International Trade Flashcards
What is international trade
Buying and selling of exports and imports between countries
Why do we trade
1 countries do not produce their own goods to suit all needs because different countries hav different natural,human and capital resources
2 it encourages countries to specialise in goods make surplus and sell
3 some goods can be manufactured else where more efficiently
Why can some countries produce some goods more efficiently than others
1 may have access to the raw materials, skill or cost of the workforce
What are the key factors behind the expansion of trade
1 consumer expectations- they see what other countries have and want it - particularly in developing countries
2 efforts of the world trade organisation to remove trade barriers
3 technological changes eg internat
4 the falling cost of transporting goods and more use of containers
5 cross border deregulation - trading blocs create an international trading community
What is free trade
When international trade is conducted without the existence of barriers to trade
What is a free trade area
There is no tariffs taxes or quota on goods from one country to another
What is a single market
No tariffs or taxes but also have free movement of goods and people
What is the advantage of free trade
Encourages specialism by countries who then trade surplus
2 it increases wealth and adds to world GDP
3 allows economies of scale to occur thus reducing costs
4 increases consumer choice
5 increases competition - improving quLITY AND REDUCING PRICE
6 INCREASES CHANCE OF TRAnsfering technology and skills
7 trading with countries increases economic stability
8 dilutes monopoly of power
What are the added advantages for a developing country
1 brings employment and higher wage
2 encourages inward investment an
3 moves employment from agriculture to manufacture which up skills workforce
What is protection
An economic policy of holding back trade between countries through imposing barriers like tariffs or quotas
Why do some countries operate a policy of protection
1 to protect domestic industry - hard for new industries to start up if against established foreign producers
2 to protect against domestic employment - preventing imports can protect and create jobs
3 prevent dumping - selling goods at less than cost price by foreign producers in other countries to drive domestic producers out of business
4 to preserve a way of life eg preventing depopulation of rural areas
List the methods of protection
1 tariffs- a tax on imported goods, can be used to raise revenue or restrict imports - the tax on goods raises the final price = fall in demand
2 quotas - a limit on the quantity imported increase the market share
3 voluntary export restraint VER - put in place by exporters to create their own restrictions
4 non competitive purchasing by governments- government only buying from domestic producers
5 embargo’s- prohibiting trade with a particular country
What are the benefits of a business moving overseas
1 higher earnings
2 spreading risk
3 new potential markets
4 cashing in on a brand
5 benefit from economies of scale
What are the problems with international markets
1 businesses need to acknowledge that products need to be adapted to suit cultural needs
2 exchange rates factors - fluctuations can cause lost orders
3 different technological and health and safety standards - can create extra cost
4 administrative difficulties
5 distribution problems
What are the differences between home and overseas markets
Home market
1 economic - so currency factors, secure economic environment
2 cultural no language problems
Known social structure
Purchasing habits understood
3 Legal - know laws and regulations
4 technological - familiar standard
5 demographic - size and structure of population known
6 marketing and competition - distribution channels established
Known brand
Activities of competition understood
Over seas market
1 Economic - fluctuation in currently value which affects pricking and profits
Cost of current transactions
Potentially uncertain environment with demands pattens that could change quickly
2 cultural - language barriers effect translation
Different social structure
Unknown purchasing habits
3 technological - different standards
Product adaption needed
4 Legal - different regulations
Lack of rule of law
Political requirements
High levels of bureaucracy
5 demographic - lack of understanding of population
6 marketing and competition - need to establish distribution channel
High spending needed to establish brand
Unknown competition
Need to adapt pricing strategies
