Chpt. 39 International Trade

Question 1

What is international trade?

Answer 1

The buying (importing) and selling (exporting) of goods and services between different countries.

Question 2

What percentage of what it produces does Ireland export?

Answer 2

Nearly 80%.

Question 3

What does it mean for an economy to be open?

Answer 3

It engages very strongly in international trade.

Question 4

What are the two types of international trade?

Answer 4

Visible trade and invisible trade.

Question 5

What is visible trade?

Answer 5

Involves physical goods that can be seen going in and out of a country.

Question 6

Give an example of visible trade.

Answer 6

Food and cars.

Question 7

What is invisible trade?

Answer 7

Involves services with no physical goods exchanged.

Question 8

Give an example of invisible trade.

Answer 8

Insurance, banking, and tourism.

Question 9

What is importing?

Answer 9

Buying goods or services from other countries.

Question 10

What happens to money when importing occurs?

Answer 10

Money leaves the country.

Question 11

What are the two types of imports?

Answer 11

Visible imports and invisible imports.

Question 12

What are visible imports?

Answer 12

Physical goods that Ireland buys from other countries.

Question 13

Give examples of visible imports.

Answer 13

Cars, oil, coal, and fruit.

Question 14

What are invisible imports?

Answer 14

Services that Ireland buys from other countries.

Question 15

Give examples of invisible imports.

Answer 15

Irish people going on holiday abroad, foreign bands performing in Ireland, and buying services such as insurance.

Question 16

Why does Ireland import goods and services?

Answer 16

Ireland imports goods and services due to various reasons, including climate limitations, lack of raw materials, consumer choice, skill gaps, cost differences, and a small domestic market.

E.G: the inability to grow products like oranges, bananas, and coffee, and the lack of natural resources like oil, coal, and steel.

Question 17

Why does Ireland import goods and services?

Answer 17

1) Ireland doesn’t have the climate to grow certain products (E.G: oranges, bananas, coffee)

2) Ireland lacks the essential raw materials or natural resources that would allow us to produce certain goods (E.G: oil, coal and steel.)

3) Irish consumers want to have a variety of goods and services to choose from. (E.G: fruit, clothing, electrical goods, etc.)

4) Certain countries have people with the skills to make certain products, E.G: Swiss watches.
There is a lack of skills and tradition in producing some goods or services, which is a limiting factor in production.

5) Foreign goods may be cheaper than comparable Irish goods.

6) The Irish market is small, so certain products cannot be produced economically and must be imported. E.G: cars.

Question 18

What skill-related issue affects production in Ireland?

Answer 18

Certain countries possess the skills needed to produce specific products, such as Swiss watches, which Ireland lacks.

This skill gap limits the variety of goods that can be produced domestically.

Question 19

How does cost influence Ireland’s importation of goods?

Answer 19

Foreign goods may be cheaper than comparable Irish goods, leading to increased imports.

Price competitiveness is a significant factor in consumer purchasing decisions.

Question 20

What is the impact of a small domestic market on imports?

Answer 20

The small domestic market in Ireland means that certain products, like cars, cannot be produced economically and must be imported.

A limited market reduces the viability of producing certain goods domestically.

Question 21

What is exporting?

Answer 21

Exporting is selling goods or services to other countries, resulting in money coming into the country.

Exports are a crucial component of a nation’s economy and trade balance.

Question 22

What is one reason Ireland exports goods and services?

Answer 22

Increased sales/profits

Irish firms can increase their sales and profits by exporting their excess output to a foreign market, helping to overcome the problem of a small domestic market.

Question 23

How does exporting support employment in Ireland?

Answer 23

Exporting helps to support jobs in Ireland

The more goods are sold, the more people are needed to produce them.

Question 24

What type of products are in demand from consumers abroad for Irish exports?

Answer 24

High-quality food products

Examples include Irish beef and butter.

Question 25

What financial benefit does Ireland gain from exporting goods?

Answer 25

Earn foreign currencies

The receipt of foreign currencies boosts the country’s reserves and helps finance imports.

Question 26

Why does Ireland export goods and services?

Answer 26

1) To increase sales and profits

2) To create more job opportunities

3) There is demand from consumers abroad for Irish products ( e.g: butter, beef)

4) The receipt of foreign currencies can boost our country’s reserves.
Provides the finance to help pay for imports.

Question 27

What is a key benefit of international trade for Irish businesses?

Answer 27

Increased sales through access to larger markets

The Irish market has fewer than 5 million consumers, making exports crucial for growth.

Question 28

What percentage of beef produced in Ireland is exported?

Answer 28

Over 80%

This highlights the reliance of Irish industries on international trade.

Question 29

What economic principle allows Irish businesses to reduce costs by increasing production?

Answer 29

Economies of scale

Producing more products lowers the cost it takes to produce each one

Question 30

How does international trade help businesses avoid risks?

Answer 30

By not relying solely on the local market

Question 31

What type of materials do Irish businesses often need to import?

Answer 31

Raw materials

An example is oil, which is not produced in Ireland.

