Class 12 Geography Notes Chapter 9 (International trade) – Fundamentals of Indian Geography Book

Detailed Notes with MCQs of Chapter 9: International Trade from your 'Fundamentals of Human Geography' textbook. This chapter is crucial not just for your board exams but also forms a significant part of the syllabus for various government exams. Pay close attention as we break down the key concepts.

Chapter 9: International Trade - Detailed Notes

1. Introduction to International Trade

• Definition: International trade is the exchange of capital, goods, and services across international borders or territories. It represents the movement of goods and services from one country to another.
• History: Trade has existed since ancient times, initially through the barter system (direct exchange of goods for goods). Later, the introduction of currency facilitated trade. Historical trade routes like the Silk Route (connecting Rome to China) are prime examples of early long-distance trade. Slave trade also marked a dark phase in trade history after the 15th century. Industrial Revolution further boosted international trade.

2. Why Does International Trade Exist? (Basis of International Trade)

Trade occurs because no country is entirely self-sufficient. It is based on the principle of comparative advantage, specialisation, and division of labour at the global level. Key factors include:

• (a) Differences in National Resources:
  • Geological Structure: Determines mineral resource endowments. Industrial development often depends on mineral availability (e.g., coal, petroleum).
  • Mineral Resources: Unevenly distributed globally, leading to trade (e.g., Middle East oil).
  • Climate: Influences agricultural produce (e.g., wool production in cold regions, bananas/rubber/cocoa in tropical regions).
• (b) Population Factors:
  • Cultural Factors: Distinctive forms of art, craft, and specific goods develop in certain cultures, leading to trade (e.g., Persian carpets, Chinese porcelain).
  • Size of Population: Densely populated countries often have large internal markets but may need to import food or export surplus manufactured goods. Sparsely populated countries might export raw materials but import finished products. Standard of living also affects demand.
• (c) Stage of Economic Development:
  • Less developed countries often export primary products (agri-products, minerals) and import manufactured goods.
  • Developed countries tend to export manufactured goods, machinery, technology, and services, while importing raw materials and sometimes food grains.
• (d) Extent of Foreign Investment: Foreign investment can boost trade in developing countries lacking capital by developing resources or setting up industries (e.g., oil drilling, plantation agriculture). Multilateral National Corporations (MNCs) play a significant role.
• (e) Transport and Communication: Efficient transport (shipping, air cargo, rail, road) and communication (internet, mobile) are prerequisites for modern international trade. Expansion and improvement in these sectors have significantly boosted trade volume and reach.

3. Important Aspects of International Trade

• (a) Volume of Trade:
  • Refers to the total value (or tonnage) of goods and services traded.
  • Generally measured in US dollars.
  • Global trade volume has consistently increased over the last centuries, though growth rates fluctuate.
• (b) Composition of Trade:
  • Refers to the types of goods and services traded.
  • Historically dominated by primary products (agriculture, mining).
  • In the 20th and 21st centuries, the share of manufactured goods and services has significantly increased, although primary products remain important. Trade in services (travel, transport, banking, IT) is growing rapidly.
• (c) Direction of Trade:
  • Refers to the countries involved in trade (trading partners).
  • Historically, developing countries exported raw materials to their colonial powers (European nations).
  • Post-WWII, Europe lost dominance, and countries like the USA, Germany, and Japan became major trading powers.
  • Developing countries like China, India, Brazil have significantly increased their share in world trade. Intra-regional trade (e.g., within Europe, Asia) has also grown.

4. Balance of Trade (BoT)

• Definition: The difference between the value of a country's visible exports and visible imports for a specific period. Visible items refer to physical goods.
• Types:
  • Favourable/Surplus BoT: Value of exports > Value of imports.
  • Unfavourable/Deficit BoT: Value of imports > Value of exports.
• Balance of Payments (BoP): A broader concept than BoT. It records all economic transactions (visible goods, invisible services, capital transfers) between a country and the rest of the world over a period. An unfavourable BoP indicates outflow exceeds inflow, potentially depleting foreign exchange reserves.

5. Types of International Trade Agreements

• Bilateral Trade: Trade between two specific countries. Agreements are signed to facilitate trade in certain goods or reduce tariffs.
• Multilateral Trade: Trade conducted among many countries. Agreements often involve reducing trade barriers globally or within a group of nations (e.g., WTO agreements, regional trade blocs like EU, ASEAN).

6. The Case for Free Trade

• Free Trade/Trade Liberalisation: The act of reducing or eliminating trade barriers like tariffs (taxes on imports) and quotas (limits on import quantity) to allow goods and services to move more freely across borders.
• Arguments For: Promotes competition, efficiency, lower prices for consumers, greater variety of goods, economic growth through specialisation.
• Arguments Against/Concerns: Can harm domestic industries unable to compete, lead to job losses in certain sectors, potential exploitation of labour/environment in developing countries.
• Dumping: The practice of exporting goods at a price lower than their normal value or domestic price, often to gain market share or dispose of surplus. Considered an unfair trade practice.

