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INTRODUCTION OF INTERNATIONAL TRADE - Coggle Diagram
INTRODUCTION OF INTERNATIONAL TRADE
DEFINITION OF INTERNATIONAL TRADE
An external trade involving the exchange of goods and services between one country and another country or territories
The basic principle of international trade is a policy of free trade
IMPORTANCE OF I.T.
Enables a country to obtain goods and services which are not available locally
Increase productivity, efficiency and quality of goods and services
Specialize in the production of goods where it has a comparative advantage
Increase economic of scale
Closer political links between different countries
ADVANTAGES OF I.T.
Promotes good relationship between trading countries
Encouraging sharing of knowledge
Income generations to government
Lead to proper resource allocation
Consumer can enjoy a wide variety of goods and services
Closer political link between countries
DISADVANTAGES OF I.T.
Decline in demand for domestic products
Decline in income
Exploits human resources
Widening the gap between rich and poor
Globalization kills domestics business
Transfer of natural resources
FACTORS FACILITATE OF I.T. BETWEEN COUNTRIES
Industries are competitive
An open society and economy
Government policies that promote competition and encourage efficiency
Technologies differences and progress
Investment in physical infrastructures and policies
BARRIERS OF I.T. (PROTECTIONIST)
Subsidies
Granting of financial assistance by the government
Currency Depreciation
If currency depreciates, imports will be more expensive, therefore lesser demand of imported goods
Import Quotas
Restriction on the quantity of goods to be imported to the country
Non Tariff Barriers
Imposed by certain rigorous safety requirements or performance on imported goods
Tariffs
Taxes and duties on imported goods
RISK IN I.T.
Performance risk
The goods and services that are imported do not meet the provision laid down in the contract
Foreign exchange risk
Fluctuation in exchange rate
Credit risk
The potential of a buyer to pay for the imported goods
Transit risk
Goods may be damaged between the transit from supplier's factory to the buyer's warehouse
Interest rate risk
Involved the interest rate on lending by bank for international trade
Documentary risk
Possibility of forged documents
TRADE BLOCK
Definition
An agreement between states, regions, or countries to reduce barriers to trade between the participating regions
2 Principal Characteristics
It implies a reduction of barriers to trade
It implies only to the member countries of the trade block
Give benefits to the member countries in terms of
Lower prices
Better quality goods
Increase competition and efficiency
Examples
European Economic Community (EEC)
Reduce the barriers by the establishment of common price levels for agricultural products and fixed the common external tariffs
North America Free Trade Agreement (NAFTA)
Remove barriers to trade and investment such eliminate all non-tariff barriers to agricultural trade between the United States, Canada and Mexico
United Nations Conference on Trade and Development (UNCTAD)
Reduce the barriers of international trade by focusing on Tariff preferences for export to industrialized
ASEAN Free Trade Area (AFTA)
Develop greater trade and industrial linkages among ASEAN member countries
General Agreement on Tariffs and Trade (GATT)
Reduce the barriers of free trade and eliminate the discrimination in international trade