2.2.2 international Trade

Question 1

What is International trade+ benefits

Answer 1

Is the transfer of ownership of goods and services from one country to another

helps raise living standards and results in higher output send income.

Question 2

why do countries internationally trade

Answer 2

To obtain goods that cannot be produced domestically—-Many countries lack natural resources to enable production
some countries produce more efficiently than others (bc they have cheaper resources and have become experts through specialization)
Have resources the do not need (commodities)

Question 3

Advantages of free trade

Answer 3

Lower prices and increased choice for customers— If consumers buy goods more cheaply, their standards of living will improve and purchasing power will increase. Most countries buy and sell the same products.

Lower input prices—though world trade, countries can obtain essential inputs for industries at low cost. If countries specialize in production of goods, glob benefit. Goods are produced in lowest costing area.

Wider market for businesses—firms will be selling to larger market ( different countries) If one declines, they have other sales, leads to economies of scale.

Increase competition

Crested new business opportunities

Question 4

Disadvantages of free trade

Answer 4

Competition for domestic businesses— imports from anywhere can flow into economy. If they are good quality and prices, domestic struggle.
Unemployment—domestic industries threatened with unemployment. If country is too dependent on narrow change of goods, it will be at risk( some countries rely too heavy on primary sector) companies should avoid overspecialization.
Exploiting of workers

Inequality worsens

Question 5

what is protectionism

Answer 5

Approach used by government to protect domestic producers.

Question 6

Reasons for protectionism

Answer 6

Preventing dumping— may use trade barriers if firm is dumping goods. (Where they sell goods below cost in domestic market) to destroy overages. Unfair for domestic and they will not survive.
Protecting employment— Could be lost from cheap imports to trade barriers are implemented.
Protecting infant industries— (new industries) yet to become established so they need overseas protection until grow> become larger> economies of scale.

Question 7

Reasons for protectionism (2)

Answer 7

To gain tariff revenue- can gain revenue from the tax. Can be spent on government services to improve living standards.
Prevent the entry of harmful and unwanted goods
reduce current deficits- might try to reduce imports and increase exports to reduce deficit.
Retaliation— against dumping. If a foreign business dumps large quantities of goods, government may impose heavy tax on those goods when they come into country. Countries may impose trade barriers to exports so they implement on imports (trade war)

Question 8

Disadvantages of protectionism

Answer 8

Restrict consumer choice

Restrict new revenue

Increase costs of production which can lead to cost push inflation

Trade wars