310 - International trade Flashcards
Intenrational trade
The exchange of goods and services between countries
Reasons for international trade
Growth, spreading risk, increasing sales and profits, spreading technical knowledge
Free trade
A trade policy that does not restrict imports or exports
Protectionism
A trade policy of protecting domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other restrictions on the imports of foreign competitors
Tariff
A tax on imports, this means that the product will be more expensive as a result of the tax and a home produced product could be cheaper in comparison, therefore incentivising. consumers to buy the home produced product over the imported product
Import quota
A limit on the number of imports allowed into a country
Subsidies
A government could sidle home produced products, resulting in businesses being able to charge lower prices and compete more successfully with foreign imported goods, these measure can help protect home businesses from the competition of foreign imported goods
Trading bloc
A group of countries that work together to provide special deals for trading, this promotes trade between specific countries within the bloc, for example: The European Union, ASEAN, NAFTA
Single market
A type of trade bloc in which most race barriers have been removed for goods, for example: mo tariffs, quotas or other restrictions with some common policies on product regulation, freedom of movement of capita, and labour, and enterprise and services
Advantages of Free Trade
Increased exports, economies of scale, lower costs
Advantages of Protectionism
Can enable some industries to survive, can help new industries become established as they are protected from competition while they growth, raise revenue or he government
Disadvantages of Free Trade
Increase competitor of a business from foreign imports
Disadvantages of Protectionsim
Can lead to retaliation by other countries so businesses may have difficulties exporting goods, possible higher prices of supplies leading to higher costs if imported raw materials are affected by import tariffs and quotas
Cultural differences
Businesses must acknowledge that most products will have to be adapted in some way to suit local cultures, currencies and buying habits
External factors that businesses must consider in international expansion
Exchange rates, difference in technological and health and safety standards, administrative difficulties, distribution problems
