International Trade And Free Trade Flashcards
Define international trade
Selling across borders i.e. the exchange of goods/ services with other countries
What are the reasons for trading internationally?
- 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
What are the factors a business is likely to consider when trading internationally?
Language, cultural differences, logistics, currency, buying habits
How would you work out the price of a UK good in another currency?
Multiply by the exchange rate
How would you work out the price of a different country’s good in the UK?
Divide that price by the UK exchange rate
What are the sources of financial support for businesses who trade internationally?
Export insurance - payment from UK gov in the case of non-payment by overseas buyers
How might export insurance help businesses who trade internationally?
Reimburse if non payment - help with cash flow
What is the source of non-financial support offered to businesses who trade internationally?
The passport to export programme
What is the passport to export programme?
Gov programme offered to small/ medium sized businesses who trade internationally
What assistance does the passport to export programme offer?
- help with market research + selection of target markets
- help visit potential markets
- detailed assessment of readiness to export
- action plan for exporting
What is globalisation?
The process of increased integration and interdependent of national economies
What happens to international trade when globalisation increases?
Increases
Why has increased globalisation led to increased international trade?
- 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
Define free trade
Trade without tariffs and quotas being imposed on products
What is protectionism?
Opposite of free trade - tariffs and quotas imposed on products
What are the advantages of free trade to a business and its stakeholders?
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
What are the disadvantages of free trade to a business and its stake holders?
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
What are the possible reasons for the government making imports free?
Helps keep costs low for businesses making prices lower for consumers
How will tariffs offer protection for some ndustires?
Encourage consumers to purchase such products domestically (cheaper) to help these industries survive
Can the government make the same assurances about free trade for exports?
No because they can only set tariffs on imports
What is a trading bloc?
A group of countries within a particular geographic region that have reduced or removed trade barriers for its member countries. Eg The EU
What does TPP stand for?
Trans Pacific Partenrship
What are two benefits of the TTP?
- lowers/ eliminates tariffs on goods
- improves workers rights, minimum wage + child labour
Why does the UK want to join the TTP?
- 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
What are the advantages of trading blocs?
- 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
What are the disadvantages of trading blocs?
- 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
