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| IMPORT AND EXPORT TRADE
International trade refers to the importing and exporting of goods and services. Importing is buying goods and services from other countries, while exporting is selling goods and services to other countries.
International trade is made up of visible and invisible trade.
Visible trade is the importing or exporting of physical goods such as food, clothes and electronic equipment.
Invisible trade is the importing or exporting of services like holidays, resources and transporting.
Advantages of international trade:
1- No country is self-sufficient. There may be a lack of natural resources or the climate may be no good for growing up certain agricultural products.
2- Every nations have a tradition in the production of certain goods.
3- The domestic market may be too small.
4- Surplus production can be sold abroad.
5- Consumers like to choose from a wide range of production.
Disadvantages of international trade:
1- Higher transport and insurance costs compared with selling on the domestic market.
2- Use foreign currency have the risk that the value can fluctuate.
3- There are higher risk in granted credit and more difficulties in getting paid for goods.
4- Dealing with complicated documentation and time-consuming bureaucratic procedures.
5- Greater risk that goods will be stolen or damaged in transit.
6- Differences in culture and language difficulties that may lead to misunderstanding.
THE BALANCES OF TRADE AND OF PAYMENTS
International trade is measured by the balance of trade and the balance of payments.
The balance of trade is the difference between visible export and visible import, while the balance of payments is the difference between total import and total export.
If the exports are greater than the imports, the balance is in surplus and if the imports are greater than the exports, the balance is in deficit.
RESTRICTIONS ON INTERNATIONAL TRADE
Sometimes countries introduce measures to restrict international trade. They do this to:
1- protect local industry against foreign competition
2- safeguard employment
3- raise revenue through tariffs
4- sanction countries for political or ethical reasons
5- improve the balance of trade
There are several different types of protective measures:
Tariffs are import duties that raise the price of imported goods making them less competitive. Tariffs protect local business and they are an important source of revenue for the government.
Quotas are restriction on the quantity of product being imported.
Subsidies are financial help given by the government to home producer to assist business, protect jobs and make locally produced goods cheaper and therefore more competitive.
Embargoes or trade sanction are restriction or prohibition of one country on trade with another country as a sign of disapproval of its actions or policies.
Standards are imposed on imports and may lead to a ban.
Anti-dumping legislation prohibits countries from operating on a foreign market in an unfair manner. Dumping is the selling of goods at a lower price then the cost of productions or lower than the market price. While many economists believe that a kind of regulotion is necessary to protect the local market, other support the free trade to promote the world trade.
TRADING BLOCS
Trading blocs are agreement between nation in geographical proximity.
In trading blocs there is a free market that permit to the smaller nations to strengthen their economies. It’s more difficult for the nations outside the blocs to trade with the countries in. At the moment the world trade is dominated by three big blocs: the Americans, the European and the Asian.
THE EUROPEAN UNION
The European Union is a trading bloc made up of twenty-seven countries, that has organised a free trade area in which:
1- No tariffs are imposed on the movement of goods and services.
2- There is free movement of capital and labour.
3- Common workers’ and costumers’ rights have been established.
4- There is increased standardisation of professional qualification.
5- There is a common tariff on imports from outside.
6- Subsidies are improved fro agriculture and industry.
7- The European Investment Bank provides loans to promote regional development in economically disadvantages area.
8- Open markets have been created a competition between EU firms that have to provide better products at lower prices.
9- Common standards of quality and safety are established.
10- Cross-border formalities have been eliminated and delays in transporting goods throughout the Union have been reduced.
Although EU citizens constitute only 7% of the world population they represent more that one fifth (1/5) of world trade, making them an extremely powerful force in the world economy.
THE EURO
In 1999, eleven of the EU countries formed the economic and monetary union and adopted the euro as a single currency. Euro began to circulate 1st January 2002. for the twelve Eurozone countries monetary policies are decided by the European Central Bank. There are several advantages to using the euro:
1- Citizens can travel more easily in the Eurozone without change the currency.
2- The euro is an international currency and therefore is accept in many parts of the world.
3- The euro makes more stable and cheaper tne international trade by eliminating the exchange rate fluctuations
4- The euro is a symbol of European integration
Britain, Denmark and Sweden chose to remain outside the Eurozone because they believe that the euro increas the cost of living and create unemployment. They are also opposed to give the control of national economy to the eruropean central bank. The country that joined in 2004 will be eligible to adopt euro only if the fulfill the “Maastricht criteria”, the economic and political conditions.
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