International Trade

International trade (definition)

International trade (definition)

Importing and exporting of goods and services between different countries. E.g. cars, beef

Invisible Imports (definition)

Purchase of foreign services by an Irish person/business. Flow of money is out of Ireland into a foreign country. E.g. Irish people holidaying in Spain

Visible imports (definition)

The purchase of foreign product goods by an Irish person/business. The flow of money is out of Ireland and goes to a foreign country. E.g. Irish people buying wine from France

What countries and products does Ireland import from?

UK (machinery), USA (fuel), Germany (Motor vehicles), China (food)

Why does Ireland import goods and services

Lack of suitable climate, lack of natural resources, law of comparative advantage

Lack of suitable climate (Why Ireland imports g/s)

Coffee, wine, chocolate, as we don't have the climate to grow the raw materials

Lack of natural resources (Why Ireland imports g/s)

Oil, gas and steel as Ireland doesn't have the natural resources.

Law of Comparative Advantage (Why Ireland imports g/s)

We must focus on exporting what we are most efficient at producing and rely upon imports for the remainder of our needs. E.g. cars (Germany)

Invisible exports (definition)

The purchase of an Irish service by a foreigner. Flow of money into Ireland. E.g. French person using an Irish Personal Trainer.

Visible Exports (definition)

The purchase of Irish goods by a foreigner. Visible exports are physical items being sent out to another country. Flow of money into Ireland. E.g. Irish beef sold to the UK

Countries and products Ireland export to

USA (pharmaceuticals), UK (chemicals), Belgium (IT), Germany (Food)

Why does Ireland export g/s?

Source of employment, earn foreign currencies, increased sales

Source of employment (Why does Ireland export g/s?)

Exporting helps support jobs in Ireland. The more we sell the more people needed to produce the goods, transport goods, suppliers for raw materials. Direct and indirect employment.

Earn foreign currencies (Why does Ireland export g/s?)

Exporting of goods helps us earn foreign currencies, in order to pay for imports.

Increased sales/profits (Why does Ireland export g/s?)

Exporting gives Irish businesses access to larger markets. E.g. EU roughly 742 mil people

Import Substitution (definition)

When domestic producers starts to make and sell goods that are being imported. Offer Irish version of a product. E.g. Cocoa Brown instead of San Topez

Balance of Payments (definition)

Difference between total exports and total imports over a period of time.

Formula of Balance of Payments

Total Exports - Total Imports

Formula of Balance of Trade

Visible exports - visible imports

Why is a Balance of trade/payment surplus good?

Country receiving more money than it is paying out

Why is a Balance of trade/payment deficit bad?

The country spends more money than it is receiving.

What principle is used to answer economic questions?

SET (Social Welfare, Employment, Tax Revenue)

Benefits of International trade for Irish businesses

Access to wider markets, economics of scale/lower costs and increased profits

Access to wider markets (Benefits of International trade for Irish businesses)

Irish companies sell products to 510mil in the Eurozone

economics of scale/lower costs and increased profits (Benefits of International trade for Irish businesses)

Businesses increase production to satisfy demand

Challenges of International Trade for Ireland

Higher costs of production. Increased transport costs. Currency fluctuation

Higher costs of production (Challenges of International Trade for Ireland)

Costs more to make products here than other countries e.g. Wages. Makes us less competitive.

Increased transport costs (Challenges of International Trade for Ireland)

We are an island on edge of EU, more transport costs

currency fluctuations (Challenges of International Trade for Ireland)

Between non-EU countries makes it hard to keep track of the cost of production.

Benefits of International Trade for Ireland

Source of direct and indirect employment, increased tax revenue.

Source of direct and indirect employment (Benefits of International Trade for Ireland)

Create jobs in Ireland, more goods made/exported

Increased tax revenue

Gov more tax revenue e.g. VAT, PAYE, Customs duty

Globalisation (Definition)

Idea that the world is shrinking and more connected through global trade + faster communication.

