INTERNATIONAL TRADE TRADE WITH TWO OR MORE COUNTRIES
REASONS FOR FOREIGN TRADE • different natural resources climate geographical position • different capital resources - factories - machinery - roads / infrastructure
labour force (skilled/unskilled) • greater efficiency • a greater variety of goods/services • greater output • greater employment through expanding export markets • higher living standards (higher income)
PROBLEMS • documentation – more documents • foreign languages – labels, leaflets, brochures, instructions • foreign currency – • debt collection – the language, legal system • distance and transportation – extra packaging, time • duties and restrictions
FREE TRADEBuying goods and services from all countries without any barriers when they cross frontiers
REASONS FOR FREE TRADE • ABSOLUTE ADVANTAGE resources are put to their best possible use - the highest productivity, the ability to produce more of a good or service than any other country • COMPARATIVE ADVANTAGE low-cost production – countries produce more cheaply than others
REASONS AGAINST FREE TRADE • cheaper production in some countries leads to destruction of industries and jobs in other countries • countries may protect their own industries from international competition PROTESTS AGAINST GLOBALISATION
TRADE RESTRICTIONS(PROTECTIONISM) • TARIFFS- tax or customs duty on imported or exported goods 2. QUOTAS- the limited amount of goods 3. SUBSIDIES – money paid by the government to reduce the cost of producing goods to keep prices low
4. EXCHANGE CONTROL - limiting the amount of local currency that people can sell or the price at which they can sell 5. EMBARGO - official order to prevent trade with another country
REASONS FOR RESTRICTIONS • protect home producers • safeguard jobs • resist dumping (selling large amounts of goods in a particular country at unfairly low prices) • correct the Balance of Payments
VISIBLE TRADE VISIBLES: goods sold / bought (visible exports/imports) food, cars, books, furniture….
INVISIBLE TRADE INVISIBLES: Services / investments (invisible exports/imports) banking, education, tourism, insurance, transportation
THE BALANCE OF TRADE The difference between a country’s visible imports and exports. The balance is favourable (in surplus) when exports are higher than imports. The balance is adverse (in deficit) when imports are higher than exports.
THE BALANCE OF PAYMENTS A record of all transactions – goods and services and investments – between one country and the rest of the world over a particular period. visible + invisible trade It shows whether the country is making a profit or loss in its trade
Visible exports +48 440 Visible imports -47 322 Balance of trade – surplus + 1 118 Visible exports +47 322 Visible imports -48 440 Balance of trade - deficit - 1 118
Write the words into the spaces in the sentences:scale budget deficit quota surplus infrastructure trade barriers globalization WTObalance of trade balance of payments free trade subsidies 1. The _____________________has established rules of trade between nations. 2. A country exporting more than it imports has a trade ____________________ . 3. Countries that export a lot of oil tend to have a positive ________________________ 4. A limit to the quantity of goods that can be importde is a _______________________. 5. The import and export of goods is called the _________________________. 6. Producing in large quantities becomes cheaper because of economies of _________ 7. „The world is one big market“ . This is one way of describing __________________. 8. The absence of trade barriers is known as ____________________________ . 9. Import tariffs and quotas are types of _________________________. 10.Buildings, roads, railway lines, telephone netwirks and power supplies are all part of a country's ______________________. 11. If government expenditure is higher than government income, the result is a _____________________. 12. European farmers receive large sums of EU money in the form of________________
MK, p.135. For and against free tradeWhich sets of arguments do you find the most convincing?
http://www.youtube.com/watch?v=ldZwGDXTsmk&feature=related Trade Justice - why world trade rules need to change ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________