Ch 23. Ireland & the Global Economy Flashcards
International trade
The importing and exporting of different products between countries
An open economy
An economy that engages in international trade
Imports
Goods/services bought from other countries
Visible or invisible
Visible imports
Physical goods e.g. cars, books and computers
Invisible imports
Services e.g. banking, insurance and tourism
Provided to Irish consumers by foreign firms
Exports
Goods/services sold by Irish firms to customers in other countries
Visible or invisible
Visible exports
Physical goods e.g. food and pharmaceuticals
Invisible exports
Services e.g. financial services, selling holidays in Ireland to foreign tourists
Balance of Payments
All the flows of money into and out of a country in a year
Balance of payments surplus
A country earning more than its spending internationally
Balance of payments deficit
A country paying out more than its earning
Balance of trade
The difference between all visible and invisible imports into and all visible and invisible exports out of a country
Free trade
When trade between countries is nit restricted in any way by barriers e.g tariffs or quotas
Benefits of free trade for business (3)
- Importing raw materials not available in Ireland
- Increase sales and profits through exporting
- Spreads business risk - exporting reduces reliance on sales in a single country.
Benefits of free trade for consumers (2)
- Imports give a wider choice of goods
- Quality - domestic firms ensuring products match or exceed quality of imports
Benefits of free trade for the economy (3)
- Successful exporting generates jobs
- Foreign exchange earnings from exports to pay for imports
- Encourages communication, understanding and co-operation between countries
Protectionism
Barriers imposed by governments to prevent free trade
Reasons for protectionism
- Business growth
- Business survival
- Protect employment
- Improve balance of payments
Tariffs
Taxes put on imported goods
Quotas
A limit on the quantity of certain goods that can be imported
Embargoes
Bans preventing the importation or export of specified goods
Subsidies
Money paid by governments to help firms cover their operating costs and keep their prices competitive.
Main trends in international trade
- Increasing power and influence of TNC’s
- Emergence of trading blocs
- Deregulation
- Increasing power of the WTO
Trading bloc
- A group of countries that agree to remove protectionist barriers to free trade between themselves.
- However, they impose tariffs and other protectionist barriers on all imports coming from countries that are not members of the bloc.
TNC
Firms that produce and market goods in more than one country, e.g. Unilever, Microsoft and McDonald’s
Deregulation
The removal of government rules and regulations from the workings of business, including the ability to trade freely without any protectionist barriers.
WTO
- Responsible for setting the rules of international trade
among its 150 member countries. - It does this by organising negotiations between member countries to reduce protectionism and allow free trade.
Opportunities for Irish businesses in international trade (4)
- EU membership
- Euro currency
- Low corporation taxes
- Government assistance
EU membership offers (3)
- Free access to a huge market
- Opportunity to develop economies of scale
- Attracts non-EU companies
Euro currency offers (1)
- Makes trade easy within eurozone
Low corporation taxes offer (1)
- Attracts foreign firms
Government assistance offers (3)
- Grants, training and advice to business
- Reduces cost and risk to TNC’s locating
- IDA Ireland
Trade missions
When a group of business people visit a foreign country to meet with potential customers and distributors and to negotiate deals and sales.
Challenges for Irish business in international trade (4)
- High costs
- Competition
- Lack of economies of scale
- Exchange rates
High costs challenges for Ireland (2)
- On the edge of Europe, higher transport costs
- High labour costs
Competition challenges for Ireland (3)
- Small by international standards
- Have to target niche markets
- Have to compete using superior design, quality etc. rather than price
Lack of Economies of Scale challenges for Ireland (3)
- Small Irish market
- Difficult to develop economies of scale and compete
- Concentrate on niche markets where price isn’t important.
Exchange Rates challenges for Ireland (1)
- Fluctuations in exchange rates for different currencies currencies causes difficulties.
