Essential Concepts of Global Trade and Economic Terminology

Key Concepts in International Trade and Globalization

Foundations of Trade

Humans began trading due to a lack of self-sufficiency.

The Spread of Commodities: Sugarcane Example

Inhabitants of New Guinea discovered that sugarcane is sweet and easily cultivated. Due to the increased human appetite for sweets, sugarcane spread geographically:

1. From New Guinea to Southeast Asia.
2. To India.
3. From India, traders took it to China and what is now Iran, and so on.

Trade Agreements and Barriers

GATT (General Agreement on Tariffs and Trade)

An agreement designed to reduce tariffs and other barriers to international trade.

Tariffs

Taxes placed on certain imports or exports, which typically stifle trade.

Quotas

Restrictions on the amount of imports a country may receive.

Subsidies

Government support that often influences producers to overproduce.

Trade Bloc

A type of intergovernmental agreement where barriers to trade are reduced or eliminated among the participating states. Example: The North American Free Trade Agreement (NAFTA).

Measuring Trade Performance

Exchange Rate

The value indicating how much of one country’s money can be bought with a specified amount of another country’s money.

Trade Deficit

The difference between the value of goods and services that a country buys from overseas (imports) and the value of goods and services it sells to other countries (exports).

Trade Surplus

Occurs when the value of goods and services exported is greater than the value of goods and services imported.

Production Models and Labor

Fordism

A production model that stressed mass production and the centralization of production processes.

Post-Fordism

A production model characterized by more decentralized processes.

Race to the Bottom

The relentless search for lower production costs in politically stable countries.

Insourcing

The practice of making products in home countries.

Labor Equality and Safety

• Companies can promote equality by giving equal job opportunities to people of all social categories.
• Global safety is important to keep the economy flowing. It is also crucial because it keeps employers and laborers, including child laborers, safe in working environments.

Decline of Labor Unions

The decline of labor unions is attributed to several factors:

• Public perceptions of unions.
• Technological advances.
• Political change.
• Global competition.
• The global financial crisis.

Globalization Impacts: Food and Health

Globalization of Food Production

Food has globalized, partly through the use of Genetically Modified Organisms (GMOs), which raises concerns regarding crop safety and sustainability.

Global Health Risks

International travel and the expansion of trade create a gateway for diseases to access all parts of the world. This makes diseases an almost immediate threat across the globe.