Module 9

Question 1

Most Common Issues you can face doing International Trade

Answer 1

(1) Distance
(2) Documentation
(3) Different Languages
(4) Difficulty in transportation and communication
(5) Lack of information about foreign businessmen
(6) Frequent market changes
(7) Risk in transit
(8) Import and Export restrictions
(9) Problems in payments
(10) Study of foreign markets

Question 2

5 Harmful Effect of International Trade

Answer 2

(1) Secular Deterioration in the terms of trade
(2) Limited possibility of gain
(3) Adverse effect on “Demonstration Effect”
(4) Not much beneficial for poor countries
(5) Dual economies

Question 3

Main factors affecting International Trade

Answer 3

(1) The Geographical location
(2) Natural Resources
(3) The level of economic development
(4) Political factors

Question 4

Importance of Trade

Answer 4

(1) Make use of abundant raw materials
(2) Comparative advantage
(3) Greater choice fore consumers
(4) Specialisation and economies of scale - greater efficiency
(5) Service Sector Trade
(6) Global growth and economic development

Question 5

Problems arising from free trade

Answer 5

(1) Displacement Effects
(2) Infant Industry Argument
(3) Environmental Costs
(4) Trade can lead to cultural homogenisation

Question 6

International trade has resulted in creating ______ in underdeveloped countries as a result of which the export sector became an island of development while the rest of the economy remained backward.

Answer 6

dual economies

Question 7

The foreign trade has also not been entirely beneficial to poor countries because of the adverse effects of foreign investments on their economy.

Answer 7

Not much beneficial for poor countries

Question 8

According to Prof. Nurkse the possibility of gain from foreign trade to underdeveloped countries is restricted or limited. It is simply due to the reason that underdeveloped countries export mainly primary goods.

Answer 8

Limited possibility of gain

Question 9

Another harmful effect is that the international operation of the ______ has been a handicap for the poor countries. It has been responsible for reducing the capacity for capital formation.

Answer 9

Demonstration effect - Adverse effect on “Demonstration effect”

Question 10

Another important criticism of foreign trade has been that it has resulted in an international transfer of income from the poor to the rich countries through a secular deterioration in the commodity terms of trade of the poor countries.

Answer 10

Secular Deterioration in the terms trade

Question 11

Mid-latitude moderate climate, coastal areas, the transportation is convenient, good for development of international trade. High-latitude climate cold, inland mountainous area traffic block, adverse to the development of international trade. Japan to “trading”, it has to do with its island position. In addition, is advantageous to the development of bilateral trade between neighbors.

Answer 11

The geographical location

Question 12

A country is rich in natural resource type and degree directly affect the country’s international trade in primary products. Such as Zaire said as “Mid-Africa gem “, in the national export commodities, minerals (70% ~ 80%).

Answer 12

natural resources

Question 13

can directly affect a country’s foreign trade commodity structure and the position in international trade. The United States, Japan and the European Union’s national economic development level is high, the imports and exports accounted for half of the world and the population of the country accounts for only about 1/7 of the world.

Answer 13

The level of economic development

Question 14

The world’s political relations, the policy of a country also has a big impact to international trade. The gulf war after Iraq’s oil exports plummeted, is due to political reasons. In China since the late 1970 s adopted a policy of opening to the outside world, foreign trade development quickly.

Answer 14

political factors

Question 15

The theory of ____________________ states that countries should specialise in those goods where they have a relatively lower opportunity cost.

Answer 15

comparative advantage

Question 16

New trade theory places less emphasis on comparative advantage and relative input costs. New trade theory states that in the real world, a driving factor behind the trade is giving consumers greater choice of differentiated products.

Answer 16

New Trade Theory (Greater choice for consumers)

Question 17

Another aspect of new trade theory is that it doesn’t really matter what countries specialise in, the important thing is to pursue specialization and this enables companies to benefit from economies of scale which outweigh most other factors.

Answer 17

Specialisation and economies of scale-greater efficiency

Question 18

Trade tends to conjure images of physical goods import bananas, export cars. But, increasingly the service sector economy means more trade is of invisibles – services, such as insurance, IT services and banking.

Answer 18

Service sector trade

Question 19

International trade has been an important factor in promopting economic growth. This growth has led to a reduction in absolute poverty levels – especially in south east Asia which has seen high rates of growth since the 1980s.

Answer 19

Global growth and economic development

Question 20

The fear is that ‘free trade’ can cause countries to specialise in primary products – goods which have volatile prices and low-income elasticity of demand. To develop, economies may need to restrict imports and diversify the economy.

Answer 20

Infant industry argument

Question 21

Some fear trade gives an advantage to multinational brands and this can negatively impact local produce and traditions. Supporters argue that if local products are good, they should be able to create a niche than global brands cannot.

Answer 21

Trade can lead to cultural homogenisation

Question 22

. Free trade can cause uncompetitive domestic industries to close down, leading to structural unemployment. The problem with free trade is that there are many winners, but the losers do not gain any compensation.

Answer 22

Displacement effects

Question 23

The transportation of goods and services imposes environmental costs of pollution and carbon emissions, contributing to global warming

Answer 23

Environmental costs