OWorld trade: Buying and selling of goods and services among different countries

Import: Buying goods and services from other countries

E.g goods - what you eat, wear and use everyday
services - HK ppl living in a hotel in Japan
Export: Selling goods and services to other countries
E.g goods - HK factory sells garments to a US department store
services - a foreigner living in a hotel in HK

explain the problems that the agricultural industry in China is facing.

The development of the country and rapid population growth have made farmiand per capita lower than international standard.
Also, a lot of quality farmland has been used for industrial and commercial purposes
Both factors would hinder the growth of the agricultural industry in China.

discuss the prospects for China's secondary industry.

China's performance in technological innovation is satisfactory, the government has put a lot of resources into research and development.
Continuous improvement in technological development could keep the competitiveness of the Chinese industrial products in the world market.

why does China need to develop its service industry?

China's tertiary industry only contributes about 59% to its GDP in 2018, which is much lower than those of developed countries. This shows that China's service industry still has a lot of
room to grow.
Service industry can be a drive for economic growth.
Since manufacturing involves huge investment and uses a lot of resources. Economic growth cannot rely on secondary industry in the long run.
Thus, there is a need to develop tertiary industry in China.

Benefits:
Save • Assume a region can produce an item. If its production costs are very high,
production the region can save costs by importing the item from another region.
costs • E.g. Rents and wages in Hong Kong are very high. It is less costly to import
agricultural products from the mainland than growing them itself.

Raise Trade allows the division of labour. Each region produces one type of goods
production only (usually the type that it can produce at lower costs).
efficiency This can raise efficiency and increase production volume.

Enjoy goods • Some regions lack the natural resources or technology required.
 that cannot They have to import those goods from other regions.
be produced • E.g. The global distribution of oil and natural gas is uneven. Many countries
by itself must import oil from the Middle East.

Provide • By importing goods from other regions, consumers can have more choices.
more • E.g. Hong Kong imports various types of apples from Japan, the mainland
choices China and the US
As rents and wages in HK are high, growing agricultural products is very costly
-> importing them costs much less
The World Trade Organization (WTO) aims to reduce international trade barriers. This allows people to enjoy goods from different countries and increases their living standards.
However, international trade will harm the less competitive industries of importing countries. Moreover, developed countries slicy have greater influence in making sebal trade policies.
Unfair policies may result. For example, developed countries subsidise local agricultural products and export them to developing countries at low prices. This has harmed the livelihood
of the farmers there.
Therefore, protests against the WTO take place all over the world
From 1985-2013, h
Facing trade protection measures
5.1 What can the producers do?
Improve efficiency in order to lower the production cost, then
-
production cost, then Producers can
export their goods at a lower price and the price will
more
----
re competitive.
Improve product quality
- Provide value-added services such as after-sales services and better customer supportOver-dependence on exports will make the Chinese economy vulnerable to external factors.
Recently, the production costs, such as wages and energy costs, in China has been rising. Its advantage of low-cost production is being replaced by other developing countries and its
status of being the 'world's factory' is shaking. Therefore, China is trying to use domestic demand instead of exports to drive economic growth.
- China's exports have been rising since 1980s. Most of them were industrial goods such as clothing, toys, food products, electrical appliances.
- In terms of total value of export of goods, China ranked 13th in 1990 and ranks first in the world now and has earned a title of the 'world factory'.

