Global patterns of trade flows:
- Global trade dominated by Europe, Asia and N America.
- Trade is most vital element in growth of global
economy.
- USA is largest importer of merchandise, while China is
largest exporter of merchandise.
- USA leads trade in commercial services, esp. as an
exporter.
- Share of N America and Europe in commercial services
trade is declining, while share of Asia is increasing.
Factors affecting global trade:
1. Resource endowment
Countries endowed with raw materials like minerals or
oil figure prominently in world trade.
Many HICs’ wealth has been built to considerable extent
on export of raw materials in demand on world market.
Wealth from raw materials can be used for economic
diversification.
E.g. Many Middle-Eastern countries dominate oil,
forming OPEC with Venezuela and Nigeria.
Kenya has tried to follow similar path over 100,000
employed in mining, with natural resources incl. gold,
iron and titanium.
,2. Comparative advantage
Different countries specialise in producing goods &
services for which each is best endowed.
Each trades proportion of these goods/services with
other nations to be able to obtain those it needs (but
isn’t naturally endowed with).
Leads to specialisation in production & employment.
E.g. Germany known for its car manufacturing.
3. Locational advantage
Advantageous for exporting country to be close to
markets for its products, as this reduces transport costs
+ increases efficiency.
E.g. Canadian manufacturing industry benefits from
proximity of huge US market.
Some places are strategically located along important
trade routes.
E.g. Singapore situated at southern tip of Malay
peninsula, which is along main trade route between
Indian and Pacific Oceans.
Kenya is gateway to East & Central African region, and
also borders Indian Ocean so is well-suited as
production & distribution base for African, Asian,
European and Middle Eastern corporations.
, 4. Investment
When investment in a country increases, so does trade.
E.g. Mexico has increased trade substantially through
attracting FDI.
Greater instability in a country means less private
investment + growth.
Crime & corruption are substantial risk to investment
since they increase cost of doing business.
5. Historical factors
Often based on colonial ties.
E.g. UK maintains significant trade links with
Commonwealth countries, as trade relationships were
established when they were colonies.
Legacy of trade dependency is a reason why poorer
countries tend to have such limited share of world
trade.
Colonies forced to play subordinate role with limited
benefits at expense of economic distortion.
Kenya’s development was stagnated due to depletion of
natural resources by British exploitation, with negative
consequences for its trade volume.
BUT strong socio-economic links with India due to protection
of its historic trade routes with Britain.
- Global trade dominated by Europe, Asia and N America.
- Trade is most vital element in growth of global
economy.
- USA is largest importer of merchandise, while China is
largest exporter of merchandise.
- USA leads trade in commercial services, esp. as an
exporter.
- Share of N America and Europe in commercial services
trade is declining, while share of Asia is increasing.
Factors affecting global trade:
1. Resource endowment
Countries endowed with raw materials like minerals or
oil figure prominently in world trade.
Many HICs’ wealth has been built to considerable extent
on export of raw materials in demand on world market.
Wealth from raw materials can be used for economic
diversification.
E.g. Many Middle-Eastern countries dominate oil,
forming OPEC with Venezuela and Nigeria.
Kenya has tried to follow similar path over 100,000
employed in mining, with natural resources incl. gold,
iron and titanium.
,2. Comparative advantage
Different countries specialise in producing goods &
services for which each is best endowed.
Each trades proportion of these goods/services with
other nations to be able to obtain those it needs (but
isn’t naturally endowed with).
Leads to specialisation in production & employment.
E.g. Germany known for its car manufacturing.
3. Locational advantage
Advantageous for exporting country to be close to
markets for its products, as this reduces transport costs
+ increases efficiency.
E.g. Canadian manufacturing industry benefits from
proximity of huge US market.
Some places are strategically located along important
trade routes.
E.g. Singapore situated at southern tip of Malay
peninsula, which is along main trade route between
Indian and Pacific Oceans.
Kenya is gateway to East & Central African region, and
also borders Indian Ocean so is well-suited as
production & distribution base for African, Asian,
European and Middle Eastern corporations.
, 4. Investment
When investment in a country increases, so does trade.
E.g. Mexico has increased trade substantially through
attracting FDI.
Greater instability in a country means less private
investment + growth.
Crime & corruption are substantial risk to investment
since they increase cost of doing business.
5. Historical factors
Often based on colonial ties.
E.g. UK maintains significant trade links with
Commonwealth countries, as trade relationships were
established when they were colonies.
Legacy of trade dependency is a reason why poorer
countries tend to have such limited share of world
trade.
Colonies forced to play subordinate role with limited
benefits at expense of economic distortion.
Kenya’s development was stagnated due to depletion of
natural resources by British exploitation, with negative
consequences for its trade volume.
BUT strong socio-economic links with India due to protection
of its historic trade routes with Britain.
