Unit 1 – International Cooperation

1. Describe a self-sufficient economy:- It is a simple economy based on limited needs. The goods produced at village level are exchanged for other goods when there is excess.

2. Name the physical factors that determine the types of goods a country produces:- The relief, location, climate, distribution of resources, etc.

3. What were the reasons for the development of closer ties between nations?

• The new discoveries made in the Middle Ages
• Explorations
• The industrial revolution.

4. How did the Industrial revolution affect the ties between nations? Due to IR economies of European countries developed rapidly. They had to obtain raw materials and a market for their goods from other regions. This prompted the completion between powerful European Nation States to obtain colonies from Latin America, Africa and Asia.

5. How did colonization affect the colonies? Resources of the colonies were utilized by the colonizers to strengthen their economies. The colonies provided markets for the goods produced by the colonizers. Therefore the economies of the colonies became weak. After obtaining freedom these countries have had to make great efforts to develop their countries. The former colonies tend to depend on developed countries for technology, capital and advanced machinery.

6. How does communication technology affect development?  Internet helps countries to keep in touch with the other counties. Developing countries can obtain the modern know-how and assistance from developed countries with the help of the latest communication methods.

7. Why is it necessary for a country to have a cordial relationship with the international community? In case of a natural disaster, civil war, terrorism, etc. a country often needs the assistance of other nations for food, medicine, clothing, intelligence, military aid, etc. Therefore it is necessary for all countries to maintain cordial relationships.

8. How do breakdowns in international relationships affect a country? Conflicts bring about breakdowns in the distribution of food and other goods. As a result people suffer from hunger, diseases and fear. Loss of life and property and refugee problems are some of the more serious problems that result from the situation.

9. What is the importance of international organizations? International organizations offer a forum for the countries to discuss common problems without resorting to armed conflicts. They also work towards eradication of poverty, illiteracy, gender discrimination, pollution, abuse, etc.

International Trade

1.      What are the factors that have contributed towards the development of international trade?

·         Developments in exploration activities.

·         Expansions in production of goods as a result of Industrial Revolution

·         Developments in transport and communication

·         Developments in the use of currency and technology

·         Based on the geography, climate and resources countries produce goods that are easier to make and more profitable 

·         Certain countries specializing in producing certain goods

·         Lack of certain resources in countries

·         The habit of obtaining goods from other countries when there is a shortage in one’s own country

·         Some goods could be obtained at a lower price from another country

2.       What are the two main types of international trade?

·         Bilateral trade

·         Multilateral trade

3.      Describe a bilateral trade agreement. Give examples.

It is a written agreement between two countries. It carries details of the goods exchanged and the mode of payment. The prices stated in the agreement cannot be changed according to the fluctuations of the international market. E.g:- rubber- rice agreement between China and Sri Lanka, Indo-Lanka Free Trade Agreement, 2007 Pakistan-Sri Lanka Agreement 

4.       Describe a multilateral agreement. Give examples.

It’s a trade agreement that encompasses several countries. The sum payable for a good imported is not charged directly from the country concerned. The value of the goods imported by ‘Country A’ from ‘Country X’ could be settled using the value of the goods ‘Country A’ export to ‘Country Y’ that has dealings with ‘Country X’.

5.      What are the advantages of a multilateral trade agreement to a developing country? Developing countries have ‘soft currencies’. In a multilateral trade agreement the entire transaction could be limited to an exchange of goods saving a lot of money on conversions.  

6.      What is a ‘hard currency’? A currency that is accepted in international transactions because of its high value.

7.       What is a ‘soft currency’? A currency that is used in a developing country that has a low value.

8.      What has prompted the European Union to use a common currency (Euro)? Increase of the value of the dollar in the international market has a negative impact on the economies of the member countries of the European Union. In order to present a united front to the powerful dollar, Euro, a common currency was introduced. This also reduces the complications resulting from the use of many currencies within the union too.

9.      What are the measures taken by the countries engaged in international trade to settle problems related to currency? Introduction of accepted foreign exchange rates.

10.  What is a ‘trade deficit’? The difference between the income from goods exported and goods importance is called the trade deficit. This could take a positive or negative value.

