7.5e Economy: International Trade Flashcards
What is the European Union?
A collection of 28 European countries who have agreed, in different ways, to unite their economies
The EU allows free movement of what between its member states?
- Labour/people
- Capital
- Goods
- Services
Opportunities for UK businesses from EU:
- Large potential market
- Economies of scale
- More competition - forces increased efficiency
Threats for UK businesses from EU:
- More legislation
- Increased competition
- Low wage rates means lower costs for businesses in other countries
When did the UK vote to leave the EU?
June 2016
Examples of free trade areas:
- EU
- ASEAN - Association of South-East Asian Nations
- NAFTA - North American Free Trade Agreement
- Tripartite Free Trade Area (proposed)
Opportunities of free trade:
- More potential for exports
- Economies of scale
- More competition
Threats of free trade:
- Less potential for exports
- Diseconomies of scale
- Fewer local jobs as multinationals expand abroad
- Countries may use child labour to keep costs down to compete internationally
What does protectionism do?
Places controls over the level of imports that come into a country
Methods of protectionism:
- Tariffs
- Quotas
- Embargoes
- Non-tariff policies
Tariffs definition
An additional tax placed upon the price of a product to make it more expensive and so less competitive
What are the two types of tariffs?
- Ad valorem tax
- Specific tax
What is ad valorem tax?
An added percentage tax on the price
What is specific tax?
A fixed amount added to the price
What do quotas do?
Limit the amount of a product that can be imported into the country (can be a fixed value or % of the market share)
What are embargoes?
The complete banning of a product
What are non-tariff policies?
Subtle attempt to restrict imports
Example of non-tariff policies
Making sure all labelling and packaging only uses local language
Opportunities of protectionism:
- Protects domestic business from foreign competition
- Keeps money from leaving the country via imports so AD/GDP doesn’t fall
Globalisation definition
The process that allows businesses to operate all over the world
Methods of international growth:
- Exporting direct to international customers
- Selling via overseas agents or distributors
- Opening an operation overseas
- Joint venture or buying a business overseas
Example of overseas agents or distributors
Sandpiper
Opportunities of globalisation:
- Higher profits
- Better market access
- Extends product life-cycles by producing and marketing in new countries
Threats of globalisation:
- More competitive market
- Low costs of factors of production in some countries creates competitive disadvantage for UK businesses
