International Trade

Question 1

What is the international trade?

Answer 1

International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. In most countries, such trade represents a significant share of gross domestic product.

Question 2

What are the major benefits of international trade?

Answer 2

• More Job Opportunities.
• Expanding Target Markets & Increasing Revenues.
• Improved Risk Management.
• Greater Variety of Goods Available.
• Better Relations Between Countries.
• Enhanced Company Reputation.
• Opportunities to Specialize.

Question 3

What does protectionism imply?

Answer 3

Protectionism refers to the policy of protecting domestic industries against foreign competition through tariffs, import quotas and subsidies, or other restrictions placed on the imports of foreign competitors.

Question 4

What does free trade mean?

Answer 4

Type of trade that implies the exchange of goods & services between countries without tariffs, quotas, etc.

Question 5

What does OECD stand for?

Answer 5

Organisation for Economic Cooperation and Development

Question 6

What was the main objective of mercantilism?

Answer 6

Favourable balance of trade = value export > value import

Question 7

What is one of the major growth drivers according to Adam Smith?

Answer 7

Specialisation = key for a greater productivity #RicardoComparativeAdvantage

Question 8

How did many countries react to the 1929 crash?

Answer 8

The world entered in period of Great Depression

Question 9

What was the goal of the Bretton Woods system?

Answer 9

• ensure a foreign exchange rate system
• prevent competitive devaluation
• promote economic growth

Question 10

Who were the primary designers of the Bretton Woods system?

Answer 10

Winston Churchill and F.D. Roosevelt

Question 11

What international organisations were established by the Bretton Woods system? What were their missions?

Answer 11

• International Monetary Fund (IMF) : control exchange rates, lend reserve currencies to nations, 1945: 29 members ; Now: 189 members
• International Bank for Reconstruction and Development (IBRD) : provide financial assistance ; the mission : shifted from reconstruction to development

Question 12

When did the Bretton Woods system end? Why?

Answer 12

Bretton Woods system ended in 1971, when Nixon put an end to convertibility of $ to gold

Question 13

What agreement was signed in Geneva in October 1947?

Answer 13

Multilateral free trade agreement (to eliminate protectionism to boost economic recovery)

Question 14

What does GATT stand for?

Answer 14

General Agreement on Tariffs and Trade

Question 15

What did GATT aim at?

Answer 15

Their agenda included: tariffs, intellectual property, agriculture, dispute settlement

Question 16

What organisation replaced GATT?

Answer 16

WTO

Question 17

What does WTO stand for?

Answer 17

World Trade Organisation

Question 18

What is the WTO’s main mission?

Answer 18

Their main mission is to help exporters & importers have better protection + manage their businesses

Question 19

How many countries are in the WTO?

Answer 19

Today there are 164 countries/members in the WTO

Question 20

What are the various rules that WTO members have to obey?

Answer 20

Non-discrimination, Reciprocity, Quotas are prohibited, Faire competition, Binding tariffs

Question 21

What does BRICS stand for?

Answer 21

Brazil, Russia, India, China, South Africa (2010)

Question 22

What is the New Development Bank?

Answer 22

It was created in 2015, to compete with IMF and World Bank.
Their mission: to mobilise financial resources for infrastructures and sustainable development

Question 23

What natural resources can be found in Brazil?

Answer 23

Oil and iron rich

Question 24

What country is the leader of the BRICS?

Answer 24

China and India because they’re the most populated

Question 25

Why do some people think that the growth of the BRICS will not last?

Answer 25

o 1st problem: resources are depleted (=decreasing) by the growing population + sabotage the ability to grow at the same pace
o 2nd problem: the dominance of China. No equality between the countries so cooperation is difficult, China has a veto power over BRICS
o 3rd problem: mixed records on human rights + conflicts w/ neighbouring countries

Question 26

How does the OECD define trade in goods?

Answer 26

• All goods which add to the stock of material resources of a country by entering its economic territory = imported goods
• All goods which subtract from the stock of material resources of a country by leaving its economic territory = exported goods

Question 27

What goods are traded the most?

Answer 27

Manufactured goods take around 2/3 of all exports

Question 28

What is the law of comparative advantage?

Answer 28

a country must specialise in goods in which it has a comparative advantage (= g produced at a lower cost) => EXPORT

Question 29

What barriers can be erected to limit imports?

Answer 29

• tariffs
• quotas
• subsidies on domestic products
• administrative regulations
• subsidies on their exports

Question 30

What barriers can be erected to limit imports?