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Introduction
It is estimated that one fifth of the worlds population lives on less than one dollar a day. Farmers in poor countries not only have to compete against subsidised food exports, they also face high import barriers.
Developing countries are finding it easier to compete in international markets, but still face higher barriers to entry than more developed economies.
Recent Trends
Keegan and Green (2000) suggested that the world economy has changed significantly due to the emergence of global markets and the development of global competitors. The emergence of international markets has been accompanied by a reduction of tariffs and non tariff barriers.
Recent Trends
Domestic markets are therefore faced with increased import competition. This can be attributed to four factors:
1. Capital movements rather than trade, are now the driving force in the world economy. 2. Production is no longer directly linked to employment. 3. The world economy has more impact on economic outcomes within a country than the national state. 4. The contest between capitalism and socialism is over the economies of socialist countries becoming increasingly market orientated.
Economic Systems
Since World War II, countries have been classified according to their economic system. They were classified as: Market Allocation System Command Allocation Mixed System
Economic Structure
Another method of classifying countries is according to their economic structure.
The classification reflects the relative dominance in the economy of the country in the following:
Agriculture Industrial Services
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GATT established guidelines for the conduct of international trade and provided a forum for the negotiations of multi lateral reductions in tariffs and non tariff barriers.
The WTO, accounts for in excess of 80% of world trade. It has endeavored to address the shortcomings of GATT through broadening its coverage of international trade to include agriculture, investment and intellectual property.
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Trade Patterns
Trade patterns are usually measured in terms of a countrys balance of payments. The balance of payments is divided into: Current Account Capital Account
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Consumption Patterns
Both income and population impact on consumption patterns. Engles law states that as income rises above a certain minimum, expenditure on food as a percentage of total income decreases. Another issue is that product saturation levels increase as per capita national income increases.
Copyright 2002 Pearson Education Australia Pty Ltd
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Merchandise Trade
Since the end of World War II, merchandise has grown at a faster rate than world production and it is the high income countries responsible for more than 80% of imports and exports of merchandise.
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Services Trade
Services is the fastest growing sector in international trade. The growth in services trade is one possible explanation for the increasing disparity in world trade between the developed and developing nations.
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Trading Environment
The trading environment governs what firms can and cannot do when they go offshore. Trading environments are regulated by governments. Most governments wish to control the international flow of trade into and out of their countries.
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Trading Environment
International flow of trade is motivated by :
Financial issues Security issues Safety issues Health issues Protectionist issues
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Aid can also take many forms including: Multilateral aid Bilateral aid Non Government aid
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