Global Marketing Mix

Global businesses often change their product to meet the needs/culture/language/economic situation in the different markets it is selling into across the world.

Global Price

Hard to sell same price worldwide. Difference in cost of living in countries. Tariffs/taxes/custom duty effects selling price. E.g. McDonalds seen as cheap here, similar prices in Thailand seen as expensive.

Global Place

Selling different markets can have issues. Info on local networks/traditions helped if business uses a local agent. May need to pay commission/fee. E.g. McDonalds can use Ubereats in some markets, not in others, lack of IT infrastructure

Global Promotion

Big difference in humour, culture, language, legislation across markets. Social media may give information on humour, slogans may need to be adapted. E.g. Pampers launched ad in Japan, stork delivers a baby, stork not used in Japanese folklore/storytelling, caused confusion

Global Product

Businesses aim to sell the same product globally, may change the product for legal, cultural, technical ... reasons. E.g. McDonalds doesn't sell their BigMac in India, as Pork & Beef isn't sold due to religion.

Multinational Company (MNC) (definition)

Company that has its headquarters in one country and branches globally. E.g. Burger King, McDonalds

Why do MNCs go to Ireland?

Access to EU, Skilled workforce, tax incentive, language

Access to the EU (Why do MNCs go to Ireland?)

Due to membership of EU, access to market of roughly 742 million people

Skilled Workforce (Why do MNCs go to Ireland?)

Ireland has an educated/skilled workforce

Tax incentives (Why do MNCs go to Ireland?)

Ireland has the lowest corporation tax in the Eurozone (12.5%)

Language (Why do MNCs go to Ireland?)

English language of International business. Attractive to US companies

Positive impacts of MNCs on Ireland

Source of direct employment, tax revenue, source of indirect employment

Source of direct employment (Positive impacts of MNCs on Ireland)

Employ highly skilled graduates, engaged in Research & Development important in MN business. E.g. MNCs employed 275,000 in 2021

Tax Revenue (Positive impacts of MNCs on Ireland)

Source of tax revenue for the government. E.g. 2021, MNCs accounted for 89% of CT (corporation tax) receipts.

Source of indirect employment (Positive impacts of MNCs on Ireland)

MNCs employ cleaners, security firms. Local pubs/restaurants benefit from the people a company employ (lunch).

Negative impacts of MNCs on Ireland

Over reliance on tax revenue, repatriation of profits, tax avoidance, domestic firm closures

Over reliance on tax revenue from MNC (Negative impacts of MNCs on Ireland)

Huge dependence on small number of MNC companies, major fall in tax revenue if a company leaves. No loyalty to Ireland (can leave if costs lower somewhere else). E.g. Dell, 9500 jobs lost in Limerick

Repatriation of profits (Negative impacts of MNCs on Ireland)

Wealth leaves the Irish Economy. Negative on Balance of Payments

Tax Avoidance (Negative impacts of MNCs on Ireland)

Legal reduction in a company's tax liability, schemes like by Apple, tax gain for country less than expected.

Domestic Firm Closures (Negative impacts of MNCs on Ireland)

Domestic firms unable to compete with large multinational companies. E.g. Ikea

Name Barriers to Trade

Quota, tariff, embargo, subsidies, administrative regulations

Quota (Barriers to Trade)

Physical limit on amount of units of a goods that can be imported. Encourage sales of domestic produced globes, discourages imports. E.g. EU placed quota on chicken imports from Thailand

Tariff (Barriers to Trade)

Tax on price of goods imported. E.g. tariff on New Zealand beef

Embargo (Barriers to Trade)

Complete ban on imports from a certain country. Political/health reasons. E.g. American placed embargo on Uk meet due to BSE (cow disease)

Subsides (Barriers to Trade)

Grants by governments to domestic firms help with operating costs (lower prices). E.g. EU has subsided agriculture and aircraft manufacturing in the past protect from Non-EU competition

Administrative regulation

Customs delays, excessive paperwork. E.g. forms needed to be filled at customs delaying imports' travel into the country.