International Trade - Class 12 Geography - Chapter 8 - Notes, NCERT Solutions & Extra Questions
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Notes - International Trade | Class 12 Fundamentals of Human Geography | Geography
Comprehensive Class 12 Notes: Understanding International Trade
International trade involves importing and exporting goods and services across international borders. This comprehensive guide delves into its historical context, economic underpinnings, and various facets, offering valuable notes for Class 12 students.
Introduction to International Trade
International trade refers to the exchange of goods and services between countries. It plays a crucial role in global economics by promoting specialisation, fostering economic relationships, and driving innovation. The benefits are manifold, including access to a broader range of products, competitive pricing, and the spur of economic growth.
Historical Perspective on International Trade
Early Barter System and Introduction of Money
Before currency existed, people used the barter system, which had several limitations, such as the need for a double coincidence of wants. Unique items like flintstones, cowrie shells, and precious metals were once used as money.
Origins of International Trade
In ancient times, trade routes like the Silk Route thrived. Stretching over 6,000 km, it connected Rome to China, facilitating the trade of silk, wool, precious metals, and other high-value commodities.
Role of European Colonialism
From the fifteenth century, European colonial powers such as the Portuguese, Dutch, Spaniards, and British leveraged international trade routes to transport exotic goods and resources, including engaging in the inhumane practice of slave trade.
Impact of the Industrial Revolution
With the Industrial Revolution, the demand for raw materials like grains, meat, and wool surged. Industrialised nations began importing raw materials from non-industrialised nations and exporting finished goods, a dynamic that shifted with World Wars and the advent of trade regulations.
Why Does International Trade Exist?
International trade exists due to specialisation in production. By focusing on industries where they have a comparative advantage, countries engage in trade that benefits all parties involved. This specialisation leads to more efficient production and resource allocation.
Types and Basis of International Trade
Types of International Trade
Bilateral trade: Trade agreements between two countries to exchange specific commodities.
Multilateral trade: Trade involving multiple countries, sometimes under agreements granting the "Most Favoured Nation" status.
Basis of International Trade
Differences in National Resources: These include geological structures, mineral resources, and climate, influencing what each country can produce.
Population Factors: Cultural factors and the size of the population affect trade dynamics.
Stages of Economic Development: Developing and industrialised nations trade differently based on their economic standing.
Extent of Foreign Investment: Investments boost trade by developing industries in resource-poor regions.
Transportation: Modern transportation aids in expanding the range and volume of trade.
Economic Concepts in International Trade
Balance of Trade
The balance of trade measures the difference between a country's exports and imports.
Positive balance: Exports exceed imports.
Negative balance: Imports exceed exports.
Case for Free Trade
Free trade, or trade liberalisation, involves reducing tariffs to encourage the free flow of goods and services. However, it can create inequalities, particularly impacting developing nations adversely by exposing them to stiffer competition without reciprocal market access.
Dumping in International Trade
Dumping is the practice of selling goods in another country at a price lower than their market value or cost of production. This can harm domestic industries in the importing country.
Role of the World Trade Organisation (WTO)
Formed in 1995, the WTO aims to promote and regulate free and fair global trade. It resolves disputes and sets the rules for international trade. Despite its noble goals, it faces criticism for disproportionately benefiting wealthy nations and neglecting issues like health, workers' rights, and environmental concerns.
Regional Trade Blocs
Countries form regional trade blocs to encourage trade within geographically proximate regions, sharing similarities and complementarities in trading items. Examples include the European Union (EU) and the North American Free Trade Agreement (NAFTA).
graph LR
A[International Trade] --> B[Regional Trade Blocs]
B --> C["European Union (EU)"]
B --> D["North American Free Trade Agreement (NAFTA)"]
Concerns Related to International Trade
While international trade can lead to higher production levels, better standards of living, and the diffusion of knowledge, it also poses risks like dependency, environmental degradation, and economic exploitation. Sustainable practices and equitable regulations are essential for a balanced global trade system.
Gateways of International Trade
Importance of Ports
Ports are the primary gateways, facilitating the docking, loading, unloading, and storage of cargo. They are crucial in maintaining navigable routes and ensuring smooth trade operations.
Types of Ports
According to Cargo Handled
Industrial Ports: Handle bulk goods like grain and oil.
Commercial Ports: Manage general cargo and passenger traffic.
Comprehensive Ports: Handle both bulk and general cargo extensively.
Based on Location
Inland Ports: Located away from the sea, connected by rivers or canals (e.g., Manchester).
Out Ports: Serve large ships that cannot dock at the main port (e.g., Piraeus for Athens).
Based on Specialised Functions
Oil Ports: Deal with oil processing and shipping.
Ports of Call: Serve as refuelling stops (e.g., Singapore).
Packet Stations: Transport passengers and mail over short distances.
Entrepot Ports: Collection centres for goods from different regions for export (e.g., Singapore).
Naval Ports: Serve military needs with repair workshops (e.g., Kochi in India).
graph TD
P[Types of Ports] --> C[Cargo Handled]
P --> L[Location]
P --> F[Specialised Functions]
C --> I[Industrial Ports]
C --> CO[Commercial Ports]
C --> CP[Comprehensive Ports]
L --> IP[Inland Ports]
L --> OP[Out Ports]
F --> OPF[Oil Ports]
F --> PC[Ports of Call]
F --> PS[Packet Stations]
F --> EP[Entrepot Ports]
F --> NP[Naval Ports]
Conclusion
Understanding international trade is vital in today's interconnected world. By appreciating its history, economic principles, and modern implementation, students and professionals alike can grasp the complexities and opportunities it presents. This guide serves as a solid foundation for Class 12 students delving into the world of international trade.
