Geography (9635) | International trade and access to markets

🌍 International Trade and Access to Markets: Who Wins and Who Loses?

Welcome to one of the most dynamic and critical topics in global geography! This chapter, 3.2.1.3, is all about how countries and companies trade with each other, and crucially, how fair that process is.

Understanding international trade isn't just about economics; it helps us explain why some nations are rich, why others struggle, and how global connections impact everything from the clothes we wear to the political power of different states. It’s central to the "Global systems and governance" section!

1. Global Features and Trends in Trade and Investment

Globalisation has caused a massive explosion in the movement of goods, services, and money around the world.

Volume and Pattern of International Trade

The volume of international trade has grown exponentially since the 1980s, driven by falling transport costs (like containerisation) and reduced trade barriers (like tariffs).

• Key Trend: Trade growth usually outpaces the growth of global GDP (Gross Domestic Product). This means the world is becoming more and more integrated.
• Pattern Shift (The Great Decoupling): Historically, trade mostly happened between rich countries (e.g., USA to EU). Now, while HDEs (Highly Developed Economies) still consume most products, the biggest change is the rise of trade flowing *out of* Emerging Major Economies (EMEs) like China.

Foreign Direct Investment (FDI)

International trade is often linked to investment. FDI is when a company or individual from one country invests directly in business assets or ownership in another country.

Think of it like this: Trade is selling a finished product (a phone) to another country. FDI is building the factory (manufacturing plant) in that country to make the phone.

• FDI tends to flow primarily from HDEs (like the USA) into EMEs (like Vietnam or Mexico), seeking cheaper labour and new markets.
• This massive flow of capital connects places but also increases the interdependence of states—if China’s economy slows down, it affects Western consumers and global businesses relying on Chinese factories.

2. Unequal Trading Relationships and Patterns

The world trading system is hierarchical. Different economic groups play different roles, often dictated by historical links (colonialism) and current economic power.

Trading Blocs and Economic Groupings:

We can identify three key relationship patterns based on the syllabus:

1. Large, Highly Developed Economies (HDEs): (e.g., USA, EU)

• Role: Major consumers, primary sources of investment (FDI), and exporters of high-value services (finance, technology) and high-end manufacturing.
• Power: They often set the rules of trade (via institutions like the WTO) and their markets are essential targets for other countries.

2. Emerging Major Economies (EMEs): (e.g., China, India)

• Role: Dominant manufacturing hubs ("The world's factory"). They export huge volumes of products, often produced via TNCs.
• Change: China is rapidly becoming a major source of FDI itself, investing heavily in infrastructure in Africa and Asia (Did you know? This is sometimes called "South-South" cooperation). India focuses heavily on exporting IT and services.

3. Smaller, Less Developed Economies (SLEs): (e.g., Sub-Saharan Africa, Southern Asia, Latin America)

• Role: Often rely on exporting unprocessed primary products (raw materials, food commodities).
• Vulnerability: They are highly vulnerable to volatile global prices. If the price of coffee or copper drops, their entire economy suffers. Their trade is often constrained by a lack of infrastructure, making access to global markets difficult.

3. Differential Access to Markets and its Impacts

Not everyone can easily sell their goods globally. This variable access is a key driver of global inequality.

Why is Access Unequal?

• Protectionism (Trade Barriers): Rich countries often impose restrictions to protect their domestic industries. These include:
  • Tariffs: Taxes placed on imported goods (making them more expensive).
  • Quotas: Limits on the quantity of a specific import allowed into a country.
  Analogy: Imagine a toll booth on a highway. HDEs put up toll booths (tariffs) that poorer countries must pay to enter their markets.
• Trading Agreements (Blocs): Membership in a trading bloc (like the EU) grants members preferential access (low or zero tariffs) within the bloc but may create barriers for non-members.
• Lack of Infrastructure: Many SLEs lack reliable ports, roads, or refrigeration necessary to consistently deliver high-quality goods to global markets.
• Non-Tariff Barriers: Strict environmental or quality standards often difficult for poorer producers to meet.

Impacts on Economic and Societal Well-being

Differential access directly impacts development outcomes:

• For countries with good access: Increased trade leads to higher GDP, better wages, technological transfer, and improved economic well-being. This allows for investment in public services, improving societal well-being (better healthcare, education).
• For countries with poor access: They remain stuck in a low-value economy, relying on primary products. Their inability to access high-value HDE markets limits industrialisation, perpetuating poverty and poor societal well-being.

