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: LEDC↔MEDC & LEDC↔LEDC

• 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.

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• 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%…