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 has the climate and land to grow grapes at low cost.
- Wine is the most expensive product.
- It wants to stop trading.