Transcript Chapter 20

Chapter 23
International Trading
Environment
What is Home/Domestic
Trade?

Buying and selling of goods & services in
our own country.
Open Economy




Is a country that imports & exports goods &
services.
Ireland is a Small Open Economy.
We export approx 80% of what we produce.
Open economies have a wide choice of raw
materials & finished products.
What is International Trade?
What is International Trade?


Importing: buying goods & services
from other countries.
Exporting: selling goods & services to
other countries.
Who are our main Trading
Partners?
COUNTRY
CURRENCY
LANGUAGE
USA
Dollar
English
Britain
Sterling
English
Europe
Euro + others
Various
Japan
(importing)
Yen
Japanese
What are imports?


Foreing goods and services that we buy
from other countries.
Money leaves Ireland.
Why do we import?




To obtain natural resources that are not
available in Ireland. Eg. oil
We have an unsuitable climate for certain
foods such as bananas, coffee…..
To avail of services not in Ireland. Eg. pop
groups, foreign holidays, watch making.
To have variey and choice of goods &
services.
Visible Imports



Goods which are bought from other
countries.
Money leaves the country
Eg. citrus fruit, wine, cars……..
Invisible Imports






Foreign services that are bought from other
countries.
Money leaves the country.
Eg.
Irish person on holidy in USA
BEP in concert in Dublin
French horse winning Irish Grand National
What is Import Substitution?


Buying Irish goods instead of foreign goods.
Eg. buying Irish potatoes instead of Spanish
potatoes.
What are Exports?


Irish goods and services that we sell to
foreign countries.
Money comes into the country.
Why do we export?




To obtain foreign currency needed to buy
our imports.
Ireland is a small country so we need a
wider market such as EU, USA etc.
Diversification means less dependency on
one market if a country is in recession.
Selling more means more jobs are created.
Visible Exports





Irish goods that are sold to foreign
countries.
Money comes into the country.
Eg. Irish beef sold abroad.
Tullamore Dew sold to UK
Waterford Crystal sold to US.
Invisible Exports






Irish services that are sold to foreign
countries.
Money comes into the country.
Eg.
Westlife playing in Wembly.
US citizen on holidy on Ireland.
Irish horse winning the English Grand
National.
What is the Balance of Trade?
(TV)

Visible Exports – Visible Imports
What is the Balance of
Invisible Trade?

Invisible Exports – Invisible Imports
What is the Balance of
Payments?
 Total Exports – Total Imports
Balance of Trade/Payments
can be…….

Surplus: Exports greater than Imports

Deficit: Imports greater than Exports

Balanced: Exports = Imports
Benefits of a Balance of
Payments Surplus



More money coming into the country.
This money can be used to pay off some of
our debt or reduce tax.
More money and jobs and a
better standard of living for Irish people.
What problems will a Balance
of Payments deficit cause?



Too much money leaving the country.
Government will have to raise taxes of
borrow.
Irish people will loose their jobs.
How can a Balance of
Payments Deficit be reduced?


Import substiution: Buy Irish!
Government Agencies such as An Bord
Trachtala, Failte Ireland and An Bord Bia
can promote Irish exports.
Free Trade



Countries can buy and sell without any
trade barriers or restricitions eg. customs
duties being imposed.
The 27 countries of the EU enjoy free trade.
Note Norway & Sweden members of.....
Protectionism




Countries try to stop foreign imports.
Countries try to help their own businesses
export.
They do this by using trade barriers.
Eg. Tariff, quota, embargo, subsidy.
Trade Barriers
1. Tariff
 Is a tax that a coutry adds on to imports.
 Eg. customs duty/import duty.
 This makes imports dearer & less attractive
to consumers.
2. Quota



Countries put a limit on the amount of a
good that can be imported.
Consumers then must by from indigenous
businesses.
The EU has a quota on the no. of Chinese
garments it will allow into the EU.
3. Embargo




Countries puts a complete ban on goods
being imported from a certain country.
Consumers have no choice but to buy home
produce.
The USA has a trade embargo with Cuba.
During apartheid Ireland had a trade
embargo with South Africa.
4. Subsidy






Is a direct payment to a producer.
It reduces the cost of production.
It makes exports cheaper.
It boosts employment.
It improves the balance of trade.
Eg. Irish farmers obtain direct farm
payment from the EU.
Department of Enterprise,
Trade & Employment.


Gives advice on documents used &
regulations to be followed when exporting.
Provide Export Credit Insurance:
This is where the government pay the Irish
exporter if a foreign customer does not pay.