Grade IX Geography: Trade

Grade IX Geography: Trade

This lesson will deal with aspects of trade dealing with balance of payments, free trade, barriers to trade, transportation routes

Categories of Goods

• Raw materials generally have low international value

• Capital goods rate higher than raw materials

• Processed goods (value added) have the highest value

Pakistan exports more raw materials than value added goods. Why is this an issue?

• Lower value of foreign exchange

• Increase our negative BOP

• Forced to take international loans for ramping up economy

• Increase in taxes at home to make up the difference

Balance of Trade vs. Balance of Payments

• BOT is the difference between payment and total receipt of a country's transactions

• BOP is the difference between import and exports of an economy.

• BOPincludes capital transfers, shows overall strength of an economy and entails all visible and invisible transactions including services.

Implications of Negative BOP

• Countries have to take loans to induce foreign currency that depreciates the national currency resulting in debt and loss of national assets

• Rise in inflation and unemployment

• Importing more than we export shows our lack of infrastructure for producing world class value added products

Trade Routes -- Challenges

• East - Challenging because of our hostile relationship with India

• North-West through Afghanistan is challenging due to rugged terrain and lack of road and railway infrastructure; dependence on historical passes - climate and earthquake area

• North - CPEC and the construction of the Karakoram Highway

• South West - Turkey and Iran - new highway in development stages

Sea Routes are King

• Pakistan has world class ports - warm water, year round, deep - Karachi, Port Qasim and Gwader

• Cheaper and more efficient to transport by sea and through the Suez Canal to Asia and Europe

• Moder ports, docks and container facilities make sea transportation viable

Signs of a healthy economy

• More competition within the marketplace

• Higher value goods exported

• Receive duties for high end imports

• Capital investment and capital goods purchase indicates growth in manufaturing sector

• Higher employment - skilled and unskilled

• Modernization of industries

Open Ended

What are some of the challenges we face both in terms of human and physical inputs that may result in a negative BOP?

Capital Investment is a huge challenge for Pakistan. What can be done to bring in investors

• 100% ownership rights

• No minimum or maximum investment limit

• Duty free on capital goods import

• No taxation on input goods and services

• Exemption from import duties and freedom from national import restrictions

The Role of Private and Public Sector to Enhance EPZ's.

• EPZ's should be established near sea ports

• Consistent government policies to create stability and investor confidence

• Adequate transportation network for logistics of raw materials to factories and finished goods to makets

Potential of Establishing EPZ's on the Makran Coast

• Foreign investor would only invest if the location (seaport) gave them a competitive advantage

• Gwadar and Ormara have many strategic advantages

• What are these?

Open Ended

Look at all the moving parts in the image and suggest how efficiencies can be created for each stage using advanced technology and communication

International Trade

• What are the pros of international trade?

• What are the cons of international trade?

• Place your answers on Padlet for homework after we have discussed it in class.

Trade Barriers

• In what situation are trade barriers beneficial?

• In what situation are these harmful?

• What are the different types of tariffs?

• What are the differences between quotas, subsidies and embargoes?

Open Ended

What are the advantages and disadvantages of trading with the EU?

Significance of Dry Ports

• Improves supply chains; logistics, customs, handling, container storage, refrigeration

• Reduces transportation costs and eliminating backup at sea ports

• Reduction in road congestion

• Employment oportunities in remote areas

WTO Membership (198)

• WTO membership will provide advantages for Pakistani producers in international markets and greatly improve the prospects of improving the industry's competitiveness and quality of products and services in the long run.

• Textiles

• Agriculture

• Service Sector

• Public Administration

• Import Duties

• Small and Medium Scale Industries