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international trade

International trade involves the buying and selling of goods and services between countries, driven by factors like climatic differences and technology. While it offers advantages such as access to a larger market and foreign exchange earnings, it can also hinder local industries and lead to the import of harmful goods. The balance of trade measures the difference between imports and exports, while the balance of payment records all payments to and from foreign countries.

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13 views9 pages

international trade

International trade involves the buying and selling of goods and services between countries, driven by factors like climatic differences and technology. While it offers advantages such as access to a larger market and foreign exchange earnings, it can also hinder local industries and lead to the import of harmful goods. The balance of trade measures the difference between imports and exports, while the balance of payment records all payments to and from foreign countries.

Uploaded by

hyman12us
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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PRINCIPLES OF BUSINESS

INTERNATIONAL TRADE
What is international trade?
International trade refers to the buying (imports) and selling (exports)
of goods and services between countries

Reasons Why Countries Trade


• Climatic difference

• Technology

• To earn foreign exchange


Reasons Why Countries Trade
• Promotes necessary political connections between countries

• Advantages of International Trade

1. opportunity to earn foreign exchange


2. people are able to consume goods that the country does not
produce
3. opportunity to sell more goods - bigger market
Disadvantages of International Trade
• Local industries may be impeded

• Mis-utilisation of Natural Resources:

• Import of Harmful Goods:


Barriers to international trade
This refers to measusres used by governments to reduce the amount
of goods imported.
Balance of Trade
▪ Import - buying of goods or services from overseas. This results in an
outflow of funds

• Export - this is selling goods or services

• Visible trade - this is the import and export of goods

• Invisible trade - this is importing and exporting of goods and services


Balance of Trade
When export is greater than import, the difference is known as surplus
or favourable. This is an inflow of funds into a country

When imports are greater than export the difference is said to be


unfavourable/adverse/deficit. This results in an outflow of funds from
a country

Balance of Trade (BOT) is the difference between a country's total


imports of goods and services and its total exports of goods and
services for a period.
Balance of Payment (BOP)
The balance of payment is a statement recording the difference of all
payments made to foreign countries and the total payments received
from them.

The balance of payment statement is made up of


a) Current Account - this section records trade in goods and services

b) Capital Acccount - this records flows for investment and savings


purposes

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