International trade Flashcards
What is international trade ?
Exchanging capital, goods and services across international borders or territories
What 5 reasons will a business trade internationally ?
- New markets for growth and profit
- Increased efficiency of production
- Lower costs
- Quality increase
- Entering new markets
What is business growth ?
Improving an area of firm’s success
What are imports ?
Goods or services brought from another country
What are exports?
Goods or services produced in one country and sold in another country
What is free trade ?
International buying and selling of goods and services free from government restrictions
What is protectionism ?
Government restrictions that limit goods and services being imported
What is a reason for protectionism ?
Protecting local businesses from foreign competition
What is a tariff ?
Tax or duty that raises price of imported products
Why are tariffs used ?
Enable growth of new industries
What are import quotas ?
Limits on amount of imports allowed in a given time period
What are the 4 trade barriers ?
- Tariffs
- Import quotas
- Government legislation
- Domestic subsidies
What is a trade bloc ?
Group of countries which engage in international trade together with a trade agreement
What is a customs union ?
Group of countries agreeing to charge the same import duties as each other and allow free trade between themselves
What are 2 impacts of trading blocs on businesses ?
- Access to a market with few or no barriers
- Higher costs = taxes imposed and meeting legal requirements
What are 4 advantages of trading blocs ?
- Free movement of goods between members
- External tariffs insulate business from competition
- As trade groans between neighbours = provide infrastructure support
- Advantages become greater = free movement
What are 4 disadvantages of trading blocs ?
- Competition increase = free trade
- New rules and regulations have to be agreed = create single market
- Availability of neighbouring markets = reduce enterprise
- Common factors causing problems = geographically proximate bloc
What are 3 advantages of free trade?
- Efficiency gains from innovation
- Access to new tech and knowledge
- Rising living standards
What are 4 disadvantages of free trade ?
- Destruction of fledging or infant industries
- Lack of robust intellectual property laws
- Poor working conditions and pay
- Reduced tax revenues
What are 3 advantages of tariffs ?
- Promotes local industries
- Increase government revenue
- Discourage dumping products
What are 4 disadvantages of tariffs ?
- Discouraging trade
- Reduces customer choice
- Increases price
- Restricts competition
What is a tariff wall ?
Rate of import duties to reduce flow of imports
What are 3 advantages of import quotas ?
- Local jobs created
- Greater tax revenue
- More flexible than tariffs
What are 4 disadvantages of import quotas ?
- Distort international trade
- Restrict competition
- No tax revenue from additional imports
- Risk of corruption in some countries
