UNIT-III
Chapter-8
International Trade
EXERCISES
1. Choose the right answer from the four alternatives given below.
(i) Most of the world’s great ports are classified as:
(a) Naval Ports (c) Comprehensive Ports
(b) Oil Ports (d) Industrial Ports
Answer: (c) Comprehensive Ports.
(ii) Which one of the following continents has the maximum flow of global
trade?
(a) Asia (c) Europe
(b) North America (d) Africa
Answer: (a) Asia
2. Answer the following questions in about 30 words:
(i) What is the basic function of the World Trade Organisation?
Answer: The World Trade Organization's (WTO) main function is to ensure smooth, predictable, and fair trade between its member countries. It acts as a global trade watchdog, setting rules, resolving disputes, and supporting developing nations in the global trading system. Think open markets, transparency, and economic growth for all.
(ii) Why is it detrimental for a nation to have negative balance of payments?
Answer: A negative balance of payments drains a nation's foreign reserves, leading to:
*Currency depreciation: Reduced foreign funds weaken the currency, making imports more expensive and exports less competitive.
*Debt accumulation: Borrowing foreign currency to fill the gap further burdens the economy.
*Restricted growth: Investor confidence dwindles, affecting investments and economic activity.
Think: weakened currency, rising debt, and stifled growth – not a recipe for national prosperity!
(iii) What benefits do nations get by forming trading blocs?
Answer: Trading blocs offer nations a sweet deal:
*Lower trade barriers: Reduced tariffs and quotas boost trade within the bloc, leading to cheaper goods and increased economic activity.
*Stronger bargaining power: Blocs wield collective clout in international trade negotiations, securing better deals for members.
*Increased investment: Stable rules and larger markets attract foreign investment, stimulating economies within the bloc.
*Collaboration and innovation: Member countries share knowledge and resources, fostering technological advancements and joint ventures.
Trading blocs create a synergistic trade ecosystem, benefiting all members through growth, efficiency, and global influence.
3. Answer the following questions in not more than 150 words:
(i) How are ports helpful for trade? Give a classification of ports on the basis of their location.
Answer: Ports: Gateways of Global Trade
Ports play a crucial role in facilitating international trade by serving as the vital connection points between land and sea transportation. They act as bustling hubs where goods are loaded and unloaded from ships, enabling their movement across vast distances.
Here's how ports are instrumental in trade:
*Connecting continents: They bridge the gap between landlocked countries and international markets, allowing them to participate in global trade.
*Facilitating cargo movement: Different types of cargo, from containers to bulk goods like oil and grain, efficiently move through ports using specialized infrastructure and equipment.
*Supporting diverse industries: Ports cater to various industries, including manufacturing, agriculture, and energy, by handling the import and export of essential materials and finished products.
*Generating economic activity: Ports create jobs in various sectors, from dockworkers and cargo handlers to customs officials and logistics companies, boosting local economies.
*Promoting regional development: They often serve as focal points for economic development, attracting investments and infrastructure projects that benefit surrounding communities.
Now, let's explore the different classifications of ports based on their location:
1. Inland Ports:
Located along rivers or lakes, these ports provide access to inland waterways and connect to maritime shipping routes via canals or feeder vessels.
Examples: Duisburg (Germany), Chicago (USA), Wuhan (China)
2. Seaports:
Situated on coastlines or estuaries, these ports are directly accessible to the ocean and handle large volumes of international cargo.
Examples: Singapore, Shanghai, Rotterdam, Los Angeles
3. River Ports:
Situated along major rivers, these ports enable cargo transportation inland and connect to seaports via waterways.
Examples: Antwerp (Belgium), Hamburg (Germany), New Orleans (USA)
4. Specialized Ports:
Focused on handling specific types of cargo, such as oil terminals, cruise ship terminals, or container ports.
Examples: Houston (USA, oil), Miami (USA, cruises), Shenzhen (China, containers)
By understanding the role and types of ports, we can appreciate their critical contribution to global trade and economic development. They serve as the arteries of a thriving global economy, connecting countries, industries, and people through the efficient movement of goods across the world.
(ii) How do nations gain from International Trade?
Answer: International trade offers a multitude of benefits for nations, fostering economic growth, increased prosperity, and a wider range of opportunities for both individuals and businesses. Here are some key ways nations gain from engaging in international trade:
1. Access to a wider range of goods and services: International trade breaks down national boundaries, exposing citizens to products and services unavailable domestically. This promotes:
*Greater consumer choice: People have access to a wider variety of goods, at potentially lower prices due to increased competition.
*Improved living standards: Consumers can benefit from innovative products and services not available locally, enhancing their quality of life.
*Specialized industries: Nations can focus on producing goods and services they excel at, trading for others they lack, leading to greater overall efficiency.
2. Economic growth and development: International trade acts as a powerful engine for economic growth by:
*Increased exports: Nations earn foreign currency from exporting goods and services, boosting their economies and creating jobs.
*Foreign investment: Increased trade attracts foreign investment, which provides additional capital for infrastructure development, technology, and job creation.
*Economies of scale: Larger international markets allow businesses to produce goods and services on a larger scale, leading to lower costs and increased profitability.
3. Job creation and improved skills: International trade creates new jobs in various sectors, from manufacturing and transportation to logistics and marketing. This leads to:
*Reduced unemployment: Increased trade activity creates new employment opportunities, benefiting individuals and families.
*Skill development: Workers gain new skills and knowledge through exposure to international competition and collaboration.
*Higher wages: Increased competition and productivity can lead to higher wages for workers in export-oriented industries.
4. Technological advancement and innovation: International trade fosters knowledge sharing and technology transfer between nations, leading to:
*Adoption of new technologies: Nations can access and incorporate innovative technologies developed elsewhere, enhancing their own production and competitiveness.
*Research and development: Increased competition and exposure to global markets incentivize companies to invest in research and development, leading to further technological advancements.
*Improved productivity and efficiency: Adoption of new technologies and best practices from other nations can boost productivity and efficiency in various sectors.
5. Increased global cooperation and peace: International trade can act as a bridge between nations, promoting:
*Mutual dependence: Increased economic interconnectivity creates interdependence, making nations less likely to engage in conflict.
*Cultural exchange: Trade facilitates cultural exchange and understanding between nations, fostering empathy and cooperation.
*International agreements: Nations collaborate on trade agreements and regulations, establishing common ground and promoting peaceful interactions.
Overall, international trade offers a complex web of benefits for nations, fostering economic growth, technological advancement, and increased prosperity. While challenges and inequalities exist, the potential gains from engaging in international trade are undeniable, shaping a more interconnected and prosperous world for all.
Answer By: Himashree Bora.
