International Trade

It can be influenced by:

• Currencies
• Governments
• Judicial systems
• Laws
• Markets

International trades increases:

• Volume of traded products
• Geographical range of markets
• Diversity of products
• Delivery speed (longer to deliver)
• Complexity of trade routes

In an exchange, middlemen are essentials: wholesalers, transporation services, provider of market information, ...

Globalization

History

After the discovery of oil in 1850, International Trade increased exponentially.

In 1950: US$289 billion

In 2019: US$20 trillion

Advantages

International Trade offers a range of opportunities:

• Raising income (valorizing work)
• Creating jobs (workforce is needed)
• Reducing price
• Workers' earning power

Interconnection

The global economy is interconnected with international trade:

• When trade decreases -> jobs & businesses are lost
• Globalization is a benefit of international trade
• International trade can also have devastating effects

Disadvantages

International Trade can cause economic & social disruption

Why export ?

• Production surplus (having more produced goods than needed)
• Sell domestic products to countries at a higher price than the local price
• Earn foreign currency (USD)

Why import ?

• Faster, cheaper, better qualit, mutual gains, opportunity cost
• To buy essential goods and services or attractive products that are not available domestically
• Goods that satisfy domestic needs
• Products that are cheaper than producing domestically
• More efficient to import rather than producing domestically

Steps

• (1) Identify buyers (potential market)
• (2) Find low skill labour country
• (3) Find country with abundance of Capital (tend to specialize)
• (4) Efficiency and reduce competitions

Rules

• No country specializes in the export of a single product
• All countries produce at least some goods and services
• Lower income countries might produce more efficiently

Trade Balance

• Difference between imports and exports
• IMPORT > EXPORT = TRADE DEFICIT
• IMPORT < EXPORT = TRADE SURPLUS

Trade deficit =

• sign of economic weakness
• less domestic production & jobs
• risk of economic crisis

Manipulating International Trade

• wide array of economic, political, diplomatic objectives
• globalization (global trade flows, economic growth and prosperity)
• Trade Agreements: EU/NAFTA
• Governments regulate/deregulate trade

How ?

• restricting imports
• encouraging exports
  • Tarrifs: import taxes => government revenues
  • Quotas: quantitative restrictions
• protecting health or satefy (COVID-19)
• economic sanctions
• export subsidies: supporting export producer s

Consequences of trade restrictions

• Costs: raising price of imported goods
  • tax on domestic consumers
  • quotas, tariffs, subsidies
• Discourage to import
• Less incentive to improve
• Impediments to development efforts