7. World Trade Organisation (WTO)

• Background: Evolved from the General Agreement on Tariffs and Trade (GATT), established in 1948. GATT aimed to reduce tariffs and promote free trade.
• Formation: WTO was established on January 1, 1995, headquartered in Geneva, Switzerland.
• Functions:
  • Administers trade agreements negotiated by its members.
  • Provides a forum for trade negotiations.
  • Handles trade disputes between member countries.
  • Provides technical assistance to developing countries.
  • Deals with trade rules for goods, services, and intellectual property rights (TRIPS).
• Criticisms: Accused by some of favouring developed countries and corporations, neglecting environmental and labour concerns, and undermining national sovereignty.

8. Gateways of International Trade: Ports

• Role: Ports and harbours are crucial nodes connecting land transport (road, rail) with sea transport. They facilitate the loading, unloading, storage, and transfer of cargo.
• Harbour vs. Port: A harbour is a sheltered body of water providing safe anchorage for ships. A port is a commercial facility built within or near a harbour, equipped with docks, wharves, cranes, warehouses, etc., for handling cargo and passengers.
• Types of Ports (Based on Location):
  • Inland Ports: Located away from the sea coast, connected by a river or canal (e.g., Manchester on Manchester Ship Canal, Kolkata on Hooghly river).
  • Out Ports: Deepwater ports built away from the actual main port to handle large ships that cannot enter the shallower main port (e.g., Piraeus is the out port for Athens).
• Types of Ports (Based on Specialised Functions):
  • Oil Ports: Specialise in processing and shipping oil (Tanker ports like Maracaibo in Venezuela; Refinery ports like Abadan on the Persian Gulf).
  • Ports of Call: Developed as convenient stopping points on main sea routes for refuelling, watering, and taking food supplies (e.g., Aden, Honolulu, Singapore historically).
  • Packet Stations (Ferry Ports): Primarily concerned with transporting passengers and mail across short sea distances (e.g., Dover in England, Calais in France).
  • Entrepot Ports: Collection centres where goods are brought from different countries for re-export (e.g., Singapore, Rotterdam, Copenhagen).
  • Naval Ports: Serve warships and have repair facilities for them; often hold strategic significance (e.g., Kochi, Karwar in India).

9. Impact of International Trade

International trade has profound impacts, leading to global interdependence. It can stimulate economic growth, increase efficiency, provide access to a wider variety of goods, and foster cultural exchange. However, it can also lead to inequalities, environmental degradation (due to transport and resource extraction), and vulnerability to global economic fluctuations.

Multiple Choice Questions (MCQs)

1. Which ancient trade route connected Rome to China?
   a) Spice Route
   b) Incense Route
   c) Silk Route
   d) Amber Route
   Answer: c) Silk Route

2. The principle that forms the primary basis of international trade is:
   a) Absolute Advantage
   b) Comparative Advantage
   c) Mercantilism
   d) Self-sufficiency
   Answer: b) Comparative Advantage

3. Which of the following is NOT considered a primary factor influencing the basis of international trade?
   a) Differences in climate
   b) Stage of economic development
   c) Domestic political stability
   d) Uneven distribution of mineral resources
   Answer: c) Domestic political stability (While important for overall economy, it's not a direct basis for trade in the same way resource differences are)

4. A situation where the value of a country's exports exceeds the value of its imports is known as:
   a) Trade Deficit
   b) Unfavourable Balance of Trade
   c) Balance of Payments
   d) Favourable Balance of Trade (Trade Surplus)
   Answer: d) Favourable Balance of Trade (Trade Surplus)

5. Trade between two specific countries under a mutual agreement is called:
   a) Multilateral Trade
   b) Entrepot Trade
   c) Bilateral Trade
   d) Free Trade
   Answer: c) Bilateral Trade

6. The practice of selling goods in a foreign market at a price lower than the domestic price is known as:
   a) Quota
   b) Tariff
   c) Dumping
   d) Subsidy
   Answer: c) Dumping

7. The World Trade Organisation (WTO) was established in which year?
   a) 1948
   b) 1985
   c) 1995
   d) 2001
   Answer: c) 1995

8. Which organisation preceded the WTO?
   a) IMF (International Monetary Fund)
   b) World Bank
   c) UNCTAD (United Nations Conference on Trade and Development)
   d) GATT (General Agreement on Tariffs and Trade)
   Answer: d) GATT (General Agreement on Tariffs and Trade)

9. Singapore is a well-known example of which type of port?
   a) Naval Port
   b) Oil Port
   c) Packet Station
   d) Entrepot Port
   Answer: d) Entrepot Port

10. Ports like Kolkata, located on rivers away from the sea coast, are classified as:
    a) Out Ports
    b) Inland Ports
    c) Ports of Call
    d) Naval Ports
    Answer: b) Inland Ports

Make sure you revise these notes thoroughly. Understanding the basis, aspects, and institutions governing international trade is essential. Good luck with your preparation!