international trade

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International Trade

BTEC Business



Look at the Trade W/S...

• What is a “Free Trade Zone”?• What do they do?• Where are they located?• What’s good/bad about them?• What are trading blocs?• What are import tariffs and why

are they used?



Trading Blocs

• A trading bloc is where a group of nations agree to allow free-trade between themselves but impose tariffs (charges) on other countries who wish to trade with them (E.U).

• Some people believe these trading blocs are unfair to non-members as it is more difficult for them to trade.



Trade Barriers

• the EU’s internal market is about removing barriers to free movement of goods, services, people and capital

• the flow of goods and services in the world economy is also important

• organisations have been set up to encourage the removal of barriers to free global trade



EPZ’s And Free Trade Zones

• Export Processing Zones: Labour-intensive manufacturing centres that involve the import of raw materials and the export of factory products.

• Free Trade Zones: Where manufacturing does not have to take place for trading privileges to be gained (retailing).



Popularity Of EPZ’s...

• Problems of Indebtedness.• Open economies.• Multi-National Corporations to locate.

LEDC’s Offer...1.Trade.2.Investment (Big/Small).3.Taxation.



Why the stress on free world trade?

• The world economy went into a deep depression in the 1930s, as many countries closed their barriers to trade with other states. This led to:

• Mass unemployment• Social upheaval• Rise of fascism

and the Second World War



How to prevent chaos happening again?

• Global powers set up bodies to support international trade

• International Monetary Fund• World Bank• All countries encouraged to join

these organisations, or face exclusion from benefits of free world trade



What do the IMF and World Bank do?

IMF:• Lends to countries with balance

of payments problems• Pushes for economic reforms• Reports on policies in member

states



What do the IMF and World Bank do?

World Bank:• Aims to help development by

advising and lending – with many conditions

• Countries encouraged to lift import and export barriers, cut subsidies and remove price controls



Criticisms of IMF

IMF only lends money if countries agree to:

• Sell their resources cheaply• Cut public spending

Critics say this serves to increase the problems of poverty in poor member countries



Criticisms of World Bank

Loans depend on countries agreeing a ‘Structural Adjustment Programme’

• Leads to rapid increase in price of goods in country

• Increases poverty• Lower investment and cut social

spendingLittle evidence that these policies work



What about the World Trade Organisation (WTO)?

• The WTO deals with the rules of trade between countries

• It developed from the General Agreement on Tariffs and Trade (GATT)

• WTO agreements set the ground rules for international commerce



Why so much outrage over globalisation?

Other than the criticisms raised earlier, opponents of globalisation point to:

• Falling share of world trade taken by developing countries

• Subsidies and tariffs set by rich developed economies: USA steel tariffs, EU agricultural subsidies are two of the culprits

international trade

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