international trade Flashcards
(23 cards)
What is international trade?
The buying and selling of exports and imports between countries.
Why do countries trade?
Because they specialise in goods they produce efficiently and trade for others they lack, due to differences in natural, human and capital resources.
What are the benefits of specialisation in trade?
- It increases efficiency
- lowers costs
- allows countries to trade surpluses for other goods.
What is free trade?
International trade without barriers such as tariffs, quotas, or restrictions.
What are the benefits of free trade?
- Economies of scale
- increased consumer choice
- innovation
- political stability.
What is a single market?
A group of countries with free trade and free movement of goods, services, people and capital, plus a common external tariff.
How does free trade help developing countries?
- Brings employment
- higher wages
- inward investment
- moves economies from agriculture to manufacturing.
What is protectionism?
The use of trade barriers like tariffs and quotas to restrict imports and protect domestic industries.
Why do governments use protectionism?
To protect new industries, preserve jobs, prevent dumping, and promote self-sufficiency.
What are the disadvantages of protectionism?
- Higher prices
- reduced choice
- inefficiency
- risk of trade retaliation.
What is a tariff?
A tax on imported goods to make them more expensive and protect domestic producers.
What is a quota?
A physical limit on the quantity of a good that can be imported.
What is voluntary export restraint (VER)?
An export quota set by the exporting country to avoid harsher trade restrictions.
What is non-competitive purchasing by governments?
When governments only buy from domestic suppliers even if it’s more expensive.
What is an embargo?
A complete or partial ban on trade with a specific country.
What are advantages of entering international markets?
- Higher earnings
- risk spreading
- access to new customers
- brand expansion
- economies of scale.
What problems can businesses face in international markets?
- Cultural differences
- exchange rate risks
- standards and regulations
What are examples of cultural mistakes in marketing?
The Ford Caprino (meant ‘goat poo’ in Italian) and Pschitt soft drink (unappealing name in English markets).
What are economic challenges in foreign markets?
- Unstable environments
- unknown demand patterns
- exchange rate fluctuations.
What are legal and regulatory challenges overseas?
- Different health, safety, and product standards
- unclear laws
- complex bureaucracy.
What are technological challenges when trading internationally?
- Different levels of tech infrastructure, standards, and product compatibility.
How do demographic factors affect international trade?
Businesses must understand local population structure, size, and purchasing behaviour.
How can marketing and competition differ abroad?
New markets may require brand building, pricing adaptation, and unknown competitors.
