Week one - international trade

Question 1

what is foreign trade

Answer 1

global transactions between domestic residents of a country and customers

Question 2

what is a negative trade balance

Answer 2

when you buy more foreign goods than the number of domestic goods sold

Question 3

what is the balance of payments made up of

Answer 3

• current account (goods, services, income, current transfers)
• capital account
• financial account

Question 4

what are some of the liberalising trade trends over a period of time

Answer 4

• comparative advantage
• economies of scale
• greater variety in goods and services

Question 5

what are some of the protectionism trends over a period of time

Answer 5

• nascent industries (expected to become bigger/stronger)
• national security
• tax collection
  counterbalance unfair trade and production practices

Question 6

which economist brought up the ideas behind comparative advantage

Answer 6

David Ricardo (1817)

Question 7

what is comparative advantage

Answer 7

benefits of international trade to the differences in the relative opportunity costs (costs in terms of other goods given up) of producing the same commodities among countries

Question 8

what are the objectives of international economic organisations like the IMF

Answer 8

• promoting a balanced International trade growth
• stability of exchange rates
• avoid competitive currency devaluations
• corrections in balance of payment problems

Question 9

what are the objectives of international economic organisations like the IMF

Answer 9

• promoting a balanced International trade growth
• stability of exchange rates
• avoid competitive currency devaluations
• corrections in balance of payment problems

Question 10

how does the IMF fulfil their objectives

Answer 10

• through advising countries on policy measures and global surveillance
• funding support to countries with balance of payment problems
• technical assistance and training

Question 11

what is the objective of WTO

Answer 11

• facilitate trade flows by:
• removing barriers to trade
• transparency and predictability
• solving trade disputes

Question 12

what is UNCTAD and its objectives

Answer 12

United Nations conference on trade and development (1964) - a non-financial international cooperation, its objective is to maximise business opportunities, investment and development in developing countries

Question 13

how does UNCTAD fulfilling its objective

Answer 13

• they provide a forum for discussion and dialogue on development
• technical assistance
• lobby to negotiate with developed countries

Question 14

what are the benefits of reduced or zero tariffs on developing countries and what is this called

Answer 14

generalised system of preferences (GSP) - aims to increase export revenues for developing countries, promote their industrialisation and accelerates the pace of economic growth

Question 15

what are the two types of trade barriers

Answer 15

tariff barriers, non-tariff barriers

Question 16

what are quantitative restrictions

Answer 16

• quotas
• voluntary export restraints

Question 17

what are some barriers that can cause an increase in costs

Answer 17

• barriers based on technical or health standards (technical barriers to trade TBT)
• customs formalities and collection of statistical data

Question 18

what are technical barriers to trade

Answer 18

those that involve the need to adapt the production or marketing of a product to the technical quality and safety of the importing country

Question 19

what are the causes of TBT

Answer 19

• technical regulations: legally binding (legislation exists)
• technical standards: not legally binding, they are voluntary although can end up compulsory

Question 20

how do we overcome TBT

Answer 20

homologation/certification, a firm can testify by the certificate of conformity or conformity mark that a product meets certain standards or technical specifications

Question 21

what are the reasons for increase of technical barriers in developed countries

Answer 21

• increasing administrative intervention
• alternative to the progressive dismantling of tariffs

Question 22

actions to overcome non-tariff barriers in general:

Answer 22

1) offensive measures: the EU trade barriers regulation (TBR) sets a legal channel for firms to report trade barriers in the markets of third countries
2) defensive measures: anti-dumping measures (measures taken by the importing country to cope with abnormally priced export policies. Subsidies and compensating measures (disciplines the use of subsidies and regulates the measures that countries can adopt to counter-balance the effects of the subsidies, safeguard clause (a WTO member can temporarily restrict imports of a product if the imports have increased so much that they cause of threten to cause injury to a domestic industry)