Transcript What Is International Trade?

What Is International Trade?
 International trade is the exchange of
goods and services between countries.
 This type of trade gives rise to a
world economy, in which prices, or
supply and demand, affect and are
affected by global events.
 Trading globally gives consumers and
countries the opportunity to be
exposed to goods and services not
available in their own countries.
Increased Efficiency of
International Trading
 Global trade allows wealthy countries
to use their resources more efficiently.
 Countries are endowed with different
assets and natural resources , some
countries may produce the same
good more efficiently and therefore
sell it more cheaply than other
countries.
Increased Efficiency of
International Trading
 Specialization in international trade
 Comparative Advantage
 Absolute Advantage
Other Possible Benefits of
International Trading
International trade not only results in
increased efficiency
 allows countries to participate in a
global economy
encouraging the opportunity of FDI
economies can therefore grow more
efficiently and can more easily become
competitive economic participants.
Aims of International Trade
Policy
 Covering Production and Resource
Deficit
 Providing A market to Product
Surplus at Internal Economy
 A Wide Market Volume
 Competition
 Improving Domestic Market Demand
 Economic Dynamism
What is Protectionism?
 Protectionism as a restriction of trade
is present as many countries have not
pursued a policy of free trade trading
internationally because it involves
costs as well as benefits.
 The restriction of imports into a
country by government.
REASONS FOR PROTECTIONISM
• Protects the country businesses from
extra competition
• Helps new the country businesses to
develop before they face competition
• Helps protect the country jobs
• Prevents foreign countries ‘dumping’ lots
of cheap imports into the country
• Prevents imports of harmful or desirable
goods
Arguments for Protectionism
 Raises government revenue
 Government revenues increase since
the US government collects the tariff
revenue.
Raises government revenue
(example)
 It is true that tariffs raise revenue for
the government (though quotas do
not directly), but this is a very
inefficient way to raise revenue
because consumers end up paying for
this tax by higher consumer prices.
The government could raise an
equivalent amount of revenue by
raising corporate or personal income
taxes.
Protectionist International
Trade Policy
 Safeguards are usually seen as
responses to fair trade behaviour, as
opposed to unfair trade practices such
as
 Custom tariffs
 Quotas
 Dumping
 Subsidies
Custom Tariffs
 ”Tariffs” means that are taxes on
imports and are usually a percentage
of the price of the import, is one
method of restricting trade .
 The aim of the tariffs which are
designated with international
aggrements is decreasing tariffs,
removing completely and, so
liberalization of world trade.
Quotas
 “Quota” is another way of restricting
trade through physical limit on the
amount of an imported good that
may be sold in a country in a given
period.
 In general, tariffs are preferred to
quotas.
Why are tariffs preferred to
quotas as a means of controlling
imports?
 Three Reasons Why Tariffs Are
Preferable to Quotas
 Tariffs Generate Revenue for the
Government
 Import Quotas Can Lead to
Administrative Corruption
 Import Quotas Are More Likely to
Cause Smuggling
Dumping
 Act of a manufacturer in one country
exporting a product to another
country at a price which is either
below the price it charges in its home
market or is below its costs of
production
Subsidies
 A subsidy is a form of protectionism
or trade barrier by making domestic
goods and services artificially
competitive against imports.
Types of Subsidies
 1-Trade protection (import
restrictions):Measures used to limit
imports from other countries may
constitute another form of hidden
subsidy.
Types of Subsidies
 2-Export subsidies (trade
promotion) :Various tax or other
measures may be used to promote
exports that constitute subsidies to
the industries favored.