International Trade Flashcards
Define Free Trade
Occurs when there are no protectionism to importing or exporting
What are the Advantages of free trade
Lower price for consumers
Increased Productivity and competitiveness as open markets.
Increased Economic efficiency (comparative advantages)
Increased economies of scale
What are the Disadvantages of free trade
Loss of Domestic Industries
Job displacement
Income Inequality
Negative impact on small businesses against huge global firms
Define Comparative advantage
If a country can produce good x with a lower opportunity cost than another country its said to have a comparative advantage of production of good X, based on opportunity cost.
Define Absolute Advantage
A country has absolute advantage if the production of one good has an equal quantity of resources can produce more of the good than another country.
What does Terms of Trade mean
is a measure of a country’s export prices relative to its import prices
How do you measure Terms of Trade
Average export prices index / Average import prices index x100
How does the term of Trade improve?
If export prices increase compared to import prices, the term of trade improves.
Define Protectionism
Protectionism refers to government policies and interventions designed to protect domestic industries from foreign competition.
What are the types of Protectionism
Tariffs
Quotas
Anti-Dumping Measures
Subsidies
Define Tariffs
Tariffs are taxes imposed on imported goods. By increasing the cost of foreign goods, tariffs make them less competitive compared to domestically produced goods.
Define Quotas
Quotas set limits on the quantity or value of specific goods that can be imported during a specified period.
Define Subsidies
Subsidies, Governments may provide financial assistance or subsidies to domestic industries, making their products more competitive in the global market.
Define Anti-Dumping Measures
Anti-Dumping Measures are designed to counteract the negative effects of dumping, which is when a country exports goods at prices lower than their normal value.
What are the advantages of Protectionism
Domestic industry protection, can shield domestic industries from intense foreign competition
Job Preservation, by limiting imports and promoting domestic production, protectionist measures can help preserve jobs in certain industries.
Infant Industry Protection suggests that new industries need protection during their early stages to compete against established foreign competitors.
What are the disadvantages of Protectionism
Higher Prices for consumers - Trade barriers, such as tariffs and quotas, can lead to higher prices for imported goods.
Reduced Export Opportunities - Protectionism limits the access of domestic industries to foreign markets.
Loss of Comparative Advantage Protectionism may prevent countries from benefiting from comparative advantage—the ability to produce goods and services at a lower opportunity cost.
Trade Wars - Trading partners may respond to protectionist measures with their own trade barriers, leading to a cycle of retaliation.
Define Globalisation
Globalisation is a process of deeper economic integration between countries and regions of the world.
Advantages of Globalisation
Greater free trade
Greater movement of labour
Lower prices
Increased global investment
Drawbacks of Globalisation
Environmental costs
All connected countries are more vulnerable to external shocks
Tax Avoidance
Labour loss, labour works move to different countries.
What does the WTO (World Trade Organisation) do?
The role of the WTO is to negotiate trades such as resolve disputes, create and implement trade agreements.
What Principles does the WTO follow
non-discrimination
reciprocity
transparency
seeking to create an open and predictable international trading system.
What are the Major UK exports
Manufactured goods
Oil and Gas
Food and beverages
Chemicals and Pharmaceuticals
What is the formula for index numbers
Index =Current value/Base period x 100
Define capital flows
The movement of money for the purpose of investment, trade, or business operations
