International Trade and Economics

What is International Trade?

• Definition: Exchange of goods and services across national borders (importing and exporting).

Reasons for International Trade

• Resource Availability: Not all countries can produce certain raw materials (e.g. oil).

• Market Expansion: Companies trade to increase sales and profits beyond limited domestic markets.

• Skill Specialization: Countries may have specialized skills that benefit others (e.g. Swiss watches).

• Increased Employment: Exports can create more jobs domestically.

Exporting and Importing

• Exporting: Selling domestic goods/services abroad.

  • Visible exports: Physical goods exported (e.g. beef, pharmaceuticals).

• Importing: Buying goods/services from abroad.

  • Visible imports: Physical goods imported (e.g. wine, cars).

Balance of Trade

• Definition: Difference between value of exports and imports.

• Formula: Exports - Imports.

Types of Trade

• Visible Trade: Concerns goods.

• Invisible Trade: Concerns services.

Benefits of Imports to the Irish Economy

• Consumer Choice: More options available.

• Lower Prices: Increased competition leads to lower prices for consumers.

• Access to Raw Materials: Essential materials not available domestically.

• Cost-efficiency: Some imports are cheaper than producing them domestically.

Disadvantages of Imports

• Impact on Domestic Producers: Cheaper imports can lead to reduced sales for local businesses.

• Imported Inflation: Currency depreciation makes imports more expensive.

• Environmental Concerns: Long-distance transportation can lead to emissions.

Benefits of Exports to the Economy

• Job Creation: Increases employment through expanded market access.

• Increased Revenue: Generates corporation tax and employment taxes.

• Market Expansion: Access to larger markets can lead to economies of scale.

Costs of International Trade for Ireland

• Infrastructure Needs: Need for improved transport and technology.

• Skilled Labour Shortages: Economic emigration could lead to lack of essential skills.

• Increased Overheads: High operating costs could lead to business relocation.

• Dependency on Foreign Markets: Vulnerability to global economic downturns.

Balance of Payments

• Definition: Record of all monetary transactions between a country and the rest of the world.

• Components: Current account, capital account, financial account.

Specialization and Comparative Advantage

• Specialization: Focus on producing specific goods/services that provide efficiency gains.

• Comparative Advantage: Countries should specialize in goods they produce most efficiently.

Protectionism and Trade Barriers

• Purpose: Protect domestic jobs and industries.

• Types of Barriers: Tariffs, quotas, subsidies, and regulations.

Global Institutions in Trade Management

• WTO: Oversees trade agreements and promotes free trade.

• World Bank: Provides financial and technical assistance to developing countries.

• IMF: Ensures global economic stability; assists countries in financial distress.

• ILO: Establishes labor standards and promotes labor rights.

• OECD: Promotes policies to improve economic and social well-being.

Conclusion

• International trade is vital for economic growth, requiring a balance between benefits and drawbacks, amidst global institutional oversight.