Trade, Aid and Exchange
Globalisation
Globalisation – The process of interaction and integration among people, companies and
governments of different nations resulting in the exchange of knowledge, transformation of the
world, and cultural diffusion
* action – process of “The world is becoming a ‘global village’ because of globalization”
* integration – coming together
Efficiency of trade depends on the efficiency of technology and vice versa. Trade and
technology are DIRECTLY PROPORTIONAL.
→ Socialisation has changed because of the availability of technology through globalisation.
Social
Pros Cons
→ Greater awareness of international affairs
→ Better communication
→ Ideas shared, new inventions
→ Social media connects people from around the world
→ Cultural diversity/exchange → Cultural conflicts (e.g. Racism)
→ De-socialization/laziness
→ Loss of own cultural traditions
→ Dangerous ideas spread faster
→ Diseases spread faster
Political
Pros Cons
→ World affairs known to all
→ Leads to improved relations
→ Create awareness about political issues → Powerful countries gain power
Political coordination and diplomacy???
Wars + weaponry???
Economic
Pros Cons
→ Urbanization
→ rural development
→ Increased employment
→ Remittances in developing countries → Economies suffer if they import more than they
export
→ Intellectual property rights
→ Brain drain
Multi-national Corporations (MNCs)???
Trade, aid & exchange
* Trade – Buying and selling of goods and/or services through barter and money.
* Aid – Taking/providing help (only one, not both).
* Exchange – Not through buying and selling; incorporates mostly ideas.
Trade Barriers intended for the protection of domestic industries:
* Tariffs – Tax on each product; as much as required
* Quota – Quantity allowed to be traded
* Sanction – Forbidding certain import of good/service
* Subsidy – Financial aid given to locals
* Embargo - A total ban on the import of goods
International trade - the exchange of capital, goods, and services across international borders or
territories because there is a need or want of goods or services.
Free Trade Zones – a geographical area where goods may be landed, stored, handled,
manufactured, or reconfigured, and re-exported under specific customs regulation and generally
not subject to customs duty (e.g. European Union).
Fair Trade - trade between companies in developed countries and producers in developing
countries in which fair prices are paid to the producers.
Benefits of Trade
→ Brings in raw material
→ Reduce conflicts
→ Countries become interdependent
→ Profit through export
Unilateral Trade - done or made by one person who is involved in something without the
agreement of the other person or people
Bilateral Trade – Two parties
e.g. CPEC – China Pakistan Economic Corridor
Multilateral Trade – More than two parties
e.g. EU – European Union
ASEAN – Association of SouthEast Asian Nations
NAFTA – North American Free Trade Agreement
WTO – World Trade Organization
Aid
→ Support/help
→ Debt (unless forgiven, in form of a grant2)
→ Service
→ Assistance
Tied – Foreign aid that must be spent in the country providing the aid or in a group of selected
countries. Decide where aid is to be spent by the donor.
Untied aid – Given to developing countries which can be used to purchase goods and services
in virtually all countries – Decide where aid is to be spent.
Forms of aid
→ Technological – Machinery
→ Relief – For natural disasters
→ Humanitarian - For humans
CPEC – It is a massive bilateral project to improve infrastructure within Pakistan for better trade
with China and to further integrate the countries of the region. The goal is to o transform
Pakistan’s economy and to connect the deep-sea Pakistani ports of Gwadar and Karachi to
China’s Xingjiang province and by overland routes.
EU – Organization of European countries dedicated to increasing economic integration and
strengthening cooperation among its members. Main members include – Belgium,
France,Germany, Italy, Luxembourg, and the Netherlands.
ASEAN – A regional intergovernmental organisation comprising of ten Southeast Asian
countries which promote Pan-Asianism3 and intergovernmental cooperation and facilitates
economic, political, security, military, educational, and socio-cultural integration amongst its
members and other Asian countries, and globally.
NAFTA – An agreement signed by Canada, USA and Mexico in 1994, creating a trilateral trade
bloc in North America.
WTO – An intergovernmental organization that regulates international trade.
Economics
Term Definition
Economic Growth Economic growth is the increase in the quantity and quality of the
economic goods and services that a society produces and consumes.
→ increase in real national income / national output
Economic Development Economic development means an improvement in the quality of
life and living standards,
→ e.g. measures of literacy, life-expectancy and health care.
GDP Gross Domestic Product
→ market value of all the final goods and services produced in a specific time period by
countries
→ made by only the country’s citizens/businesses
GDP per capita A country's GDP divided by its total population.
→ economic output of a nation per person
Nominal GDP GDP measured using current prices
→ does not consider inflation
Real GDP GDP measured using a base year’s price
→ more reliable because it considers inflation
GNP Gross National Product
→ measures the value of goods and services produced both domestically and abroad
→ production inside a country no matter who makes it
HDI Human Development Index
→ socio-economic index
→ measures 3 dimensions of welfare:
⦁ Longevity (life expectancy)
⦁ Knowledge (literacy rates, access to education)
⦁ Standard of living (GNI/GDP per capita)
Unemployment Unemployment refers to the condition wherein someone who is capable
of working does not work.
Poverty Poverty refers to the lack of or scarcity of resources for an individual
Two main types:
→ Absolute: individual does not have the financial means to obtain necessities
→ Relative: standard of living compared to economic standards of living within the same
surroundings
Population Population growth refers to the increase in population over a period of time, and
poverty refers to the lack of or scarcity of resources for an individual.
Inflation/Deflation Inflation: rate of increase of prices for goods and services over a set
period of time
→ ideal rate is between 2-3%
→ either value of currency decreases or value of goods increases
Deflation: reduction of price levels of goods and services over a set period of time
Business Cycle
Terms Definition
Business FluctuationsThe ups and downs in business activity throughout the economy
Expansion National economic activity is speeding up
Contraction National economic activity is slowing down
Recession Rate of growth of a business is consistently less than its long term trend
→ or growth rate is negative
Depression Extremely severe recession
Peak Highest point b/w the end of an economic expansion and the start of a contraction
Leading Indicators Events that occur before changes in business activity
Ex:
→ decrease in prices of raw materials
→ rise in unemployment insurance claims
→ drop in quantity of money circulating
→ reduction in the average workweek
The Idealized Course for Business Fluctuations