SOL 9 GLOBAL PATTERNS AND NETWORKS OF ECONOMIC INTERDEPENDENCE
Factors that influence Economic Activity • Access to human, natural, and capital resources • Location and ability to exchange goods
Access to human, natural, and capital resources • – Skills of the work force • – Natural resources • – Access to new technologies • – Transportation and communication networks • – Availability of investment capital
Location and ability to exchange goods – Landlocked countries: Examples- Paraguay, Democratic Republic of the Congo – Coastal and island countries: Examples- Japan, US, UK – Proximity to shipping lanes: Examples- Singapore, Egypt (Suez Canal), Panama – Access to communication networks
factors that influence economicactivity (continued) • Membership in political and economic alliances that provide access to markets. • European Union (EU)- an economic alliance est. after WWII and made up of over 20 European countries; created to reduce trade barriers among member nations and promote better cooperation
NAFTA- North American Free Trade Agreement – an economic alliance created in 1989 that reduces trade barriers between Mexico, Canada, and the United States • ASEAN- Association of SouthEast Asian Nations- an economic organization established in 1976 to reduce trade restrictions between member countries in Southeast Asia.
OPEC – Organization of Petroleum Exporting Countries- an economic alliance created in 1960; dedicated to the policy of controlling the production and sale of petroleum among member countries. Most member countries are located in the Middle East (Southwest Asia, North Africa). Others include Venezuela, Indonesia, Ecuador, Gabon, and Nigeria.
Advantages to economic unions • Member countries have more efficient industries because they are in cooperation with one another. They have better access to one another’s technology. • Member countries have access to larger markets because they are working in unity in the global market.
Member countries have access to natural, human, and capital resources without restrictions among the members. • Member countries have greater influence on the world market (global market) because they are more powerful in unity than if they were trading as a single country.
Disadvantages to economic unions • Economic unions can result in the closing of some industries. • Economic unions result in a concentration of some industries in certain countries while the surrounding countries (peripheral areas) are excluded.
Large agricultural companies (agribusiness) will often replace small family farms. This will leave the small farmers unemployed • Member countries may disagree on certain economic policies, such as setting prices, etc.
Term to know • Comparative advantage - Countries will export goods and services that they can produce at lower costs than other countries. (One of the reasons comparative advantage exists is because of the unequal distribution of natural resources.)
Effects of unequal distribution ofresources • Specialization in goods and services that a country can market for profit • Exchange of goods and services (exporting for profit; import what cannot produce profitably)
Some countries’ use of resources • Japan— • highly industrialized • Major manufacturing • Very limited resources • Most valuable resource is skilled labor
Some countries’ use of resources • Russia— • Numerous resources, • many of which are not economically profitable to develop
Some countries’ use of resources • United States— • Diversified economy • abundant natural resources • specialized industries
Some countries’ use of resources • Côte d’Ivoire— • Limited natural resources • cash crops (commercial farming) in exchange for manufactured goods
Some countries’ use of resources • Switzerland— • Limited natural Resources • production of services on a global scale • known for banking
Reasons why countries engage intrade • To import goods and services that they need • To export goods and services that they can market for profit
Effects of comparative advantage • Enables nations to produce goods and services that they can market for profit • Influences development of industries (ex. steel, aircraft, automobile, clothing) • Supports specialization and efficient use of human resources
Changes over time • Industrial labor systems (e.g.,cottage industry, factory, office, telecommunications) • Migration from rural to urban areas
Changes over time • Industrialized countries export labor-intensive work to developing nations • Growth of trade alliances
Changes over time • Growth of service (tertiary) industries • Growth of financial services networks and international banks
Changes over time • Internationalization of product assembly (e.g., vehicles, electronic equipment) • Technology that allows instant communication among people indifferent countries
Changes over time • Modern transportation networks that allow rapid and efficient exchange of goods and materials (e.g., Federal Express, United Parcel Service, U. S. Postal Service)
Changes over time • Widespread marketing of product (e.g., Fuji film, Nike, United Colors of Benetton)
Examples of economic unions • EU—European Union • NAFTA—North American Free Trade Agreement • ASEAN—Association of Southeast Asian Nations • OPEC—Organization of Petroleum Exporting Countries