4. The Nature and Role of Transnational Corporations (TNCs)

TNCs are companies that operate in multiple countries. They are the engine room of global trade and investment, responsible for up to 80% of world trade.

Don't worry if this seems tricky at first. TNCs are simply businesses that have decided the best way to make money is to operate everywhere!

Spatial Organisation and Production

TNCs organise their operations globally to maximise profit, leading to a specific spatial pattern:

• Headquarters (R&D/HQs): Located in HDEs (e.g., London, New York). These are high-skill, high-wage jobs focused on research, design, and management.
• Production/Assembly: Located in EMEs or LEDCs (e.g., Vietnam, Bangladesh, Mexico). These are low-skill, low-wage jobs, taking advantage of cheaper labour and lax environmental rules.

Linkages, Trading, and Marketing Patterns

TNCs create complex global linkages via their supply chains (the network that brings raw materials to the final consumer).

• Trading Patterns: Much of world trade is actually intra-firm trade—goods moving between different branches of the *same* TNC (e.g., a car part shipped from a TNC factory in Malaysia to a TNC assembly plant in Germany).
• Marketing Patterns: TNCs use global marketing strategies to create demand, sometimes leading to the homogenisation of culture (selling the same product everywhere, like Coca-Cola).

Case Study Requirement: TNC Impacts (Reference to a Specified TNC)

Let's consider a large technology company like Foxconn (a supplier for Apple, Microsoft, etc.), operating in China.

• Positive Impacts on Host Country (China):
  • Injects huge amounts of FDI, boosting the local economy and infrastructure (roads, power).
  • Provides millions of jobs, raising overall income levels and reducing poverty.
  • Introduces new technology and management skills.
• Negative Impacts on Host Country (China):
  • Accusations of poor working conditions and low wages ("sweatshop" conditions).
  • Environmental damage due to large-scale production (e.g., pollution from electronics manufacturing).
  • Economic dependence: If the TNC decides to move production (footloose industry) to another cheaper country, the host community suffers massive job losses overnight.

5. World Trade in a Commodity: The Coffee Value Chain

The syllabus requires the study of trade in at least one food commodity or one product of manufacturing. Let’s look at Coffee, a crucial commodity for many SLEs.

The journey of a coffee bean illustrates how market access and unequal power relations work:

Step 1: Production (The SLEs)

• Where: Countries like Ethiopia, Vietnam, Colombia, Brazil (LEDCs/EMEs).
• Value: Farmers sell raw green beans at a very low price. Farmers often receive only 7–10% of the final retail price.
• Vulnerability: Farmers are highly exposed to price fluctuations on the global commodity market (e.g., due to weather or speculators).

Step 2: Processing and Trading (TNCs/HDEs)

• What happens: The beans are bought by large TNCs (e.g., Nestlé, JDE Peet’s) and shipped to HDEs.
• Value: The biggest jump in value occurs here, through roasting, packaging, and marketing—all controlled by HDE-based companies.

Step 3: Consumption (HDEs)

• Where: USA, EU, Japan.
• Value: Sold as branded products in supermarkets or in cafés (e.g., Starbucks). The final retail price is vastly higher than the price paid to the farmer.

Key Takeaway: The value chain is heavily skewed. Poorer nations export raw materials (low value), while richer nations and TNCs control the value-adding processes (roasting, branding, distribution), securing the largest share of the profit. This cycle reinforces unequal trade relations.

6. Geographical Consequences and Global Impact

Ultimately, international trade and market access are not abstract concepts—they have real-world geographical consequences that impact people everywhere.

Consequences of Global Trade:

How international trade and variable market access impact our lives:

• Inequality and Injustice: Unequal access means that while HDE consumers benefit from cheap products, SLE producers often face low prices and exploitative labour practices to keep supply costs down.
• Environmental Impacts: The massive volume of global trade requires immense shipping and transport networks (contributing to carbon emissions). Furthermore, production standards in countries with limited market power may be low, leading to pollution.
• Development Outcomes: For countries like South Korea or Singapore, successful market access fuelled decades of rapid development. For countries reliant on a single primary commodity, limited access (or poor pricing) entrenches underdevelopment.
• Conflict: Competition for resources needed for global trade (like oil or minerals) can fuel geopolitical conflicts and political instability in resource-rich but economically vulnerable nations.