Unit 4 - International Trade Flashcards
Definitions
International trade
Trade that involves the export and imports of goods or services between countries
Free trade
International trade that is not subject to any kind of trade barriers, such as tariffs or quotas
benefits to intl trade? (7)
increased competition, lower prices, greater choice, acquisition of resources, more foreign exchange earnings, access to larger markets, economies of scale, more efficient resource allocation, more efficient production
benefits of free trade to consumers (2)
lower prices, greater choice
benefits of free trade to producers
domestic firms access larger markets and enjoy EOS
benefits to economy + resource allocation (4)
- countries can acquire resources they don’t have (acquire needed sources)
- trade specialization (more efficient resource allocation)
- domestic firms face increased competition -> higher efficiency, lower cop
- countries can earn foreign exchange from export revenue (source of foreign exchange)
Trade protection
Government intervention aiming to limit imports and/or encourage exports by setting up trade barriers that protect from foreign competition
Tariffs
A tax that is placed on imports to protect domestic industries from foreign competition and to raise revenue for the government
Quota
An import barrier that sets limits on the quantity or value of imports that may be imported into a country
Subsidy
An amount of money paid by the government to a firm, per unit of output, to encourage production and provide the firm an advantage over foreign competition
Administrative barriers
Trade barriers in the form of regulations that aim to limit imports into a country. These barriers may take the form of product safety standards, sanitary standards or pollution standards but may also include more stringent than necessary application of customs procedures
Economic integration
Economic interdependence between countries usually involving agreements between two or more countries to phase-out or eliminate trade and other barriers between them
Preferential Trade Agreements (PTA)
Where a country agrees to give preferential access (e.g. reduced tariffs) for certain products to one or more trading partners
Trading bloc
A group of countries that have agreed to reduce protectionist measures like tariffs and quotas between them
Free trade areas/agreements
An agreement between two or more countries to phase-out or eliminate trade barriers between them, members of the agreement to maintain their own trade policy towards non-members (EFTA) (USMCA)
