THE POLITICAL ENVIRONMENT - INTERNATIONAL TRADE Flashcards
What is internal trade
International trade is a measure of the total value of exports and the total value of imports to a country. - It’s not focused on the goods that come in and out of the UK, it’s focused on the money that comes in and out of the economy.
What does internal trade include
The total value of traded goods (physical goods)
The total value of a traded service (non physical - like a insurance policy)
FDI (Foreign direct investment) - If the UK builds a factory abroad or the other way around - a sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or service low.
What are the advatages of international trade for businesses
Increases number of customers
Gains from economies of scale
Increases in competitiveness drive improvement and create competative advatage
Access to new technology
Access to lower cost production environments
What are the disadvantages of international trade
Need to differentiate products for different arkets
Increased costs as a result of diseconomies of scale
Increases in competition
The diseconomies of scale are because the business would have to communicate with employees in foreign countries with different time zones, which can cost money.
Free trade
Free trade and protectionism represent two opposing approaches to international trade. Free trade emphasises the removal of trade barriers, promoting economic efficiency and market access. Protectionism aims to protect domestic industries but can lead to higher prices and reduced consumer choice.
What are examples for free trade
Examples:
Joining the EU
Joining the world trade organisation
Reducing barriers to trade - tariffs and restrictions
Negotiating trade deals with other countries
What are the opportunities of international trade
Increase sales to overseas countries
Manufacturing in lower cost environments overseas
Import cheaper raw materials
What are the threats if international trade
Increased competition from overseas competitors
Impact of brexit on sales to EU
Impact of trump’s trade policies, and international reaction to them
