CHAPTER 12 Main Points: INTERNATIONAL TRADE 1. Inter means between two sides or parts or persons. Therefore, interval in a movie, inter-state, inter-national. 2. In trade profits are generated by purchasing goods that are cheaper in one place, and transporting them for sale to another place, where those goods are costlier. The difference in the prices between the two places is the profit from trade. 3. Trade can be national or local as well as international. 4. International Trade is always between two or more than two countries. It involves crossing the inter-national borders and complying with the laws and procedures of both countries. Figure 9.1 TYPES OF INTERNATIONAL TRADE Trade and commerce are Tertiary Economic Activities. Through them peopel and countries exchange goods and services. Trade can be local, national or International. International trade is through two modes or routes: 1. Membership of International trade blocs or groups having multiple member countries that have a mutual interenst 2. Bilateral trade between two countries. There are more than 120 Regional Trade Blocs. 1.ASEAN, OPEC SAFTA, CIS, EU, LAIA, NAFTA. The country may also be given the status of ' Most Favoured Nation' (MFN) 10x10 Learning TM Page 1
5. Basis of International Trade is that certain natural resources are available only in some countries and not in others, but they are needed by all countries. Therefore, these are exchanged or traded internationally. Figure 9.2 Basis of International Trade 1.Climate zone 2. Geological structure 3. Mineral Resources Population factors of size, distribution, diversity. Transport sector Stage of economic development and extent of foreign investment for capital intensive industries. 10x10 Learning TM Page 2
6. Figure 9.3 Types of Ports 1. Cargo variety basis Industrial ports Commerci al ports Compreh ensive ports 2. Location basis Inland ports are away from sea coasts. Out ports that are deep water ports built away from natural ports Strategic Naval ports : serve only warships. Kochi,Karwar. 3.Specialised functions basis: Oil ports. Ports of Call : on long routes for re-fuelling, watering, and food. Packet stations or ferry ports. Entrepot Ports: they are collection centres for exports from different countries. eg. Singapore Naval ports: have strategical location. Karwar 10x10 Learning TM Page 3
Figure 9.4 Important Aspects of International Trade 1.Volume of Trade: that is marked by actual tonnage for goods and total value for services 2.Composition or content of trade 3. Direction of Trade : from developing to developed, European to Asia etc. 2.1 Primary sector produce 2.2 Secondary or 2.3 Tertiary sector products. 4. Balance of Trade that records volume of goods and services Questions at the end of the Chapter Choose the right answer from the four alternatives given below. 1. Most of the world s great ports are classified as: 1.1 Naval Ports 1.2 Oil Ports 1.3 Comprehensive Ports 1.4 Industrial Ports 10x10 Learning TM Page 4
2. Which one of the following continents has the maximum flow of global trade? 2.1 Asia 2.2 North America 2.3 Europe 2.4 Africa 3. Which one of the following South American nation, is a part of OPEC? 3.1 Brazil 3.2 Chile 3.3 Venezuela 3.4 Peru 4. In which of the following trade blocs, is India an associate member? 4.1 SAFTA 4.2 OECD 4.3 ASEAN ( But in 2017 India has become a member of ASEAN) 4.4 OPEC Answer the following questions in about 30 words: a) What is the basic function of the World Trade Organisation? Answer. The basic function of the World Trade Organisation is to promote free and fair trade among all nations of the world. It makes and implements global trade rules and resolves trade disputes. (32 words) b) Why is it detrimental for a nation to have negative balance of payments? Answer. It is detrimental for a nation to have negative balance of payment because in indicates that its expenditure is higher than its earnings, and this could result in collapse of its economy. (32 words) c) What benefits do nations get by forming trading blocs? 10x10 Learning TM Page 5
Answer. Member nations of a trading bloc carry get tariff concessions and free trade is encouraged amongst them because of trade in complementary goods and services. All members benefit from it. (30 words) Answer the following questions in not more than 150 words: a) How are ports helpful for trade? Give a classification of ports on the basis of their location. Answer. Ocean routes are the cheapest means of transport for bulk goods. 70% of Earth s surface is covered by Oceans and Seas on which major routes have been established. Ports serve as the gateway for international trade on these sea routes. They enable the cargo ships to anchor, re-fuel, and obtain fresh water and food supplies. Many modern international ports provide quality cargo handling and specialized services, to facilitate world trade. On basis of their location ports are classified as Inland ports and Out ports. Inland ports are connected to the coast through a canal or river. Out ports are deep water ports built in the deep sea through a connecting pathway. They enable larger ships to anchor, load and unload and refuel as they cannot reach the coastal main port due to shallower waters. A few ports are strategically important due to their location. These become Naval ports for servicing warships only. (152 words) b) How do nations gain from International trade? Answer. Through International trade nations are able to obtain supplies of natural resources and produce and of skills and services that are not available or are in short supply in their own country. The composition of goods and services trades internationally indicates the development and growth in the world economy. The composition of world trade has been changing from primary sector produces of grains, fruits and vegetables, to manufactured goods and services. 10x10 Learning TM Page 6
Direction of trade patterns enables members to decide joining Multinational Trade blocs that are most beneficial to them. Through bilateral trade nations can trade more easily and widely and avail many concessions that are mutually beneficial. From 1990, Globalisation has given the call for opening of all tariff borders to make international trade, open and free. Many small countries, however, have not opened up their trade barriers as they fear unfair treatment at the hands of the developed nations. (150 words) 10x10 Learning TM Page 7