International Trade Flashcards
Open Economy
An economy that engages in international trade through importing and exporting with other countries.
Trading Bloc
a group of participating countries that allow free trade between them. There are no trade barriers or tariffs in place between them. e.g. The EU
Visible Trade
physical goods that can be seen going out and coming in to Ireland.
Invisible Trade
services. No physical goods can be seen coming in or going out of Ireland as a result of a sale or purchase of a service. E.g. tourism
Invisible Import Example
Going on holidays abroad because the other country gets the money.
4 Reasons Why Ireland Import
CLIMATE: we do not have the correct climate to grow certain products.
RAW MATERIALS: Ireland lacks the essential raw materials or natural resources that would enable us to produce certain goods.
CHOICE FOR CUSTOMERS: Irish customers want to have a variety of goods and services to choose from.
SMALL DOMESTIC MARKET: the Irish market is small so certain products cannot be produced economically and must be imported.
Import Substitution
Domestic producers start to make and sell a good that is currently being imported into the country. They offer an Irish version of the product to compete with foreign competition. E.g. Cocoa Brown tan competes with larger companies such as Clarins.
Invisible Export Example
international students coming to study in Ireland
4 Reasons why Ireland Export
INCREASED SALES/ PROFITS: Irish firms can increase their sales and profits by exporting to a larger market
EMPLOYMENT CREATION: exporting helps to support jobs in Ireland. The more we sell the more people we need to make the product.
DEMAND: there is a demand from consumers abroad for Irish products e.g. beef or butter
DIVERSIFICATION: if a business depends solely on one market then they are taking a big risk in that country’s economy. If it goes wrong then the business may suffer. To minimise the risk, the business should sell to other countries.
Balance of Trade
VISIBLE EXPORTS - VISIBLE IMPORTS
more exports then its a surplus
more imports then its a deficit
Balance of Payments
TOTAL EXPORTS - TOTAL IMPORTS
more exports then its a surplus
more imports then its a deficit
Impact of a Balance of Trade Deficit
*more money leaving the country
*government may have to increase taxes
*people lose jobs as Irish businesses need fewer employees.
Impact of Balance of Trade Surplus
*more money coming into the country
*government can reduce taxes
*higher employment levels and people have more disposable income which improves the standard of living.
Protectionism
government actions and policies that restrict or restrain international trade, often with the intent of protecting local businesses and jobs from foreign competition. They do this with barriers to trade.
Deregulation
the reduction or elimination of government power in a particular industry, usually enacted to create more competition within an industry.
Free Trade
countries that can buy and sell without any trade barriers or restrictions such as customs duties on goods
5 Barriers to Trade
quota
subsidy
tariff
administrative regulations
embargo
Quota
a limit on the number of units of a good that can be imported
Subsidy
money that a government gives to its own domestic businesses to allow them to sell their products and services more cheaply so that people won’t buy from other countries
Tariff
tax on the price of goods imported. As a result imports will be more expensive and products in the domestic market will be less expensive
Administrative Regulations
such as customs delays and excessive paperwork. They are designed to exclude imports
Embargo
to reduce the number of foreign imports and to help indigenous businesses, a country puts a complete ban on all foreign imports into the country
4 Changes in International Trade
CURRENCY FLUCTUATIONS- sterling weakened versus the euro over the past no. of years. This lowers the spending power of UK citizens who want to buy Irish exports
MNC’S IN IRELAND- a low corporation tax rate and a highly skilled workforce has attracted MNC’s to Ireland
EMERGENCE OF TRADING BLOCS- a trading bloc is a group of countries that agree to freely buy from and freely sell to each other without any barriers to trade. However they may impose a tariff on all imports coming from non-member countries.
GLOBALISATION- the increasing number of global businesses that operate throughout the entire world. These global businesses could wipe out indigenous businesses with competition but could also aid them by proving my employment and more choice for the consumer. To beat this the business will have to invest in R&D to come up with a USP.
3 Opportunities for Trading with Non- EU Countries
NEW EMERGING MARKETS- the growth of China and Japan has given Irish exporters big opportunities to move unto these markets such as food and drink. Ireland is one of the largest exporters of powdered instant formula
CHANGES IN TECHNOLOGY- this has a positive impact on Irish exporters making communications easier and instantaneous world wide. The internet allows Irish exporters to market their goods internationally.
GREEN IMAGE- Ireland has a good image around the world as clean, green and a unspoilt country. This is our USP. This makes it easier for us to sell food to other countries as they can trust our food to be of top quality.
2 Challenges for Trading with Non-EU Countries
LANGUAGE BARRIER- although English is the international language it is not the worlds universal language and many firms tend to deal in their own language. The name of the product may have to be changed and the website will have to be available in different languages.
DISTRIBUTION COSTS- Ireland is an island which makes transporting goods more difficult and more expensive for Irish businesses. Goods can only be exported by boat or plane and can only be transported according to shipping and airline companies time tables and weather.
Role of ICT in International Trade
increased sales
faster and cheaper communication
decision-making
reduced costs
advertising
2 Government Helps for Irish Exports
ENTERPRISE IRELAND- helps Irish firms export by market research information on opportunities abroad, low cost loans to Irish businesses to help them export and grants to help them export.
DEPARTMENT OF ENTERPRISE, TRADE AND DEVELOPMENT- helps Irish businesses export by giving advice on the documents used in foreign trade and the regulations that must be obeyed, providing export credit insurance for industries. This is where the Irish Government promises to pay the Irish exporter if the foreign customer does not pay them.
