business theme 2

• Tariff


  A tax on imported goods
• Trading block


  A group of countries in a geographical area that have come together to protect themselves economically from countries outside of this group
• Tariffs and trading blocks impact international trade
• Tariffs and trading blocks have advantages and disadvantages
• Largest businesses operating internationally

  • McDonald's
  • Apple
  • Nike
• Benefits of international trade for large businesses

  • Increased number of consumers to sell their products to around the world
  • Tapping into many different international markets
  • Increased revenue potential
• Trading internationally is not as simple as just deciding to trade internationally
• There are potential barriers that can make it difficult for businesses to trade on a global scale and expand into other countries
• Main barriers to international trade

  • Tariffs
  • Trading blocks
• Imported goods


  • Coffee being imported into the UK from Costa Rica
• Exported goods


  • UK selling items such as machinery overseas to another country
• Tariff is placed on imported goods


  Makes foreign goods more expensive and less competitive than domestic products
• Simplified example of tariff impact

  • Cost of UK-made car: £20,000

  Cost of imported car from Japan: £18,000

  UK government places 25% import tax on Japanese cars: £22,500
• Advantages of tariffs


  • Domestic products can compete with foreign alternatives

  Increases government revenue

  Protects domestic jobs
• Disadvantages of tariffs


  • Makes goods more expensive for consumers

  Tariffs are rarely one-sided, leading to retaliation

  Can lead to job losses in export industries
• Examples of trading blocks

  • NAFTA

  EU

  APEC
• Advantages of trading blocks


  • Free trade and movement of goods/services within the block

  Fostering strong relationships between member countries
• Disadvantages of trading blocks


  • Importing/exporting to countries outside the block is more expensive

  Can only be part of one trading block based on geographical location

  Loss of ability to negotiate individual trade deals