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International Trade Notes

The document discusses international trade, which involves the exchange of goods and services between countries. It provides reasons for why countries engage in international trade, such as differences in climate and resources that allow countries to specialize. Benefits include increased production and standard of living, while problems include different currencies and import restrictions between countries. Theories of trade discussed are absolute advantage and comparative advantage. Common trade documents like bills of lading and certificates of origin are also outlined.

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Taelor Ferguson
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83 views12 pages

International Trade Notes

The document discusses international trade, which involves the exchange of goods and services between countries. It provides reasons for why countries engage in international trade, such as differences in climate and resources that allow countries to specialize. Benefits include increased production and standard of living, while problems include different currencies and import restrictions between countries. Theories of trade discussed are absolute advantage and comparative advantage. Common trade documents like bills of lading and certificates of origin are also outlined.

Uploaded by

Taelor Ferguson
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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International Trade

International Trade
• International Trade: The buying and selling or (exchange) of goods and
services between different countries.

• Regional Trade: Trading among countries belonging to a particular


region.

• Local Trade/Domestic Trade: Trading within a country


Reasons for International Trade

• Climate differences – different crops thrive under different climatic and


soil condition 
• Inequality of natural resources – some countries are rich in natural
resource such as fertile land, forest, rivers, minerals etc. other countries
have little or none at all.
• Specialization and technological know-how – some countries have
developed a greater degree of specialization and technology than others.
Reasons for International Trade

• It enables countries to access a wider variety of goods and services with which to
enhance the quality of life
• It earns countries foreign currency with which to pay for imports
• By selling abroad countries gain the benefits of wider markets
• It increases competition and as a result the quality of local production.
• It helps to established and maintain friendly foreign relationships with other
countries
Benefits of International Trade

• Increase production
• Reduction of unemployment
• Improvement in the standard of living
• Wider variety of goods available
• Prevention of famine and starvation because scarce goods can be obtained from
abroad
• Reduction of the powers of monopolies since they would be facing competition
from imported products which may be cheaper and of better quality.
Problems of International Trade

• Different currencies in each or group of countries and different exchange rates


• Differences in language which do not make trading simple
• Import restriction (quotas, embargo, ban)
• Legal and technical regulations of countries (weight of production – strict standard)
• Excessive documentation
• Delays in payment
• Long distances drive up transport costs
• Unfair competition also called dumping – product sold cheaper in other country than home
country.
Restrictions on International Trade

• Tariffs: These are import duties such as customs and excise duties. These have the effect of raising
the price of the imported goods and therefore making them less competitive when compared to
home products.
•  Quotas: These are physical restrictions on the amount of goods that can be imported into a
country over a period of time.
• Subsidies: These are given to home producers, which makes their goods cheaper and therefore
more competitive when compared with the prices of overseas products.
• Embargoes: These are bans on importing certain items from overseas.
• Exchange control: The government limiting the amount of foreign exchange available to pay for
imports
Theories of International Trade
 The Theory of Absolute Advantage
• If a country has the absolute advantage in the production of a good or
service, it means it’s the most efficient producer of that good or service.
• In other words, if all countries use the same inputs in their production
process this country will be able to produce more and better quality
products than all the other countries.
Theories of International Trade
The Theory of Comparative Advantage
• The principle of comparative advantage is based on the assumption that
countries that produce the same thing will compare their cost of
production and produce the goods that cost them less to produce.
• Bill of Lading – this is used when sending goods by sea. The bill of
lading gives the holder of the original bill legal ownership of the goods
mentioned on it. Several copies are made: one is given to the ship’s
captain, one to the consignor which is the person sending the goods and
one to the consignee which is the person receiving the goods. The bill of
lading gives a full description of the goods and says where they are to go.
To take position of the goods, the consignor must show his copy of the
bill to the captain of the ship or his representative.
• Airway Bill – this is used when sending goods by air. It serves as a receipt of
goods by an airline carrier and as a contract of carriage between the shipper and
the carrier. It includes conditions of carriage such as the carrier's limits of
liability and claims procedures, a description of the goods and applicable charges
.
• Certificate of Origin – this document states the country from which the goods
came. Countries may charge a tariff on goods which they import in order to force
up their prices making home produce products attractive to buyers. Therefore,
this document is required by a country’s customs in order to charge such tariff.

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