international trade ch 29

Question 1

international trade

Answer 1

the exchange of goods and services between countries i.e. importing/exporting products

Question 2

open economy

Answer 2

an economy that engages in international trade i.e. goods/services traded between countries

Question 3

imports

Answer 3

goods/services bought from other countries
-> money leaves ireland

Question 4

exports

Answer 4

goods/services sold to other countries
-> money comes into ireland

Question 5

visible trade

Answer 5

buying/selling physical goods

Question 6

invisible trade

Answer 6

buying/selling services

Question 7

visible imports

Answer 7

physical goods that irish firms/individuals buy from foreign countries

Question 8

invisible imports

Answer 8

services that irish firms/individuals buy from foreign countries e.g. taking flight with american airline

Question 9

visible exports

Answer 9

physical goods that irish firms sell to other countries

Question 10

invisible exports

Answer 10

irish services sold to customers in foreign countries e.g. german person takes ryanair flight

Question 11

reasons for irish businesses’ involvement in international trade (imports)

Answer 11

-ireland does not have enough natural resources e.g. oil and gas -> need to import raw materials
-climate not suitable for growing certain products
-improves standard of living -> wider range of goods/services + competitive prices

Question 12

reasons for irish businesses’ involvement in international trade (exports)

Answer 12

-profitability -> wider market abroad
-economies of scale reduce costs
-diversification into new markets lowers risk i.e. lower dependence on irish market

Question 13

balance of trade

Answer 13

BoT: measures difference between visible imports and visible exports (physical goods)
surplus or deficit or balanced

Question 14

balance of payments

Answer 14

BoP: measures difference between total exports and total imports (visible and invisible)

Question 15

balance of trade deficit

Answer 15

-imports > exports
-more money leaving country
-govt may have to increase tax to raise income
-job losses as firms need less employees

Question 16

balance of trade surplus

Answer 16

-exports > imports
-govt may be able to reduce taxes
-higher employment, more disposable income, better standard of living

Question 17

overcoming BoT deficit

Answer 17

-increase exports
-reduce imports e.g. import substitution, protectionism
-try adapt products to use domestic raw materials e.g. strawberry rather than lemon flavoured products

Question 18

importance of international trade to irish businesses

Answer 18

-larger markets -> increased sales
-lower costs -> economies of scale
-business can expand + become TNC
-allows firms to buy raw materials that aren’t available domestically

Question 19

importance of international trade to irish consumers

Answer 19

-wider variety of goods
-better quality goods -> competition + skill e.g. german cars
-lower prices -> increased competition
-infrastructure built for international trade e.g. transport/communication links also benefit consumers

Question 20

importance of international trade to irish economy

Answer 20

-exports bring in foreign currency -> helps pay for imports
-BoP surplus helps country to repay loans/invest overseas
-more exports increases employment -> reduces social welfare + more income tax rev.
-builds international relationships -> more cooperation, less conflict

Question 21

trading bloc

Answer 21

countries in a trading bloc create a free trade area and agree to reduce/eliminate barriers to trade between member countries e.g. EU, USMCA (US-mexico-canada agreement)

Question 21

free trade

Answer 21

enables countries to buy/sell each other’s goods/services without barriers to trade such as tariffs, quotas, embargoes

Question 22

WTO

Answer 22

world trade organisation: international agency that aims to promote free trade. negotiates with govts to remove taxes/barriers to trade.
-monitors free trade agreements + helps settle disputes between govts

Question 23

deregulation

Answer 23

occurs when trade barriers are reduced/removed from a market, which enables firms to enter and trade in the market

Question 24

protectionism

Answer 24

occurs when govts introduce barriers to trade e.g. tariffs, quotas, embargoes to protect domestic industries from foreign competition

Question 25

reasons for protectionism

Answer 25

-allow new industries to grow/become competitive -protect domestic jobs -raise tax rev -> e.g. tariffs on imports -national security -> protect industries of strategic importance e.g. electricity -consumer protection -> e.g. EU restricted poultry imports to stop spread of avian flu

Question 26

barriers to trade

Answer 26

-tariffs -quotas -embargoes -subsidies -administrative regulations

Question 27

tariffs

Answer 27

tax placed on imported goods. encourages purchase of domestic products

Question 28

quota

Answer 28

limit on the number of products that may be imported e.g. clothes from china -discourages imports + encourages sale of domestic products

Question 29

embargo

Answer 29

complete ban on all imports from or exports to a particular country. often imposed for political, economic or environmental reasons e.g. 1973 OPEC embargo

Question 30

subsidy

Answer 30

govts give financial support to a domestic industry -> can make domestic products cheaper than foreign competition

Question 31

administrative regulations

Answer 31

creating customs delays or demanding excessive paperwork to make importing as difficult as possible

Question 32

trends in international trade

Answer 32

-growth of globalisation -improvements in transport infrastructure -> trade faster + more efficient -developments in ICT e.g. websites, e-commerce -> easier to engage in IT -increase in trade agreements + trading blocs -growth of new markets e.g. brazil, russia, india (BRICS) -increasing international competition -> low cost economies

Question 33

impact of ICT on international trade

Answer 33

-quicker communication -improved decision making -> internet -websites + e-commerce increase sales -> low cost promotion + sales -lower costs e.g. video conferencing reduces need for meetings -marketing -> websites + social media -> interact to build loyalty

Question 34

opportunities for irish businesses in international trade

Answer 34

-access to larger markets -educated workforce (attracts FDI) -govt aid e.g. enterprise ireland -EU membership -> access to EU free market of 500 mil. countries set up here + increase employment + multiplier effect -english is a key international business language -'green' image is a USP when selling abroad

Question 35

challenges for irish businesses in international trade

Answer 35

-expensive to run business in ireland -> makes irish goods/services more expensive than low cost economies -must translate websites, packaging, advertising into foreign languages -island location -> expeensive + slow to transport by air or sea -> less competitive -must understand cultural differences to avoid offense -exchange rates: if euro strengthens against foreign currencies, exports become more expensive -> decline in sales -difficult to collect debts -> physical distance/ legal differences