Challenges faced by Hong Kong's visible trade

- Mainland is the largest trading partner of Hong Kong. In terms of trade, Hong Kong relies on Mainland in a very large extent.
The prospect of the trading industry of Hong Kong will be influenced by the economic and trading development of the Mainland as well as the trade relations between China and other
countries.
If there is any trade dispute between China and other countries ( such as the US ), Hong Kong's trade industry will be adversely affected.
- The Hong Kong International Airport is reaching its full capacity. The growth of trade by air will be hindered. Some trading activities may be lost to neighboring airports.
Hong Kong's visible trade
In the 1970s, Hong Kong's manufacturing industry was thriving. Most of the exports were locally produced
As the Mainland reformed and opened up in 1978, Hong Kong's manufacturing industry declined.
Domestic exports _
fell
Nowadays, the Mainland imports raw materials and export goods through Hong Kong. The territory's re-exports and imports have hence increased greatly.
H.K.'s major imports :
Baw materials, semi- finished
products, machinery, consumer goods
H.K.'s major domestic exports:
Raw materials, semi-finisned
products, machery!_ consumer goods H.K's major re-exports: Telecommunication equipment+ jewellery, erectrical machinery, clothing

Finish Activity 5 on P.13 of your textbook.

5.2 What can the government do?
- Join international economic and trade organizations such as WTO
- Sign trade agreements with different countries or regions
- Set up institutions and departments which help industries raise productivity, improve product quality, develop new products ...Trade balance = Exports of goods - Imports of goods
Trade balance can be in form of trade surplus and trade deficit.
Trade surplus exists when exports of goods > imports of goods Trade deficit exists when exports of goods < imports of goods
The US has a trade deficit with China for a long period of time and the gap is widening.

Effect on the US manufacturing sector :

American consumers buy Chinese products in large quantities, implying that they buy fewer local produ Profits of the US manufacturers will drop.
Workers may face wages cut or layoffs.
In the long run, some of the US manufacturers may be forced to shut down.

With world trade, countries export goods they can produce at lower costs, and import goods they can produce only at higher costs. If a country is less competitive than others in
producing most goods (e.g. at higher prices and of poorer qualities), goods that it can export will be fewer and its reliance on imports will increase. Less competitive industries in the
country will diminish with massive job losses. Moreover, its infant industries are usually less competitive. Facing fierce competition from imported goods, they may fail to survive.
Revaluation
Exchange rate refers to the price of a currency in terms of another currency.
For example, the exchange rate between Renminbi ( Chinese Yuan) and the US dollar
is 1 RMB = 0.15 USD.
It means that the price of 1 Renminbi is 0.15 US dollar.
Revaluation refers to an increase in the price of a currency in terms of another currency.
Suppose RMB revalues against USD and the new exchange rate is 1 RMB = 0.2 USD.
In recent years, the US trade deficit against China has grown larger.
To import less from China, the US has urged China to revalue the RMB.
Example: ( Revaluation of RMB)
Find the answers for the following blanks from 'More Information' on P.9 of your textbook.
When RMB revalues, it means more units of US dollar are needed to be exchanged for 1 RMB.
This will raise the _
prices
of Chinese goods in USD and make
US consumers buy
Fewer
_ of Chinese goods.
Safety requirements
As the quality of some Chinese goods is not satisfactory, some countries have tightened the safety requirements on imports from China.
However, ever - stringent
_ requirement can be seen as a kind of trade protection measures.
Carbon tariff
In addition, importing countries may impose a carbon tariff.
For most developing countries, their factories emit a lot of carbon dioxide.
Carbon tariff is a tax imposed on imported goods which come from countries with_
no restriction
on carbon dioxide emission.
From the viewpoint of the developing countries, carbon tariff is viewed as a kind of trade protection measure.
Reasons for trade protection
• With world trade, countries export goods in which they can produce at lower costs, and import those goods they have a higher cost.
• In the less competitive countries, local consumers tend to buy imported goods and the export volume is small.
• The less competitive industries then contract ( sell fewer products and profits drop), many jabs
are lost.
• Moreover, for infant industries which are usually less competitive, they may fail to
survive when facing fierce competition from
imported goods
• As a result, the less competitive countries may use different trade protection measures to protect their local industries.
Consumers and importers will lose under trade protection measures. Although local producers and workers gain, their productivity or competitiveness does not improve. Therefore,
these measures do more harm than good to the overall economy. In the long run, this may lead to trade disputes and trade barriers between countries. The economies of these
countries will be harmed as a result.