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Trade & Globalization: fun facts and quiz
The essentials in 7 ideas, with fun facts, an illustrated story and a quiz to see how much you know.
The essentials
Why Countries Trade
Countries trade because none can make everything well. Trading lets each focus on what it’s good at and buy the rest.
Key fact
World trade is worth over 30 trillion dollars a year.
Comparative Advantage
Even if one country is better at making everything, both gain by specialising in what costs them least to give up. Economists call it comparative advantage.
Key fact
David Ricardo explained the idea in 1817.
Imports & Exports
Exports are goods and services a country sells abroad; imports are what it buys. Tourists spending money in a country count as that country’s exports.
Key fact
China is the world’s biggest exporter of goods.
The Shipping Container
The standard shipping container, first used in 1956, made loading ships far faster and cheaper. Around 80% of goods traded worldwide travel by sea.
Key fact
Container capacity is counted in TEU: twenty-foot equivalent units.
Tariffs
A tariff is a tax on imports. It can protect local producers, but it usually raises prices for buyers and can spark trade wars.
Key fact
Tariffs are usually paid by the importer, not the foreign seller.
Globalisation
Globalisation is the world becoming more connected through trade, travel, money and ideas. A single phone may use parts from dozens of countries.
Key fact
Supply chains can be disrupted by events on the other side of the world.
Trade Agreements
Countries sign trade agreements to cut tariffs and red tape between them. The World Trade Organization, set up in 1995, helps settle trade disputes.
Key fact
The WTO has 166 members.
Fun facts
About a quarter of everything the world produces is sold abroad.
Ricardo’s famous example: England should make cloth and Portugal wine, even if Portugal was better at both.
The Netherlands, a small country, is one of the world’s biggest food exporters, second only to the United States.
Before containers, loading a ship by hand could take about a week.
The US Smoot-Hawley tariffs of 1930 sparked retaliation and are often blamed for deepening the Great Depression.
A single pair of jeans can travel tens of thousands of kilometres between the cotton field and the shop.
Before the WTO, trade rules came from the GATT, signed in 1947 by just 23 countries.
Story: The Truck Driver’s Box
The Truck Driver’s Box
1937, New Jersey. Truck driver Malcom McLean waits all day at the docks while men load his cotton bales onto a ship, one by one.
Why not lift the whole trailer box aboard? In 1956 his ship, the Ideal X, sails from New Jersey to Houston carrying 58 metal containers.
Loading costs fell from $5.86 a tonne to about 16 cents. Today, a single ship can carry over 20,000 of his boxes.
True or false?
Tap your answer to see if you got it, and why.
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Question 1 of 10
Trade lets countries specialise.
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True. Each can focus on what it does best.
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Question 2 of 10
Two countries can gain from trade even if one is better at everything.
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True. Each focuses on what it gives up least to make.
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Question 3 of 10
Exports are things a country sells to other countries.
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True. Imports are what it buys in.
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Question 4 of 10
Most goods traded worldwide travel by sea.
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True. Around 80% by volume.
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Question 5 of 10
A tariff is a tax on imported goods.
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True. Charged when goods cross the border.
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Question 6 of 10
Globalisation connects economies around the world.
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True. Through trade, travel, money and ideas.
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Question 7 of 10
The WTO helps settle trade disputes.
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True. Between its member countries.
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Question 8 of 10
Most countries make everything they need themselves.
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False. Almost every country relies on imports.
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Question 9 of 10
Comparative advantage is just about who can make the most.
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False. It’s about what each gives up to make something.
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Question 10 of 10
Imports are goods a country sells abroad.
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False. Those are exports.
Keep going in the app
KnowSoda learns what you know and brings back what you’re about to forget. Trade & Globalization has 6 more ideas at the Advanced and Expert levels.
Sources
- World Trade Organization — World Trade Statistical Review and members
- UNCTAD — Review of Maritime Transport
- David Ricardo (1817), On the Principles of Political Economy and Taxation
- Marc Levinson (2006), The Box: How the Shipping Container Made the World Smaller
- Encyclopaedia Britannica — tariff, globalization
- World Bank — Migration and remittances data
- European Commission — The single market
- Encyclopaedia Britannica — Corn Law, Shenzhen, just-in-time manufacturing
