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Trade - Coggle Diagram
Trade
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Trade Integration
Customs Union - a group of countries agree to have free trade amongst themselves and agree to a common external tariff to countries outside the zone
eg the EU, SACU (Southern Africa)
Free Trade Area - no tariffs between members, no external tariffs, meaning the countries can negotiate their own trade deals
eg NAFTA (US, Canada, Mexico), ASEAN (china FTA), SAFTA (south Asia)
Single Market - no tariffs, common external tariffs, freedom of movement of goods and people and common riles and regulations
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Protectionism
Anti-dumping tariffs
when firms sell products abroad at below costs or significantly below prices in the home market. this is a form of predatory pricing
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Import Quotas
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the effect is to create excess demand for imports for a given level of domestic demand. The higher market price incentivises domestic producers to increase their supply/enter the market
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Domestic subsidy
financial help given to domestic producers in order to lower their costs to help them compete in international markets
does not change the wold supply price, but does give domestic firms a higher price
domestic producers - gain directly from the subsidy, but may become dependent or a lack of innovation and efficiency
consumers do not gain on price assuming the subsidy is not large enough to change the world price. may face higher taxes if expensive subsidies take up a high percentage of gov spending
Non-tariff barriers
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hidden protectionsim like indirectly discriminating against foreign workers, investors and traders
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Advantage
absolute advantage
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if a country is using the same factors of production can produce more a product, then it has an absolute advantage
comparative advantage
focuses on when a country has lower relative opportunity cost when it decides to specialise in a particular product
opportunity cost is the sacrifice of alternative products made when you specialise in another good or service
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