AQA Geography-International trade and access to markets

forms of trade groupings
free trade, customs unions, common markets and economic or monetary unions such as the EU.
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How and why are trade agreements formed?
trade agreements have been formed by countries joining together to form trade blocs in order to stimulate trade between themselves and to gain economic benefits from co-operation.
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A free trade area is a grouping of countries within which tariffs and non-tariff trade barriers between the members are generally abolished but with no common trade policy toward non-members. EG NAFTA or EFTA
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a group of states that have agreed to charge the same import duties as each other and usually to allow free trade between themselves.
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a group of countries imposing few or no duties on trade with one another and a common tariff on trade with other countries (this last bit is the difference between a custom union and a common market).
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An economic union is a type of trade bloc which is composed of a common market with a customs union. The participant countries have both common policies on product regulation, freedom of movement of goods, services and the factors of production
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Are trade agreements exclusive?
Trade agreements are not exclusive; many other regionally agreements exist and some overlap as many states are members of more than one agreement.
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are trade agreements always regionally based?
Not all trade agreements are regionally based, e.g. Organisation of Petroleum Exporting Countries (OPEC) is made up of members mainly from the Middle east but also from South America & Africa.
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Why do Countries group together ?
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Trade Blocs
A trade bloc is a group of countries within a geographical region that protect themselves from imports from non-members. Trading blocs increasingly shape the pattern of world trade. E.g. the EU
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The “Group of 8” most powerful countries in the world, which includes France, United States, United Kingdom, Russia, Germany, Japan, Italy, and Canada.
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The Group of Twenty is an international forum for the governments and central bank governors from 20 major economies-
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Brazil, Russia, India and China – a group of 4 countries identified by Jim O’Neil from Goldman Sacs as upcoming major global economic powers in 2001.
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Mexico, Indonesia, Nigeria and Turkey - the next batch of potential economic giants identified again by Jim O’Neil in 2014.
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Trade is the movement of goods and services from producers to consumers, spanning many sectors of industry
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why is international trade inevitable?
As no single country has everything it needs and materials and resources are unevenly distributed, international trade is inevitable.
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Visible trade
Trade if goods are exchanged, because they can be counted, weighed and given a value. For example – foodstuffs and manufactured goods.
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Invisible trade
Trade if services are exchanged. For example Tourism.
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The main charateristic of a LIC's trade
tend to be dominated by a limited number of low value primary products such as crops or raw materials
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why are single market economies bad?
single product economies are vulnerable to market price fluctuations and may have limited options for generating other sources of foreign income should a natural disaster strike (e.g. flood or drought) or even if tastes or fashions change.
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leading world exporter
China overtook Japan as the leading Asian exporter in 2004, just 3 years after it joined the WTO.It then overtook the USA in 2007 and Germany in 2009 to become the worlds leading exporter.
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comparative advantage
countries should specialise in providing goods and services that they excel at producing, and trade these goods for ones that they are not so good at producing. It’s easier to make these trades if there were fewer barriers.
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why has most of the 20th century trade has remained relatively limited ?
because of regulations, protectionism and high transport costs.
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Free trade
When international trade is left to natural course without governments imposing tariffs or quotas.
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a tax paid on imports
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a restriction on the number of a certain product that can be imported
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effect of tariffs and quotas?
The effect of tariffs and quotas is the same: to limit imports and protect domestic producers from foreign competition
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what has the idea that "that nations are better off when buying and selling from each other"?
the focus on liberalising trade through free trade agreements. The foreign producer is able to sell more and make increased profits and the consumer has access to products that might not be available domestically.
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how does free trade theoretically benefit everyone?
Free trade benefits all parties, in theory, because it allows countries to maximise trade with other countries in those activities which they are relatively more efficient and skilled at producing.
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Government offer subsidies (money) to help make firms more competitive by lowering their cost.
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Foreign direct investment
is an investment made by a firm or individual in one country into business interests located in another country.
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what are 3 main attractions that pull in FDI?
Plentiful natural resources Large and accessible consumer markets. Financial services
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A TNC is a company that operates in more than one country.
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how do TNCs accelerate globalisation ?
