imp of international trading links & their impact on business activity

Question 1

intro

Answer 1

-the growth of world trade in recent years has been very rapid.
-by trading together,countries can build improved
political and social links
& this can help resolve differences b/w them
-trading internationally can also have some drawbacks,however and these need to
be considered carefully by governments.
-selective assistance may need to be given to firms and groups most adversely affected.

Question 2

Potential risks of international trade

Answer 2

1.loss of output & jobs from those domestic firms that cannot compete effectively w imported goods.

2.there may be a decline,due to imports,in domestic industries that produce v imp strategic goods for eg coal or foodstuffs.
this could put the country at risk if there were a conflict b/w countries or another factor leading to the loss of imports,

3.newly established businesses may find it impossible to survive against competition from existing importers.
this will prevent ‘infant industries’ from growing domestically.

4. some importers may ‘dump’ goods at below cost price in order to eliminate comp from domestic firms.
5. if the value of imports exceeds the value of exports for several years,then this could lead to a loss of foreign exchange.

Question 3

some definitions

Answer 3

• FREE TRADE= no restrictions or trade barriers exist that might prevent or limit trade between countries.
• TARIFFS=taxes imposed on imported goods to make them more expensive than they otherwise would.
• VOLUNTARY EXPORT LIMITS= an exporting country agrees to limit the quantity of certain goods sold to a country.(possibly to discourage taiffs/quotas)
• PROTECTIONSIM= using barriers to free trade to protect a country’s own domestic industries

Question 4

BENEFITS of free trade between nations.

Answer 4

1.by buying products from other nations(importing)
consumers are offered a much wider choice of goods and services.
many of these would have not been available without international trade because farming and prod facilities might not have existed in their own country,for eg bananas in europe.

2.same principle applies w raw materials-uk industry depends heavily on imports of foreign iron ore.

3. imports of raw material can allow a developing company
   to increase its rate of industrialisation.

4.importing prods creates additional competition for domestic industries and this should encourage them
to keep costs and prices down
and make their goods as well designed and of as
high quality as possible

Question 5

BENEFITS continued

Answer 5

5. countries can begin to specialise in those products that they are best at making
   if they import those they are less efficient as compared to other countries. this is called comparative advantage.

6.specialisation can lead to economies of scale and further cost and price benefits.

7.by trading in this way,the living standards of all consumers in all countries trading together should increase
as they r able to buy products more cheaply than those
that were produced just within their own country.