INTERNATIONAL TRADE
– Is the trade taking place between two or more countries.
Bilateral trade – Is the trade taking place between two countries
Multilateral trade : Is the trade taking place between more than two countries.
Domestic trade: Is trade involving exchange of commodities within the country.
Qn:– What is the difference between International and domestic trade?
The following are the differences:-
1. Domestic trade few document while international require many.
2. Domestic trade requires use of domestic currency while International requires use of other currency.
3. Domestic trade does not require use of very standardized goods while International trades require standardized goods with quality.
4. There are few barriers to domestic trade while there are many to International trade.
5. There is free movement of production factors i.e. capital and labor in domestic trade.
There are restrictions to mobility of factors of production in International trade.
Reasons for International trade “It must for International’ trade” Discuss:-
1. Different countries are endowed with different natural resources not found in other countries.
2. There is a different in human skills among the countries, talents and creativity leads to production of different commodity which has to be exchanged.
3. There is an even distribution of capital and technology. Countries with high capital and high level of technology will produce and export.
4. The benefits from trade in terms of revenue, profits and International relation.
Importance of International trade:-
1. It increases competition and quality of goods.
2. In enables countries to dispose surplus
3. It brings foreign exchange.
4. In increase International relations
5. It leads to specialization in production
6. It leads to mobility of factors of production especially labor and capital.
7. It leads to expansion of market
8. It helps to improve the balance of payment
9. It increases consumer sovereignty
DISADVANTAGES OF INTERNATIONAL TRADE
1. It affects the growth of infant industry
2. It leads to importation of harmful products
3. It leads to over reliance on imported commodities
4. It leads to over reliance on imported commodities
5. Importation can lead to inflation i.e. Imported Inflation
6. It leads to capital freight in case of foreign investment
7. It leads to repatriation of profit.
8. It can lead to political black mail where countries are forced to adopt policies due to over
dependency.
Qn.:- 1. International trade is must, Discuss
1. Discuss the problem faced by developing countries in international trade.
Barriers for International trade:-
Barriers are limitation or difficulties which limit smooth flow of commodities in
International trade. They can either be natural or artificial (man mode).
1. NATURAL BARRIERS
(i) GEOGRAPHICAL BARRIERS
Long distance implies high cost of transport affecting the smooth flow of commodities.
1/ Social and cultural difference
2/ Changes in the weather condition (world climatic pattern)
3/ War uprising
4/ Ignorance of goods and services available elsewhere
2. ARTIFICIAL (MAN MADE) BARRIERS
Tariffs (custom duty); It’s a tax which government imposes on goods entering the country. It is aimed at controlling imports by making them expensive. It can either be specific or adventurer.
1. Exchange controls; Businessmen exchange commodities using the currency of the exporting country. The government hence restrict trade by controlling the amount of foreign currency to be used.
2. Uses of subsidies; the government can give subsidy to exporters to increase export and reduce import.
3. Use of Quota; is a situation where the government fixed a certain amount of goods to be imported though licensing.
4. Total ban (embargoes); is situation where government restricts completely the importation of a given commodity.
5. Custom Draw backs
6. Administrative restriction; is a situation where the government refuses to disclose important information about a product to foreigners so as to protect local industry from competition.
Reasons for restricting import:-