What this lesson teaches
I can define specialisation by country, explain its basis, and weigh its advantages and disadvantages.
Syllabus K343, 6.1.1. Specialisation by country: definition of specialisation by country; the basis for specialisation by country in terms of the best resource allocation and/or low-cost; advantages and disadvantages of specialisation
Make a guess
Singapore imports most of its food and specialises in services such as finance and shipping. What is the main risk of this?
- It cannot buy food, because it does not grow much.
- It will run out of services to sell to the world.
- A fall in world demand for its exports hits it hard.
Show the answer
A fall in world demand for its exports hits it hard.
Relying on a few industries means a global slump in those industries cuts incomes and jobs quickly.
Countries specialise in what they can produce best or at lowest cost, then trade for the rest.
Specialisation by country means a country concentrates on producing the goods and services it is best at, and trades with others for the rest.
A country specialises in what it can make well or cheaply. This may come from natural resources, such as oil or good farmland. It may come from skilled workers, modern machines or a good location.
Advantages: the world makes more in total, because each country uses its resources where they work best. Firms selling to the world can produce on a large scale, which cuts their costs. Consumers get cheaper goods and more choice.
Disadvantages: a country that relies on a few products suffers if world demand or prices fall. Foreign rivals can wipe out some local industries, leaving workers without jobs. And countries depend on others for basics such as food.
- Specialisation by country
- Concentrating on what a country produces best or at lowest cost.
- Advantages
- More total output, economies of scale, cheaper and wider choice.
- Disadvantages
- Over-dependence, structural unemployment, reliance on imports.
Worked example: Singapore's specialisations
Singapore has little land and few natural resources, so it specialises in other ways.
- Location: on major shipping routes, so it specialises in port and logistics services.
- Skills and capital: it specialises in finance, electronics and pharmaceuticals.
- Trade: it imports most of its food and energy, paid for by these exports.
- Risk: a fall in world demand for electronics hits Singapore hard.
Watch out for this
Specialisation means a country produces only one product.
Specialisation means focusing on what it does best, usually a range of goods and services, and trading for others. Few countries produce only one product.
Check your understanding
Why might a country specialise in producing wine?
- It wants to stop trading and rely on what it can make at home.
- Wine sells at high prices, so any country earns more by making it.
- It has the climate and land to grow grapes at low cost.
Show the answer
It has the climate and land to grow grapes at low cost.
Right. Its natural resources make wine a low-cost product.
Check your understanding
Why does Singapore import most of its food rather than grow it?
- Imported food never costs more than local food
- Its farmland is scarce, so buying food abroad costs less
- Its government bans all farming on the island
- Singaporeans do not eat the foods that farms grow
Show the answer
Its farmland is scarce, so buying food abroad costs less
Right. Its scarce land is better used for other activities, and food comes from countries with more land.