International Trade

BTEC Business

Trade Barriers

• the EU’s internal market is about removing barriers to free movement of goods, services, people and capital

• the flow of goods and services in the world economy is also important

• organisations have been set up to encourage the removal of barriers to free global trade

Why the stress on free world trade?

• The world economy went into a deep depression in the 1930s, as many countries closed their barriers to trade with other states. This led to:

• Mass unemployment• Social upheaval• Rise of fascism

and the Second World War

How to prevent chaos happening again?

• Global powers set up bodies to support international trade

• International Monetary Fund• World Bank• All countries encouraged to join

these organisations, or face exclusion from benefits of free world trade

What do the IMF and World Bank do?

IMF:• Lends to countries with balance

of payments problems• Pushes for economic reforms• Reports on policies in member

states

What do the IMF and World Bank do?

World Bank:• Aims to help development by

advising and lending – with many conditions

• Countries encouraged to lift import and export barriers, cut subsidies and remove price controls

Criticisms of IMF

IMF only lends money if countries agree to:

• Sell their resources cheaply• Cut public spending

Critics say this serves to increase the problems of poverty in poor member countries

Criticisms of World Bank

Loans depend on countries agreeing a ‘Structural Adjustment Programme’

• Leads to rapid increase in price of goods in country

• Increases poverty• Lower investment and cut social

spendingLittle evidence that these policies work

What about the World Trade Organisation (WTO)?

• The WTO deals with the rules of trade between countries

• It developed from the General Agreement on Tariffs and Trade (GATT)

• WTO agreements set the ground rules for international commerce

Why so much outrage over globalisation?

Other than the criticisms raised earlier, opponents of globalisation point to:

• Falling share of world trade taken by developing countries

• Subsidies and tariffs set by rich developed economies: USA steel tariffs, EU agricultural subsidies are two of the culprits