INTERNATIONAL

TRADE
Prepared by: Lamagon, Jenifer
INTERNATIONAL TRADE

Refer to the exchange of products

and services from one country to
another.
IMPORT AND EXPORT
1. Imports- flowing into a country from abroad
2. Exports- flowing out of a country and sold
overseas.
As the Mercantilists advocacy before, a nation
must have more exports than imports to be
able to gain more wealth.
TWO TYPES OF TRADE

1.Visible Trade- refer to the buying

and selling of goods (solid,
tangible things) between country.
2.Invincible trade- refer to services
ECONOMIC BASIS OF TRADE
1. Different nation are endowed with various kinds and
amount of natural resources
2. The production of varied goods and services require
different combination of economic resources and
also particular technology.
3. Various nations have different specializations that
make their products highly differentiated.
COMPARATIVE CHEAPNESS
■ Bananas and coffee cannot be grown in the United State, so
they buy it abroad
■ The raw materials of US are insufficient so they buy copper
from Chile, iron from Canada and Venezuela, and oil from
Middle East
But why do they buy large amount of manufacture goods?
■ They are great manufacturing nation. They export large
amount of manufactures to these same countries.
ABSOLUTE AND COMPARATIVE
ADVANTAGE
1. Comparative Advantage- Introduce by David Ricardo, it
consider two countries which can produce the same
products become more productively efficient.
2. Absolute advantage- formulated by Adam Smith, there I only
one producer
example: A tailos does not attempt to make his own
shoes, but buys them for shoes maker
A family attempt to make at home what it will cost. More
to make than to buy.
BALANCE OF TRADE-SURPLUS-DEFICIT-
NET EXPORTER
The Balance of trade is the value of exports
minus the value of import. If the balance is
positive, then the value of exports exceeds the
value of imports and the US is a Net Exporter
but if the balance is negative, it is vice versa.
If an economy exports more than it imports, it
has a trade surplus.
A Trade Deficit occurs when imports are
greater than exports.
THE GAIN FOR TRADE
Countries can gain from trade if their opportunity costs differ.
 We buy cars made in Japan and American producers of
grain and lumber can sell large parts of their output to
Japanese households and firms.
 We buy cars and machineries from European producers and
sell airplanes and computers to European in return.
 We buy shirt and fashion goods from the people of
Hongkong and sell them machinery in return.
 We buy TV sets from South Korea and Taiwan and sell them
financial and other services as well as manufactured goods
in return.
 Reduces trade
fluctuations

Greater variety
Fosters peace and Of goods
goodwill

BENEFITS
OF
Better utilization of INTERNATIONAL Consumption at
sources TRADE Lower prices

Promote efficiency in Utilization of

production Surplus produce
More jobs
REASONS OF IMPORTING
1. Price- a foreign company produce something more
cheaply
2. Quality- may be superior abroad
3. Availability- It might not be possible to produce the
item locally. Therefore, the only way consumers can
buy it is by importing it.
4. Demand- might be greater than local supply. To
satisfy the difference, it is necessary to import.
ADVANTAGE OF INTERNATIONAL TRADE
1. Comparative Advantage- Trade encourage a nation to
specialize in producing or supplying.
2. Economies of Scale- if you sell our goods globally, you will
have to produce more than if you sold just domestically.
3. Competition- international trade boosts competition.
4. Transfer of technology- increases thanks to international
trade
5. Jobs- great trading nations such as Japan, German, UK,
USA and South Korea have one thing in common. They have
much lower level of unemployment.
 DISADVANTAGES OF INTERNATIONAL
TRADE
1. Over-Specialization- employees might lose their jobs in large
numbers if global demand for a product declines.
2. New Companies- find it much harder to grow if they have to
complete against giant foreign firms.
3. National Security- If a country is totally dependent on
imports for strategic industries, it is a risk of being held to
ransom by the explorer. Strategic industries include food,
energy and military equipment.
 BARRIERS TO TRADE: THE TARIFF
CONTROVERSY
 Quotas- form of regulation that limits the number of units of
imports that can enter a country in a particular length of
time, commonly in a year.
 Voluntary export restraint- agreement between two
government that the exporter agrees to restrain the volume
of its own exports.
 A tariff is a tax on import. The importer is required to pay
either a certain percentage of the value of the imported
article or so many dollars and cents per physical unit
imported.
 Non-tariffs Barrier- licensing technique that restrict imported
goods and services.
 The Global System of Trade Preferences (GSTP) - is a
preferential trade agreement between emerging economies
and LCD’s.
 North American Free Trade Agreement (NAFTA)- consist of
three countries- USA, Canada and Mexico- which also trade
freely with each other.
 Less Developed Country (LDC)- In most cases, the
agreements involve either lifting or reducing tariffs.
However, the LCD member nations do not have to
reciprocate
 General agreement on tariffs and trade (GATT)- An
international agreement design to limit government
intervention to restrict international trade.
GLOBALIZATION
 Refer as a process whereby international economic
migration transpires
 According to Todaro and Smith, “ a process by which the
economies of the world become increasingly integrated,
leading to a global economy and global economic policy
maker”.
Thank you
For
listening