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NCERT Solutions - International Trade | Fundamentals of Human Geography | Geography | Class 12
Most of the world’s great ports are classified as:
(a) Naval Ports
(b) Oil Ports
(c) Comprehensive Ports
(d) Industrial Ports
The correct answer is:
(c) Comprehensive Ports
Which one of the following continents has the maximum flow of global trade?
(a) Asia
(b) North America
(c) Europe
(d) Africa
(c) Europe
Europe has the maximum flow of global trade due to its advanced economies, extensive trade networks, and significant industrial activities.
Answer the following questions in about 30 words:
(i) What is the basic function of the World Trade Organisation?
(ii) Why is it detrimental for a nation to have negative balance of payments?
(iii) What benefits do nations get by forming trading blocs?
(i) The World Trade Organisation (WTO) sets the global rules for trade between nations, resolves trade disputes, and aims to promote free and fair trade globally, covering goods, services, and intellectual rights.
(ii) A negative balance of payments indicates that a country is spending more on imports than it earns from exports. This can lead to the exhaustion of financial reserves and economic instability.
(iii) Nations in trading blocs benefit from reduced trade barriers within the group, promoting increased trade, economic cooperation, and sometimes stronger political ties. This can enhance economic growth and development.
How are ports helpful for trade? Give a classification of ports on the basis of their location.
Ports are chief gateways for international trade, facilitating the docking, loading, unloading, and storage of cargo. They play a crucial role in the global supply chain, enhancing the economic development of their hinterlands by providing essential services such as maintaining navigable channels, arranging tugs and barges, and offering labor and managerial services. The efficiency and capacity of ports can directly influence the volume of trade and the economic prosperity of a region.
Classification of Ports Based on Location
Inland Ports: Located away from the sea coast, these ports are connected to the sea via a river or canal. They are accessible to flat-bottom ships or barges. Examples include Manchester (linked by a canal), Kolkata (on the river Hoogli), and Memphis (on the river Mississippi).
Out Ports: Deep water ports built away from the main port to handle larger ships that cannot approach the main port. Examples include Athens with its out port Piraeus in Greece.
These classifications help in understanding the strategic roles different ports play in facilitating various types of maritime trade.
How do nations gain from International Trade?
Nations gain from international trade through specialization and division of labor, producing commodities in which they have a comparative advantage. This leads to efficient allocation of resources and boosts economic growth. Countries can import goods and services that they cannot produce efficiently, ensuring better availability of diverse products for consumers. International trade encourages technological advancements and innovation by exposing countries to new ideas and practices. It also generates employment opportunities and enhances income levels by expanding markets for domestic products. Additionally, trade fosters diplomatic and economic relationships between nations, promoting global stability. The balanced exchange of goods and services supports sustainable development and improves the standard of living worldwide. Overall, international trade is a key component of the global economy, facilitating progress and prosperity.
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Many United States companies have unfortunately made the search for legal protection from import competition into a major line of work. Since 1980, the United States International Trade Commission (ITC) has received about 280 complaints alleging damage from imports that benefit from subsidies by foreign governments. Another 340 charge that foreign companies “dumped” their products in the United States at “less than fair value.” Even when no unfair practices are alleged, the simple claim that an industry has been injured by imports is sufficient grounds to seek relief. Contrary to the general impression, this quest for import relief has hurt more companies than it has helped. As corporations begin to function globally, they develop an intricate web of marketing, production, and research relationships. The complexity of these relationships makes it unlikely that a system of import relief laws will meet the strategic needs of all the units under the same parent company. Internationalization increases the danger that foreign companies will use import relief laws against the very companies the laws were designed to protect. Suppose a United States-owned company establishes an overseas plant to manufacture a product while its competitor makes the same product in the United States. If the competitor can prove injury from the imports—and that the United States Company received a subsidy from a foreign government to build its plant abroad—the United States Company’s products will be uncompetitive in the United States since they would be subject to duties. Perhaps the most brazen case occurred when the ITC investigated allegations that Canadian companies were injuring the United States salt industry by dumping rock salt used to de-ice roads. The bizarre aspect of the complaint was that a foreign conglomerate with United States operations was crying for help against a United States company with foreign operations. The “United States” company claiming injury was a subsidiary of a Dutch conglomerate, while the “Canadian” companies included a subsidiary of a Chicago firm that was the second-largest domestic producer of rock salt. The passage warns of the following dangers: Companies in the United States may receive no protection from imports unless they actively seek protection from import competition. Companies that seek legal protection from import competition may incur legal costs that far exceed any possible gain. Companies that are United States-owned but operate internationally may not be eligible for protection from import competition under the laws of the countries in which their plants operate. Companies that are not United States-owned may seek legal protection from import competition under United States import relief laws. Companies in the United States that import raw materials may have to pay duties on those materials.
The passage warns of which of the following dangers?
A. Companies in the United States may receive no protection from imports unless they actively seek protection from import competition.
B. Companies that seek legal protection from import competition may incur legal costs that far exceed any possible gain.
C. Companies that are United States-owned but operate internationally may not be eligible for protection from import competition under the laws of the countries in which their plants operate.
D. Companies that are not United States-owned may seek legal protection from import competition under United States import relief laws.
E. Companies in the United States that import raw materials may have to pay duties on those materials.
The correct option is D: Companies that are not United States-owned may seek legal protection from import competition under United States import relief laws.
The passage highlights that foreign entities, such as companies that are not United States-owned, can indeed exploit United States import relief laws. This was evident in the example where a Dutch conglomerate's subsidiary in the U.S. sought protection against a U.S. company's Canadian subsidiary. This underscores the complexity and potential abuse in the legal protection framework, where the entities the laws are intended to protect might not align with their original purpose.
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