INTERNATIONAL

TRADE
INTERNATIONAL TRADE
- Is the
exchange of
goods and
services
between
countries.
HISTORY OF INTERNATIONAL TRADE

BARTER MERCANTILISM LIBERALISM PROFESSIONALISM

Characteristics of International Trade
• Long chain of middlemen
- It require the services of expert middlemen such as,
indent houses, forwarding agents, clearing agents,
foreign exchange banks, etc.
• Mutually acceptable currency
- The currencies of importing and exporting countries
generally are different.
• International rules and regulations
- Businessmen engaged in international trade require
knowledge of international laws and trade restrictions.
Characteristics of International Trade
• Government control
- The government of every country exercises
control over imports and exports for national
interest.
 "The aim of international trade is to increase
production and to raise the standard of living of
the people. International trade helps citizens of
one nation to consume and enjoy the possession
of goods produced in some other nation."
Advantages and
disadvantages of
International Trade
Advantages
• Economies of Scale: if you sell your
goods globally, you will have to
produce more than if you sold just
domestically. Producing in higher
volumes provides greater economies
of scale. In other words, the cost of
producing each item is lower.
• Competition: international trade
boosts competition. This, in turn, is
good for prices and quality. If
suppliers have to compete more,
they will work harder to sell at the
lowest price and best quality
possible. Consumers benefit by
having more choice, more money
left over, and top-quality goods.
• Transfer of Technology: increases
thanks to international trade.
Transfer of technology goes from
the originator to a secondary
user. In fact, that secondary user
is often a developing nation.
Jobs: great trading nations such as
Japan, Germany, the UK, the USA,
and South Korea have one thing in
common. They have much lower
levels of unemployment
than protectionist countries.
Disadvantages
• Over-Specialization: employees
might lose their jobs in large
numbers if global demand for a
product declines.
• New Companies: find it much
harder to grow if they have to
compete against giant foreign firms.
• National Security: if a country is
totally dependent on imports for
strategic industries, it is at risk of
being held to ransom by the
exporter(s). Strategic industries
include food, energy and military
equipment.
 ABSOLUTE ADVANTAGE
• Refers to the possibility
that due to differences in
supply conditions, one
country can produce a
product at a lower price
than another country.
 COMPARATIVE ADVANTAGE

• is an economic term that

refers to an economy's ability
to produce goods and
services at a lower
opportunity cost than that of
trade partners
Absolute Advantage
-Produce at lower cost.
Comparative Advantage
-Produce at lower opportunity
cost.
 Slide INTRA-INDUSTRY TRADE

refers to the exchange of similar products

belonging to the same industry.
The term is usually applied to international
trade, where the same types of goods or
services are both imported and exported.
Types of trade Phrase Meaning Source

Inter-industry Either/or Either imports or Comparative

exports in a given advantage
sector of the
economy

Horizontal intra- Both/and/ Both imports and Product

industry same exports in a given differentiation
sector of the
economy at the
same stage of
processing
Vertical intra- Both/and/ Both imports and Fragmentation
industry different exports in a given (comparative
sector of the advantage in some
economy at instances
different stages of
processing.
Slide Title TRADE POLICY ANALYSIS
• TARIFF – tax on import
a. Specific Tariff- a fixed tax per physical unit
of the import.
b. Ad Valorem Tariff- percentage tax applied
to the value of import.
• QUOTA- a quantitative restriction on imports
and one important type of non-tariff
measurement.
Slide Title WORLD TRADE ORGANIZATION
tle PREFERENTIAL TRADE AGREEMENT
Pursuit of a common economic policy by the political
units

Member countries share one currency.

Free movement of goods, services, labour, and capital

among member countries that also share common
trade policy among non-members.
Free movement of services and capital among
member countries.
Free trade among the members is sheltered behind a
unified schedule of customs duties charged on imports
from the rest of the world.
Tariffs between member parties are reduced or
eliminated.
Agreement among participating countries to remove
or reduce tariffs on certain imported and exported
goods.
IMPORTANCE OF INTERNATIONAL
TRADE
1. Make use of abundant raw materials
2. Greater choice for consumers
3. Specialization and economies of scale –
greater efficiency
4. Service sector trade
5. Global growth and economic development
Slide Title
Product A Product B
• Feature 1 • Feature 1
• Feature 2 • Feature 2
• Feature 3 • Feature 3