Trade Flashcards
Define International Trade
is the exchange of capital goods and services across international borders.
Define Exports and Imports
Exports – Goods and services produced in one country to be sold in another.
Imports – Good and services bought from another country.
Why do firms participate in international trade
To access new markets for growth and profit
For increased efficiency of production
Reductions in cost and increases in quality
Define Free trade
Is where buyers and sellers from different countries can trade without domestic governments applying any barriers (such as taxes) on the goods and services
Define protectionism
Any attempt by a country or region to impose restrictions on the import of goods and services, mainly used to help against trade imbalances.
Define tariff
A tariff is a tax or duty that rises the price of imported products, likely to reduce demand for the good and for motivate domestic producers to produce more of that good. Also to protect infant industries from larger and powerful producers
Define Import quota
creates a limit of how many imports are allowed into the country of that good.
Define trading bloc
A trade bloc is a group of countries which engage in international trade together, with a trade agreement to reduce or eliminate trade barriers within the group. An example of a trade bloc is the European union, NAFTA.
Define single market
Similar to trading bloc, A single market in trading refers to a unified economic area where goods, services, capital, and labour can move freely without restrictions such as tariffs, quotas, or regulatory barriers.
Advantages of free trade
Lower price for consumers
Increased Productivity and competitiveness as open markets
Rising Living Standards
Disadvantages of free trade
Loss of Domestic Industries
Reduced tax revenues
Income Inequality
Negative impact on small businesses against huge global firms
Advantages of protectionism
Domestic industry protection
Job Preservation
Increased government tax revenue
Disadvantages of protectionism
Increased Price for consumers
Can cause trade wars
Reduces competitive drive to improve
What are Challenges to businesses of developing international markets for their products
Identifying the international market need of customers
Cultural nuances – businesses may have to change the product for a cultural
Potential extra cost of transporting the products to the location
Advantages to a business of developing new international markets for its products
Expand the length of a product life cycle (if at the decline of a product they may be able to extend it by selling it to a new market)
Potential for new customer base
Businesses may benefit from first mover advantage (gain the best locations for factories, retail outlets etc before competitors)
