4.1.2 - International Trade And Business Growth Flashcards
Def international trade
Exchange if products that takes place between the economic agents of a country such as a business, governments of consumers
Def imports
Are products and services produced abroad and consumed domestically
Def exports
Are products and services that are produced domestically and consumed overseas
Cash flow of Imports
Goods and services arrive in UK meaning cash flows out of the UK
Cash flow of exports
Goods and services go out of the UK meaning cash flows into the UK
How much does Britain import a year
£40 billion a year: such as foreign brands, cheap materials and services such as tourism
How does exporting benefit businesses
Increasing sales overseas meaning businesses can gain economies of scale and avoid reliance on domestic markets
4 Benefits of international trade
- export revenues and jobs help reduce poverty
- low prices for consumer markets are more competitive
- technology is spread, raising productivity
- economies of scale - causing lower unit costs
4 Drawbacks of international trade
- transport costs and emissions
- rasht inequality due to uneven gains from trade
- pressure on wages and working conditions
- risks from global/ external shocks
Def of business specialisation
Focusing on producing one product or a limited scope of products to become more efficient
Def foreign direct investment
Occurs when a business purchases non-current assets in another country
Def inward FDI
When foreign capital is invested into local resources
3 impacts of specialisation
- can boost efficiency
- lower selling prices
- economic output increased globally
How can specialisation boost efficiency
Producing one product means fewer machines will be used, associated lower costs, no need to train multi-skilled staff
What does Taylor suggest
‘Employees who repeat one simple task gets quicker, boosting efficiency’
Benefits of engaging with FDI
- take advantage of lower labour costs in other countries
- operate closer to source of raw materials and other supplies rather than transport long distances
- helps avoid protectionist measures
- brings in high paying, new jobs
Weakness of FDI
- large companies can exploit developing countries working conditions
- developing countries tempted to compete by reducing environmental regulation to attract FDI
- more competition within domestic market from foreign firms
- profits may be taken back to home countries
4 strategies to attract FDI
- attractive rates of corporation tax
- tax reliefs/ other subsidies, trade and investment agreements
- flexible labour markets and up-skilling of working
- attraction of relatively low unit labour costs
