Chapter 5: International trade

• What is international trade?

  The process of a business or country buying or selling products to and from other countries.
• Why to we trade?

  To increase efficiency and gain supply (Eg. Labour, resources, capital)
• What is free trade?

  The exchange of goods and services between countries without restrictions or barriers such as tariffs or quotas.
• Advantages of free trade

  It allows economies of scale and increases choice in supply and labour

  allow economics of scale

  increase competition

  increase choice
• What is protectionism?

  Trade policy that restricts imports in order to protect domestic industries. Cost of trade may increase because of this
• What are tariffs? 


  A tax on imported goods. Also referred to 'customs duties'. They are used by the government to raise revenue to finance expenditure.
• What is a quotas?

  Limits or restrictions on the number or proportion of people or goods allowed.
• Voluntary export restraints 


  A self-imposed limit on the quantity of a good that an exporting country is able to export.
• Non-competitive purchasing by government 


  Involves a government only buying from domestic producers, even if it means paying higher prices.
• Embargo

  A legal restriction on trade or other transactions with a certain nation or company.
• Problems with international markets

  Exchange rate factors,

  distribution problems

  different technology

  cultural differences
• Import


  Buying goods and services from abroad
• Export

  Selling goods and services to a country abroad
• Factors behind expansion of trade

  Consumer expectations

  World Trade Organisation

  Technological change

  The falling costs of transporting goods

  Cross-border deregulation
• What is an international business?

  When a business moves into a overseas market
• Advantages of international business:

  Higher earning potential

  increase employment

  Greater choice of goods and services

  Benefits of economies of scale
• Problems of international markets

  Exchange rate

  Distribution problems

  Different technological and health and safety standards

  Administrative difficulties

  Cultural difference
• What is a single market?

  A single market is a market where there is free movement of goods, services, capital and labour between member states
• What are trading blocs?

  Trading blocs are groups of countries that promote and manage trading activities in the region. (Eg. The EU). They try to increase the amount of free trade between countries by reducing protectionism
• Disadvantages of protectionism

  Consumer has less choices

  reduces competition

  foreign countries may retaliate by imposing trade restrictions on exports.