Question 32

What is a major challenge of international trade for Irish businesses related to transportation?

Answer 32

High transportation costs due to Ireland being an island

Goods can only be transported by plane or ship, increasing expenses.

Question 33

What language-related challenge do Irish exporters face?

Answer 33

Need to make websites available in multiple languages

This is important for reaching customers in different countries.

Question 34

How do exchange rates impact the pricing of Irish products abroad?

Answer 34

If the euro increases in value, Irish products become more expensive for non-euro countries

This can lead to reduced demand for exports.

Question 35

What happens to raw material costs for Irish importers if the euro decreases in value?

Answer 35

It becomes more expensive to buy raw materials from non-euro countries

This can affect production costs for Irish businesses.

Question 36

What payment-related challenge do Irish businesses face in international trade?

Answer 36

Difficulty collecting payments from foreign businesses

This can complicate cash flow and financial planning.

Question 37

What is a significant competitive challenge for Irish manufacturers?

Answer 37

Competition from low-cost economies

High wages in Ireland make it difficult to compete with countries that have lower labor costs.

Question 38

What are 4 Benefits of International Trade for Irish Businesses?

Answer 38

1) Less than 5 million consumers in Ireland. Market is small.
By exporting, Irish businesses can increase sales and access much larger markets. Important for industries that rely on exports.

2) Irish businesses have to increase production due to demand from abroad. More products made = cheaper it becomes to make each one. This is known as economies of scale.

3) A business can avoid risks by not relying on its local market alone.

4) Irish businesses need to import some raw materials as they’re not produced in Ireland. E.g: oil.

Question 39

Name 4 Challenges of international trade for Irish businesses

Answer 39

1) High costs: Ireland = island, Transportation = difficult and expensive for lrish exporters as goods can only be transported abroad by plane or ship.

2) Languages: Irish exporters may need to make their websites available in many languages for customers in different countries. (E.G: Ryanair)
May have problems communicating with overseas customers via phone and email, etc.

3) Exchange rates: If the euro increases in value, the price of Irish products in countries that do not use the euro will become more expensive.
May lead to reduction in demand for Irish products

4) Getting paid: Trying to collect payments from businesses in other countries can be difficult.

5) Competition from low-cost economies: Irish wages = quite high. Cheaper to produce goods in other countries (especially in Asia and Africa.)
Difficult for Irish manufacturers to compete on cost against goods manufactured in low-wage economies.

Question 40

What is free trade?

Answer 40

Free trade occurs when countries can buy and sell without any trade barriers or restrictions such as customs duties on goods.

Question 41

Which countries enjoy free trade when trading with each other?

Answer 41

Member countries of the European Union (EU) enjoy free trade when trading with each other.

Question 42

What is a tariff?

Answer 42

A tax added to imports to make them more expensive, encouraging consumers to buy home-produced products.

Question 43

What is a quota in terms of trade?

Answer 43

A limit on the amount of a good that can be imported into a country to increase demand for home-produced goods.

Question 44

What is an embargo?

Answer 44

A complete ban on goods being imported from a certain country.

Question 45

What is a subsidy?

Answer 45

A direct payment to a domestic producer that reduces production costs and makes exports cheaper.

Question 46

Why do governments impose trade barriers?

Answer 46

To protect their domestic industries and limit imports that may harm local businesses.

Question 47

Fill in the blank: A _______ is a tax that makes imports more expensive.

Answer 47

[tariff]

Question 48

Fill in the blank: A _______ limits the amount of a good that can be imported.

Answer 48

[quota]

Question 49

True or False: An embargo can be imposed for health or political reasons.

Answer 49

True

Question 50

Give an example of a subsidy.

Answer 50

Irish farmers receiving direct farm payments from the EU.

Question 51

What was the reason for the temporary ban on British beef in the 1990s?

Answer 51

An outbreak of BSE (mad cow disease).

Question 52

Why do countries impose barriers to free trade? (4 reasons)

Answer 52

1) To protect their domestic industries: Industries may have difficulty competing with industries in other countries. Gov. may protect them by limiting these imports.

2) To protect domestic employment: Competition from foreign producers can lead to job losses in the domestic economy. Limiting imports may help to protect jobs in some industries.

3) To protect against ‘cheap labour’ economies: Domestic firms may not be able to compete with countries where workers are paid low wages. A Gov. might restrict imports from these countries.

4) National security: Free trade can result in the spread of animal diseases. (E.G: if there is an outbreak of foot and mouth disease abroad, the government will ban the importation of cattle to protect this vital industry.)

Question 53

What is Enterprise Ireland?

Answer 53

Enterprise Ireland = state agency that helps Irish businesses who want to sell their
goods/services to other countries.

Question 54

What does Enterprise Ireland do?

Answer 54

1) Provides market research info on foreign markets to lrish businesses.

2) Organizes trade fairs and exhibitions for Irish businesses to show their products to foreign buyers.

3) Provides advice on everything to do with foreign trade, including all documentation, how to get paid, labelling of goods, etc.