international trade Flashcards
what is international trade
the buying and selling of goods and services between countries
why do countries engage in international trade
- specialisation in goods/services they produce efficiently
- access to goods they cannot produce
- product differentiation: variety for consumers
what factors have led to the growth of international trade
- consumer demand
- WTO promotes free trade by reducing barriers
- technology and communication
- containerisation has made shipping costs cheaper
what is free trade
trade between nations without restrictions like tariffs or quotas
what are benefits of free trade
- more products available
- increased completion: better quality and lower prices
- political stability
- businesses innovate to remain competitive
how does a single market differ from a free trade area
- free trade area: no tariffs/quotas but each country has its own external tariffs e.g. USA-Mexico-Canada
- single market: no tariffs/quotas and free movement of goods, services and people e.g. European Single Market
what is protectionism
policies that restrict trade to protect domestic industries using tariffs, quotas and regulations
why do goverments impose protectionist measures
- help domestic industries grow
- protect jobs
- stops dumping/foreign firms selling below cost price
what are disadvantages of protectionism
- higher prices: reduced competition
- lower quality: less competition discourages innovation
- retaliation: other countries may do the same
what are the benefits of entering foreign markets
- higher earnings
- risk spread across multiple economies
- market saturation reduced
- economies of scale
what problems do business face in overseas markets
- cultural differences: mistaking consumer preferences
- regulations and safety standards might vary
- finding reliable partners abroad
how does economic factors affect overseas market
- exchange rates affecting price
- potentially unstable economy with demand patterns changing quickly
how do cultural factors affect oversees markets
- language barriers
- unknown purchasing habits
how do legal factors affect oversees markets
- political requirements
- different regulations
