Scribd
Upload
2 views

IBT-module-1_1

The document provides an introduction to international trade, defining it as the exchange of goods and services between countries and outlining two main types of trade. It discusses key concepts such as trade balance, trade surplus, and trade deficits, as well as factors affecting trade, benefits of international trade, and methods of protectionism. Additionally, it describes various trading blocs and organizations involved in world trade, including the IMF, World Bank, and GATT.

Uploaded by

Hannah Zoe Mongaya
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
2 views

IBT-module-1_1

The document provides an introduction to international trade, defining it as the exchange of goods and services between countries and outlining two main types of trade. It discusses key concepts such as trade balance, trade surplus, and trade deficits, as well as factors affecting trade, benefits of international trade, and methods of protectionism. Additionally, it describes various trading blocs and organizations involved in world trade, including the IMF, World Bank, and GATT.

Uploaded by

Hannah Zoe Mongaya
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

LESSON 1

INTRODUCTION TO INTERNATIONAL TRADE

International trade
The process of exchanging goods and services produced in one country with those
produced in another country.

There are two basic types of trade between countries:

 At first in which the receiving country itself cannot produce the goods or
provide the services in question, or where they do not have enough.
 The second, in which they have the capability of producing the goods or
supplying the services, but still import them.

Basic Terms:
Trade Balance (commercial balance or net export)
The difference between the monetary value of nation’s export and import over a certain
period of time.

Trade Surplus or positive balance


The nation’s exports are greater than imports.

Trade Deficits or negative balance


The nation’s imports are greater than exports.

Differences Between Domestic and International Market


1. Consumer
2. [Purchasing power
3. Product and packaging
4. Currency
5. Payment terms
6. Language
7. communication

Factors That Can Affect the Balance of Trade


1. The cost of production.
2. Cost and availability of raw materials, intermediate and other inputs.
3. Currency exchange rate movement
4. The availability of adequate foreign exchange with which to pay for imports.

Benefits Of International Trade


1. Greater variety of goods available for consumption.
2. Efficient allocation and better utilization of resources
3. Promote efficiency in production
4. More employment
5. Consumption at cheaper cost
6. Utilization of surplus produce
7. Foster peace and goodwill

Methods Of Protectionism

Tools of protection may be categorized as either tariff or non-tariff


barriers:
 Tariffs - A tariff is a ‘tax’ or import duty levied on goods or services entering a
country.
Levels of Tariffs
 Specific duty
 Ad valorem
 Compound tariff

 Non-tariff barriers – There’s a list of non-tariff measures which have been deployed
by both developed and developing countries:
Non-tariff barriers
 Quotas
 Boycott
 Embargoes
 Voluntary Export Restraints
 Domestic Subsidies
 Import deposits
 Safety and health standards / technical specifications
 Custom and Administrative Entry Procedure

Regions In World Trade


Four Basic Forms Of Trading Blocs

1. Free Trade Area


Member are agree to reduce or abolish trade barriers such as tariff and import quotas
between themselves but retain their individual tariffs and import quotas against non-
members.

2. Custom Union
Countries belong to custom union agree to reduce or abolish trade barriers between
themselves and agree to establish a common tariff and import quota against outsider.

3. Common Market
Essentially Common Market is a Custom Union in which members also agree to reduce
restrictions on the movement of factors of production and agree to reduce barriers on
the sale of goods.

4. Economic Union
Countries belong to Economic Union agree to have a common policy in the areas of
taxation, interest rate and currency.
Organizations In World Trade
1. International Monetary Fund (IMF)
The prime task is to try to regulate the way in which countries adjust to fluctuation in
exchange rate. IMF also helps member countries experiencing trade deficit by lending
money and providing enhancement programs.

2. World Bank (WB)


Formerly International Bank for reconstruction and Development the WB also provides
loans mostly to developing country at preferential rates to accelerate their economic
development.

3. General Agreement on Tariffs and Trade (GATT)


The GATT was signed at Geneva in 1947 and came into operation in 1948. GATT
superseded by the World Trade Organization (WTO) on January 1, 1995. This
organization was formed to establish a binding agreement between members to reduce
tariffs and to solve conflict between opposing country.

You might also like