4.2.1 Contemporary Networks and Flows Notes

Interconnections Through Trade, Finance, and Migration

1. Imagine a world where countries operate in isolation, producing everything they need without interacting with others.
2. Now, compare this to our interconnected global economy, where goods, services, money, and people flow across borders every second.

This interconnectedness shapes economies, influences policies, and impacts lives worldwide.

Trade Flows: The Movement of Goods and Services

Raw Materials, Fuels, Agricultural Products, Manufactured Goods, and Services

1. Raw Materials: These are the building blocks of global trade including ores and metals.
2. Fuels: Key export products for multiple countries strengthening their role.
3. Agricultural Products: Significant components of global food security.
4. Manufactured Goods: Countries like China, Germany, and South Korea are major exporters of electronics, automobiles, and machinery. Manufactured goods are main export products from most of the HICs.
5. Services: The global trade in services, such as finance, tourism, and information technology, is growing rapidly.

What Is the Volume and Pattern of Trade?

1. Globally export of goods reaches 20-25 trillion USD annually and accounts for approximately 80% of the value of international trade.
2. The remaining 20% (~5-7 trillion USD) is constituted by export of services.

Why Trade Matters

1. Economic Growth: Trade enables countries to specialize in what they do best, creating jobs and boosting productivity and income.
2. Interdependence: Countries become reliant on each other, fostering cooperation but also creating vulnerabilities.
3. Access to Resources: Trade ensures access to resources that may not be available domestically.
4. Market Expansion and Diffusion: Trade allows for spreading out products, but also information and culture.

Foreign Direct Investments (FDI): Market Expansion and Job Creation

What Is the Trend and Pattern of FDI?

1. Since the 1990s the value of FDI has been increasing, but there are some serious fluctuations (e.g. after 2001 terrorist attacks, 2008 financial crisis, or COVID-19 pandemic).
2. Historically, HICs (developed economies) have attracted most of the investments, but this trend has changed recently making MICs and LICs (developing economies) major FDI recipients.
3. In recent years the annual volume of FDI oscillates around 1.5 trillion USD.

Aid, Loans, Debt Relief, and Remittances: Financial Flows for Development

Types of Financial Assistance

1. Aid: Humanitarian and development assistance provided by governments (then called Official Development Assistance - ODA) or non-governmental organizations (NGOs).
2. Loans: Financial support that must be repaid, often with interest.
3. Debt Relief: Cancellation or reduction of debt to alleviate financial burdens on heavily indebted countries.

Remittances - the Power of Individual Transfers of Money

1. Remittances play a significant role in poverty reduction, securing basic needs and improving quality of life, as well as are used as initial investments in local businesses in LICs and MICs.
2. Flow of remittances reflect the flow of international migrations, but in a reversed direction.

Illegal Flows: Against the Law, But Also Connecting Places

Counterfeit Goods

1. The trade in counterfeit goods undermines legitimate businesses, reduces tax revenue, and poses safety risks to countries and consumers.
2. Counterfeit goods include fraudulent medicines, counterfeit food and drink, consumer electronics, textiles, tobacco and alcohol.

Narcotics Trade

1. The illegal drug trade destabilizes regions, funds criminal networks, and contributes to violence and corruption.
2. Most drugs originating from natural plants come from Afghanistan (heroine), Colombia (cocaine), and Mexico.
3. There is growing concern related to synthetic drugs (e.g. fentanyl) that are being illegally produced in clandestine labs, often located in countries like China and Mexico.