by linking together groups of countries through the production and sale of goods. In large assembly industries, the parts are often made in one country, assembled in a second country, then sold in a third.
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Are TNCs new phenomenon?
No! TNCs are not new The East India Company existed in 17th century - it ran parts of India and controlled over half of the world’s trade in cotton, silk etc
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name 2 TNC Links
merger. acquisitions. FDI. subcontracting
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a merger is where two companies (usually of similar size) agree to become one bigger company, e.g the two oil and gas companies BP and Amoco merged in 1998. This helps links form between countries where the two companies operate
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an acquisition is where one company buys another company, e.g the US car company Ford brought the Swedish company Volvo cars in 1999
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Foreign Direct Investment
this is any investment that gives TNC a long term interest in a country outside the one they're from. It can involve mergers, acquisitions and using sub contractors, e.g if HSBC acquire a bank in Indonesia, they're investing money in Indonesia 
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why can TNCs use foreign companies to manufacture products?
TNCs can use foreign companies to manufacture products without actually owning the businesses, e.g NIKE products aren't always made in factories NIKE own. This links the countries of the TNC and the sub-contracted company together
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involves improving links between different firms at the same stage of production.
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why do TNCs have strong links between all parts of their organisation
TNCs have strong links between all parts of their organisation, allowing them to control and coordinate economic activities in different countries.
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describes an industry where one company either owns or controls multiple stages in the production and distribution chain. This gives the company significant economic advantages over competitors.
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international division of labour
When the division of labour is broken down into tiny tasks across international boundaries
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example of how TNCs are able to take advantage of spatial differences in factors of production and government policies across all of the countires in which they operate.
For example, TNCs can exploit differences in the cost of labour, raw materials, land and buildings as well as the availability of capital, tax incentives, subsidies and more favourable government policies.
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Spatial Organisation of TNCs
Factories are usually located in LEDCs where there are lower production costs. Production plants may also locate in a country where their product is sold, to avoid import and export taxes and reduce transport costs.
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name 5 Reasons for growth
Cheap Labour Mergers & takeovers- allows big business to buy out smaller competitors + increase their market share Flexible workforce- Willingness to travel to jobs overseas Transport improvements- e.g. containerisation Technological developments
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The largest TNCs
number one = walmart
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RECAP- What is a TNC?
A TNC is a global company or corporation with branches all over the world. The Headquarters and research and development tend to be based in MEDC.s such as the USA or Japan where there is a skilled workforce. Production is often, but not always, base
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Case Study of TNCs
Coca Cola
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Coca Cola interbrand rating
Coca Cola was rated by Interbrand as one of the worlds’ most valuable and successful brands.
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How is Coca Cola global?
The Company HQ are in Atlanta, USA but it has it’s operation based in 200 countries around the world!
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Example of how coca cola adapts worldwide?
The size, shape, and labelling of the bottle are changed to match the norms in each country. While the company formerly used a standardized advertising approach, it has changed to adapt advertising messages to local culture.
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What is Fair Trade?
Fair trade means that the producer gets a guaranteed, fair minimum price for his produce. Fair trade also sets minimum standards for the pay and condition of workers
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where do bananas come from?
Most of the bananas we eat come from the Caribbean, but they are also grown in some parts of Africa, Southern Asia, central America and Northern Australia. To grow bananas need hot and humid weather.
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Fair trade premium
Fairtrade Premium is an additional sum of money which goes into a communal fund for workers and farmers to use to improve their social, economic and environmental conditions. 
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banana wars
The "banana wars" is the culmination of a six-year trade quarrel between the US and the EU. The US complained that an EU scheme giving banana producers from former colonies in the Caribbean special access to European markets broke free trade rules.
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Support Caribbean Bananas Campaign
Caribbean bananas are grown on small, family owned farms using more sustainable methods of production than those used on the huge monoculture plantations in Latin America.  The livelihoods of these small producers are dependent on continued trade
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Who controls what we eat?
Less than 10 TNCs control more than 50% of the food on sale in a typical supermarket.
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how do TNCs maximise their profits?
the food they sell is manufactured as cheaply as possible whilst appealing to our taste buds.
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throwing food away stats
40% of bakery items 2/3rds of salad sold in bags
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where did Almost half the grain harvested worldwide in 2014 ?
did not got to food processing but into animal feed, biofuels or raw materials for industry.
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How and why are trade agreements formed?


trade agreements have been formed by countries joining together to form trade blocs in order to stimulate trade between themselves and to gain economic benefits from co-operation.

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