International Trade Flows Anderton: Ch. 66/67 Edexcel Link – p68 http://qualifications.pearson.com/content/dam/pdf/A%20Level/econo mics-a/2015/teaching-materials/Getting_Started_Guide_new.pdf

Read through the following article: http://www.economist.com/node/21562221 Please make notes on the following – we will discuss…. What do they argue causes changes in trade patterns? What do they argue increases trade? What are the trade patterns of mentioned countries/ trading blocs? What do you think protectionism is? What impact is it having?

From the getting started guide: 4.1.3 Patterns of trade The G7 share of world trade in manufacturing has fallen significantly over the past century. In global terms, trade flows with emerging economies have increased significantly. Trade within trading blocs, such as the EU, has also significantly increased (trade creation), but at the expense of trade with more traditional trading partners, such as between the UK and the Commonwealth countries (trade diversion). Students should be encouraged to look at how patterns of trade have changed and the reasons for these changing patterns, particularly with reference to the growing importance of trading blocs and the growth of emerging economies.

From Specification - today

Impact of Emerging Economies Who – How – Why – What Goods / What Impact –

Impact of Emerging Economies Who – BRICs (Brazil, Russia, India, China) How – Utilised large pools of labour, Improved communications (improved technology), Rise of TNCs and movement of labour/capital Why – Larger (world) markets, End of USSR – bridge building to E. Europe via trade, Trade Liberalisation – low cost production What Goods / What Impact – Manufactured goods (China), Services (Call centres, IT Support/Development (India), Russia (Oil & Gas), Brazil (Commodities). Impact: Wider extremes of wealth, ↑migration, challenge to low skills sectors of developed economies, erosion of individual cultures, ↑ industrialisation / pollution in LDCs

Trading Blocs Main Trading Blocs: How have patterns changed? Why intra-bloc trades?

Trading Blocs Main Trading Blocs : (in order of GDP (2007 figures)) NAFTA, EU, ASEAN, DR-CAFTA-US, CISFTA How have patterns changed?   Rise of regional trading blocs, deindustrialisation in many advanced economies, the increased participation of former communist countries, the emergence of China and India. Why intra-bloc trades? Free trade within bloc = benefits of specialisation As a % of world GDP, trade increased from 40% in 1990 to 60% in 2014 (World Bank)

Changes in relative exchange rates (Intro) Effect of stronger currencies on Imports / Exports Effect of weaker currencies on Imports / Exports Growth of Emerging Market currencies (Why)

Changes in relative exchange rates (Intro) Effect of stronger currency = ↑Imports / ↓Exports Effect of weaker currency = ↓Imports /↑ Exports Growth of Emerging Market currencies (Why) ↑ Export led trade (especially China CNY, CNH) China lifting restrictions on CNH (hangover from 1997/8 SE Asian Crisis). High(er) interest rates in EM, Investment in Emerging Markets by TNCs Chinese policy of maintaining weak CNY to promote export-led growth but strengthening now with liberalisation under pressure from US and trade partners

Interest Rates vs Inflation = Real Interest Rate Chinese Inflation is higher than US, hence Assets held in China grow faster in value than US – and – CNH has been strengthening vs USD (below) Chinese interest rates are higher than US, hence attractive to place money in China (see charts below)

Trade Flows Exam Question 25 marks: 3 main points, 2 evaluation points

From specification – next week

Mark scheme