4.1.2 International trade & business growth

• Imports are goods bought in from other countries.
• Countries can specialise in certain goods, meaning that they can sell products at more attractive prices (with their lower labour costs) than we could in the UK.
• Exports are goods sold to foreign countries.
• Examples of UK exports are:

  • Medical supplies
  • Cars
  • Gas turbines
  • Gold
• Specialisation is the principle of concentrating on or becoming an expert in a particular subject or skill.
• Countries can be specialised in certain industries.
• Countries can be specialised due to:

  • Proximity of raw materials
  • Low labour costs
  • Historical ability
• An example of specialisation is Belgian chocolate
• Comparative advantage is where a country has a lower opportunity cost of producing a product
• The benefits to India of specialisation are:

  • Increased productivity, output and economies of scale (reduced average costs)
  • More resources means increased scale of production, leading to economies of scale
  • Comparative advantage
  • GDP growth / boosted economic growth
• Downsides to specialisation are:

  • A country can become over-reliant on one industry, which doesn’t spread risk
  • Other countries can become cheaper in the same industry, increasing competition
  • Can suffer from diseconomies of scale through lack of communication or coordination
• FDI (Foreign Direct Investment) is where a business from one country invests or establishes itself in another
• FDI stimulates business growth as it building factories or premises in a host nation can create jobs. It also brings skills and technology to emerging countries, for example, training up new managers.