International Trade and Free Trade Flashcards
What is international trade?
Exchange of capital, goods and service across boarders of different countries
Why do international trade?
- Variety/choice
- Efficiency and EOS
- Growth and profit motives
- International co operation
- Specialiasation principle
What stops international trade?
- Taxation/tariffs
- Regulation
- Quotas
- Embargos
- Politicial situations
Is there help available for exporters? What is the risk?
- pre buying to avoid volitility (pre contract)
- export factoring - bank collects importes money, takes fee and pays to exporter
- export insurance - UK gov backed
- training and support banks - FCO
What must companies consider when choosing to operate internationally?
- Language
- Culture and customs
- Logistics
- Buying habits
- Currancy and exchange rates
Why are exchange rates important?
Holidays
Tourism
Imports from Europe could rise
What happens if the pound appreciates from a UK point of view?
- UK importers win - cheaper to import
- UK exporters lose - expensive to export
- UK tourists abroad gain, foriegn tourists gain
What is a free trade area?
- No tariff barriers, quotas and other restrictions
- No common barrier, but can impose own barrier or non members
- Usually trade of goods, not labour
What is a customs union?
Free trade area and common external tariff against non members
What is a common market?
Customs union and harmonising economic environment
e.g taxes, laws regulation economic activity, free movement of labour
What is an economic and monetary union?
- Common market and fixed exchange rate/single currancy
- Most follow the same monetary policy
