Chapter 29 International Trade INTERNATIONAL TRADE International trade

Chapter 29: International Trade

INTERNATIONAL TRADE • International trade is the exchange of goods and services between countries, i. e. importing and exporting products.

IMPORTS AND EXPORTS • Imports are goods and services that are bought from other countries. • Exports are goods and services that are sold to other countries.

Ireland’s Main Imports and Exports

Ireland’s Main Imports Ireland’s main imports include: Ireland’s main imports come from: → Machinery → UK → Cars → USA → Chemicals → Germany → Food → China → Oil → Japan

Ireland’s Main Exports Ireland’s main exports include: Ireland’s main exports go to: → Pharmaceutical products → USA → Food and drink products → UK → Optical and photo apparatus → Belgium → Electronics → Germany → Perfumes, cosmetics and toiletries → Switzerland

Classification of Imports and Exports Visible Imports Explanation → Physical goods that Irish businesses and individuals buy from foreign countries. Invisible Imports → Services that Irish businesses and individuals buy from foreign countries. Visible Exports → Physical goods that Irish businesses and individuals sell to foreign countries. Invisible Exports → Irish services sold to customers in foreign countries.

Classification of Imports and Exports

MEASURING INTERNATIONAL TRADE 1. Balance of Trade Bo. T measures the difference between visible exports and visible imports. Remember, visible trade refers to physical goods that are imported and exported to and from Ireland. Visible Exports > Visible Imports = Surplus Visible Exports < Visible Imports = Deficit

MEASURING INTERNATIONAL TRADE 2. Balance of Payments Bo. P measures the difference between total exports (visible and invisible) and total imports (visible and invisible). Total Exports > Total Imports = Surplus Total Exports < Total Imports = Deficit

Impact of the Balance of Trade Deficit Surplus → More money is leaving the country. → More money is coming into the country. → Government may have to increase taxes. → Government may be able to reduce taxes. → People lose jobs as Irish businesses need fewer employees. → Higher employment levels. People have more disposable income. This improves the standard of living.

How to Overcome a Balance of Trade Deficit Increase exports Sell more goods and services abroad in existing and new markets. Reduce imports Encourage consumers to buy more Irish products and services Try to adapt products to use more raw Raw materials

IMPORTANCE OF INTERNATIONAL TRADE TO IRELAND Business → Larger market: Irish businesses can sell their goods to more customers. This results in increased sales and profits. → Lower costs: Producing goods in larger quantities leads to a reduction in business costs. → Growth of TNCs: With increased profits, a business can afford to expand further and become a transnational company (TNC). → Raw materials: International trade enables firms to purchase raw materials that are unavailable in the domestic market.

IMPORTANCE OF INTERNATIONAL TRADE TO IRELAND Consumer → Wider variety of goods: Irish consumers have a wider choice when buying goods and services. → Better-quality goods: Some countries have better skill when manufacturing certain goods. → Lower prices: As a result of competition in the market, the price of goods and services may fall. → Infrastructure: International trade requires good transport and communication links.

IMPORTANCE OF INTERNATIONAL TRADE TO IRELAND Economy → Foreign exchange: Exports bring in foreign currency, which helps to pay for imported goods. → Balance of payments: Having a surplus balance of payments helps a country to repay loans and invest overseas. → Higher employment: Increased exports creates more jobs in Ireland. → International recognition: International trade helps to build relationships between countries.

FREE TRADE • Free trade enables countries to buy and sell each other’s goods and services without barriers to trade such as tariffs, quotas or embargoes.

BARRIERS TO TRADE (PROTECTIONISM) 1 New industries 2 Domestic jobs 3 Raise revenue 4 National security 5 Consumer protection

BARRIERS TO TRADE (PROTECTIONISM) Barrier to Trade Tariff Quota Embargo Subsidy Administrative Regulations Explanation → A tax placed on imported goods. This makes the imported item more expensive. → A limit on the number of products that may be imported. → A complete ban on all imports from or exports to a particular country. → A government gives financial support to a domestic industry. → Creating customs delays or demanding excessive paperwork to make importing as difficult as possible.

TRENDS IN INTERNATIONAL TRADE Globalisation Transport Developments in ICT Trade agreements New markets Increased competition

Impact of ICT on International Trade Faster Communication Lower Costs Improved Increased Sales Marketing

OPPORTUNITIES FOR IRISH BUSINESSES IN INTERNATIONAL TRADE

CHALLENGES FOR IRISH BUSINESSES IN INTERNATIONAL TRADE High costs Cultural differences Languages Location Exchange rates Payment difficulties

CHALLENGES FOR IRISH BUSINESSES IN INTERNATIONAL TRADE High costs Languages • It is expensive to run a business in Ireland. This can make Irish goods and services more expensive than those of competitors based in low-cost economies such as Poland. • Irish firms must translate their websites, product packaging and advertising into a range of foreign languages. This can be time-consuming and expensive.

CHALLENGES FOR IRISH BUSINESSES IN INTERNATIONAL TRADE Location • As Ireland is an island, goods must be transported by air and sea, which is expensive for Irish firms. It can also slow down distribution of goods. • Irish firms must understand the cultural differences of countries around the world Cultural differences to avoid the risk of offending foreign customers.

CHALLENGES FOR IRISH BUSINESSES IN INTERNATIONAL TRADE Exchange rates • As the euro strengthens against foreign currencies such as the US dollar, Irish exports become more expensive, leading to a decline in sales in international markets. Payment difficulties • It can be difficult for Irish firms to collect debts from foreign customers due to physical distance or differences in the legal system.

Key Terms • • • international trade open economy imports (visible and invisible) exports (visible and invisible) balance of trade balance of payments surplus deficit import substitution free trade • • • trading bloc deregulation World Trade Organisation (WTO) protectionism tariff quota embargo subsidy administrative regulations trade agreements

CREDIT SLIDE • i. Stockphoto. com • Alamy. com