading of goods which can be touched and weighed

  • Visible imports – goods that are tangible that cross a border into your country. (Oil, Machinery, food, clothing …)

  • Visible exports – tangible goods that cross a border leaving a country. (minerals, SA wine, cheese …)

Invisible trade:

  • Invisible trade involves the import and export of services rather than goods.

  • Invisible imports – non-tangible services bought from overseas. (Insurance, shipping, banking …)

  • Invisible exports – services sold to foreigners (tourism, education …)

Balance of trade:

  • It is the difference between the value of visible exports and value of visible imports of a country.

  • If the value of visible exports is more than visible imports the country will have a Surplus balance of trade. 

  • If the value of visible imports is more than visible exports the country will have an unfavourable balance of trade.

Trade flows:

LEDCs:

  • There is a lot of inter-industry trade: LEDCMEDC & LEDCLEDC

  • Imports: machinery, chemicals, fuels, transport & manufactured goods …

  • Exports: foods, fuels, minerals …

LEDCs need fuel, machinery, transport equipment and manufactured goods in order to develop. These cost a lot. In order to pay for these imports, they must export. However, they import high-value goods and export low value goods – there is a trade gap. This does not auger well for development of LEDCs. They need freer access to MEDC markets at higher prices, no-strings aid, debt relief …

MEDCs:

  • There is a lot of intra-industry trade MEDC MEDC

  • Imports: foods (exports too), fuel (can afford it) and manufactured goods (export more) …

  • Exports: manufactured goods, machinery, food …

MEDCs trade mainly between themselves and OPEC (for fuel). LEDCs accoor a small portion of world trade. Great inequalities in trade flow (Africa accounted for just 3% of world trade in 2008). But China and India are rising, with China (not per capita but an absolute value of goods) now the 2nd biggest economy to USA.

Nagle TB page 398

  • The emergence of different generations of newly industrialised countries (NICs) since the 1960s has changed the trade pattern that existed in the previous period.

  • In 2008 (exports): Germany was the largest exporter with 9.1% market share, China with 8.9% and USA with 8.1%. Top 10 countries accounted for 50.7% of world exports and top 20 accounted for 70.2%.

  • In 2008 (imports): USA was first with 13.2% world share, 2 – Germany with 7.3% and 3 – China with 6.9%.

Patterns of international trade:

  • Most international trade takes place between MEDCs (diagram above)

  • Contiguity (being next to one another) also plays a role. For example, 75%

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