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uk

International Trade

BTEC Business

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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

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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

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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

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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

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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

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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

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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
spending
Little evidence that these policies work

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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

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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

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