Trade and trading blocs Flashcards
International Trade
International trade is trade between different countries for different products and services - selling across borders.
Why do businesses trade internationally
Increased globalisation
Encourage exporting to reduce a balance of payments deficit
Increase economic output
Build relationships with foreign countries
Access to new goods and services
Increase factors of production.
Barriers to international trade
Exchange rates
Tax, tariffs and quotas
Government regulations to try and stimulate domestic growth
Sustainable policies
Factors to consider when trading internationally
Logistics State of the economy Tariffs and quotas Diplomatic relationships between countries Language barriers Cultural limitations Currency
Financial and non financial sources of support for international trade
Financial:
Government subsidies
Decreasing taxes and quotas on goods
Non-financial:
Deregulation
Impacts of exchange rates on trade
Strong Pound Imports Cheap Exports Dear
SPICED - Increased imports, less domestic consumption, Decreases inflation
Weak Pound Imports Dear Exports Cheap
Increased demand for countries exports, encourages domestic growth, inflation rises.
What is an exchange rate?
A comparison of the strength of two currencies.
Explain the relationship between globalisation and international trade
International trade increases globalisation as it builds countries diplomatic relationships and the economies become more interdependent on each other for goods and services
Define a trading bloc
A group of economies which agree to trade internationally with each other under certain rules and regulations.
Examples of trading blocs
European Union - Europe
Pacific alliance - South America
South east Asian nations
Advantages of trading blocs
Promotes free trade
Free movement of labour
Improves diplomatic relationships
Disadvantages
Importing and exporting outside the trading bloc becomes very expensive
Countries can only be a part of one trading bloc
What is free trade
Trade between nations and economies without limits such as tariffs and quotas
Advantages of free trade
Unlimited movement of goods and services and resources
Comparative advantage - can produce and improve more cheaply and efficiently
Disadvantages of free trade
Can leave out countries who are not involved in the trading bloc or agreement
Winning countries in the trading bloc may have to compensate those losing out.
