International trade Flashcards
What is international trade?
Countries depend on each other to buy things they cannot produce themselves and to sell things other countries cannot produce. Things bought by a country from another country are called imports and things that the country sells to another country are called exports.
What has helped the growth of international trade?
Faster aircrafts and bigger container ships have meant that trading with other countries has been easier than ever before.
What is free trade?
Free trade is trade between countries without any imposed limits.
What are the advantages of free trade?
- A country can export as many things as they like and thus make lots of profit.
- Good for businesses and farmers in the country who depend on export.
- Cheap, unlimited imports means lower prices for the consumer.
What are the disadvantages of free trade?
- Cheap imports can be a result of cheap labour and unlimited exports means that it is encouraged.
- Could lead to job losses in similar industries in the country.
How do countries restrict imports?
Some countries restrict import in order to protect their own industries.
- Quotas. A limit on the number of imported goods each year.
- Tariff. Import tax on some products make them more expensive than locally produced goods.
- Subsidies. The government pays local farmers and producers so that they can sell their products cheaper than the imports/
What are the advantages of restricted trade?
Businesses in a country do not close due to cheap imports.
What are the disadvantages of restricted trade?
People in LEDCs who depend on making exported goods become unemployed from their only source of income.
What are trade blocs?
A group of countries who have formed trade partnerships. They are allowed to import and export to each other without restrictions. An example is the EU.
What are the problems with trade blocs?
Some countries are not part of any trade blocs. This means that people in the country find it hard to sell their goods and make a living.
What is ‘supply and demand’?
When a country produces too much of something than is demanded, they have a surplus. This causes the price of that product to drop. On the otherhand, when a country produces too little of something than is demanded, they have a deficit. This causes the price of that product to rise.
How does fair trade work?
Fair trade is an organisation set up to make things fairer for farmers in LEDCs. How trade usually works is that the product goes from the producer to the supplier to the buyer. The supplier pays the farmer very little and takes a large chunk of the profit. Fair trade replaces the supplier and gives a larger amount of money to the producer. They also teach the producers to package and weigh things themselves to they do not get conned by suppliers. Their only condition is for the producers to then spend some of their increased profit on helping their community.