11.  What are the advantages of international trade?

·         A country could import necessary goods it is incapable of producing

·         A country could sell excess goods to a country that has a need for them

·         Maximum use of the available resources could be made

·         Consumption patterns broaden as a result of trade between countries

·         Goods produced has a broader market

·         Certain goods could be imported at lower prices

·         International relations broaden

·          

12.   What are the problems related to international trade?

·         Fluctuation of the prices of primary trade goods

·         Difficulties in selling primary trade goods

·         A large part of the income of the developing countries goes to developed countries as insurance premiums and shipping costs

·         Defensive trade policies practiced by developed countries (quota system, tax)

·         The prices of the goods produced by developed countries increase

13.   How does the fluctuation of the prices of the primary goods affect the developing countries? Developing countries are the primary exporters of primary trade goods.

·         When the prices fluctuate these countries encounter difficulties in making development plans.

·         As their income drops these countries are unable to import goods necessary.

·         They may have to obtain loans to meet their obligations.

·         Difficulties in repayment of loans could result from such a situation.

14.   What are the problems faced by the developed countries in international trade?

·         Difficulties in obtaining raw materials

·         Difficulties in selling the goods produced

·         Increasing price of the fossil fuel

15.   What are the measures taken to meet the difficulties faced in international trade by the developing countries?

·         Diversification of export goods

·         Trade agreements

·         Foreign aid

16.  How has the economy of Sri Lanka diversified to meet the negative impacts of the international trade?

·         In 1960s 90% of the income from exports was earned by tea, rubber and coconut. By 1996 the figure had dropped to 20%.

·         The agro-sector is now exporting cinnamon, coffee, cocoa, cinchona, pepper, areca nut, betel leaves, vegetables, cloves, cardamom, nutmeg, fruits, etc. in addition to the traditional products

·         Garment industry makes up more than 50% of the non-traditional export goods   

17.  Name three trade agreements between Sri Lanka and the international community.

·         ‘SAPTHA’ agreement among the South Asian countries

·         Rubber-Rice Agreement between Sri Lanka and China

·         Indo- Sri Lanka Free Trade Agreement

18.  What are the reasons for low investments in developing countries?

·         Earnings from primary goods are unreliable

·         High prices of clothes, food, medicines, machinery, etc. in the world market

·         Negative trade deficit

As a result the capacity to invest declines

19.  How does poor investment capacity affect the development of a country?

·         Investments in production decline as result of scarcity of funds

·         As a result of this production of goods decline. Decline in production affect the assets of a country. As a result the funds are not adequate to allocate for development activities, inventions and investments after setting aside moneys for services and maintenance.

  

20.  Name the different types of foreign aid.

·         Donations of money, machinery, goods, buildings and services

·         Loans (with/without interest, short term/ long term, conditional/ unconditional)

·         Loans in the form of goods and services

21.  Fill the table

Name	Inception	Nature of aid	Type of aids
International Bank for Reconstruction and Dev. (World Bank)	1945	Selective in the projects it sponsors and strict on repayment terms	Fisheries, agriculture, harbours, airports
International Development Agency	1945	Loans could be obtained without the mediation of a government. Interest free long-term loans.	Development of agriculture, rural areas, energy and transport
Asian Dev. Bank (Manila, Philippines)	1966	Dev. of the Asia- Pacific region	Dev. of education, power and energy, urban areas, water and drainage, sanitation
Colombo Plan (Colombo)	1950	Betterment of the standard of life of the people of the Commonwealth, south and south-eastern Asian countries, USA. Interest-free loans, food, training, scholarships, machinery and technology	Education, nutrition, industries
OPEC	1960	Stabilizing the prices of the fossil fuel. Assist developing countries in need	Subsidies on fuel
European	1957	Structured development through a common market. A common understanding in how to deal with countries that do not belong to the org.	No taxing between member countries.
UNCTAD (Geneva, Switzerland)	1964	Directing international trade on a path conducive to the developing countries. Prevention of inequalities meted out to dev. countries in the sale of primary trade goods and stabilizing the prices.	Provide technical know-how
GATT World Trade Organization (1995)	1948	Removal of tariff and taxes and settlement of disputes in international trade