International Trade And Free Trade

Question 1

Define international trade

Answer 1

Selling across borders i.e. the exchange of goods/ services with other countries

Question 2

What are the reasons for trading internationally?

Answer 2

• for variety - cant obtain products countries cant make themselves
• for economic efficiency - economies of scale
• to grow - access to millions of potential new customers
• to avoid conflict - nations become dependent on each other
• to specialise - country can specialise in what it does best

Question 3

What are the factors a business is likely to consider when trading internationally?

Answer 3

Language, cultural differences, logistics, currency, buying habits

Question 4

How would you work out the price of a UK good in another currency?

Answer 4

Multiply by the exchange rate

Question 5

How would you work out the price of a different country’s good in the UK?

Answer 5

Divide that price by the UK exchange rate

Question 6

What are the sources of financial support for businesses who trade internationally?

Answer 6

Export insurance - payment from UK gov in the case of non-payment by overseas buyers

Question 7

How might export insurance help businesses who trade internationally?

Answer 7

Reimburse if non payment - help with cash flow

Question 8

What is the source of non-financial support offered to businesses who trade internationally?

Answer 8

The passport to export programme

Question 9

What is the passport to export programme?

Answer 9

Gov programme offered to small/ medium sized businesses who trade internationally

Question 10

What assistance does the passport to export programme offer?

Answer 10

• help with market research + selection of target markets
• help visit potential markets
• detailed assessment of readiness to export
• action plan for exporting

Question 11

What is globalisation?

Answer 11

The process of increased integration and interdependent of national economies

Question 12

What happens to international trade when globalisation increases?

Answer 12

Increases

Question 13

Why has increased globalisation led to increased international trade?

Answer 13

• globalisation increased competition so businesses needing lower prices - inc IT bc businesses will import cheaper materials
• infrastructure inc as globalisation has - inc IT bc easier to transport goods between countries
• globalisation = greater connectedness between markets - inc IT bc customers + businesses can order + pay anywhere in world

Question 14

Define free trade

Answer 14

Trade without tariffs and quotas being imposed on products

Question 15

What is protectionism?

Answer 15

Opposite of free trade - tariffs and quotas imposed on products

Question 16

What are the advantages of free trade to a business and its stakeholders?

Answer 16

Business - economies of scale obtained if demand inc (one country expects something in return for removing barriers)
Business - access to greater raw materials at lower cost
Customers - lower prices through inc competition

Question 17

What are the disadvantages of free trade to a business and its stake holders?

Answer 17

Workers - forge in completion can lead to job loss
Environment- less economically developed countries (LEDC’s) may use up non renewable resources for export
Business - more completion from businesses based in mother countries

Question 18

What are the possible reasons for the government making imports free?

Answer 18

Helps keep costs low for businesses making prices lower for consumers

Question 19

How will tariffs offer protection for some ndustires?

Answer 19

Encourage consumers to purchase such products domestically (cheaper) to help these industries survive

Question 20

Can the government make the same assurances about free trade for exports?

Answer 20

No because they can only set tariffs on imports

Question 21

What is a trading bloc?

Answer 21

A group of countries within a particular geographic region that have reduced or removed trade barriers for its member countries. Eg The EU

Question 22

What does TPP stand for?

Answer 22

Trans Pacific Partenrship

Question 23

What are two benefits of the TTP?

Answer 23

• lowers/ eliminates tariffs on goods
• improves workers rights, minimum wage + child labour

Question 24

Why does the UK want to join the TTP?

Answer 24

• will boost UK exports through lowering tariffs
• provides hope in the future for the UK to get a trade deal with the USA
• access to raw materials and components at lower costs (tariffs removed)
• future growth of services, robotics, data and digital industries - more jobs in the UK
• 4% fall in GDP bc of leaving EU so hope to compensate for that
• CPTPP countries fast growing + inc emerging middle class - interest in more expensive British goods

Question 25

What are the advantages of trading blocs?

Answer 25

• access to a potential market of hundreds of millions of people
• can import raw materials at lower cost (tariffs removed)
• if exports inc potential for economies of scale

Question 26

What are the disadvantages of trading blocs?

Answer 26

• membership could hinder trade with countries outside bloc - especially true if bloc has common tariffs for non-members - place tariffs in retaliation
• competition from firms within member countries may be too great for domestic businesses - loos sales bc customers import goods from member countries - redundancies may follow