Exporting, Importing and International Trade

Exporting and Importing

  • Exporting: Selling products to another country.
  • Importing: Purchasing products from another country.

Advantages in International Trade

Absolute Advantage

  • When a country is the only one able to produce a certain product at a very low cost.
  • Example: The United States has technical skills to produce airport software, while Brazil has a climate suitable for growing coffee beans.
  • The US has an absolute advantage in airport software creation and sells it to Brazil, while importing coffee beans from Brazil.

Comparative Advantage

  • Countries should specialize in producing and exporting goods and services they can produce at a lower relative cost than other countries.

South African Exports

  • Refined petroleum and petrol fuel are significant exports.
  • Wine.
  • Commodities like gold and platinum.
  • Cars.
  • South Africa refines certain commodities, exports gold, and then re-imports the same gold after it has been refined elsewhere.

Balancing International Trade

  • Countries need to balance trading to avoid negative impacts on their income.

  • Governments manage this balance.

  • Measuring international trade is important, leading to terms like:

    • Balance of trade.

      • Goal: Exports should be greater than imports.

    • Trade deficit.

      • Imports are more than exports.

  • Balance of payments: Refers to the payments, the physical cash or the financial inflows and outflows. It often goes hand in hand with the balance of trade.

  • Exports should be high to maximize total inflow.

  • International trade involves individual businesses importing and exporting.

  • The country manages the data, and changes occur with new businesses entering or existing ones exporting more.

Trade Barriers

  • Tariff barriers: Financial monetary tax that increases the price of a product.
  • Non-tariff barriers: Focus on the quantity of products imported.

Import Quotas

  • Limit the amount of a certain product category that can be imported.
  • Example: Only one ton of electronic phone chargers can be imported.
  • The aim is to support local producers by limiting the imported supply.

Embargoes

  • Certain product categories are completely banned from import.
  • Can apply to products from specific countries, especially those considered enemies.
  • Example: A country may ban the import of firearms from another country it considers an enemy.

Foreign Exchange Control

Dumping

  • Selling products at a price lower than the cost price.
  • It negatively impacts the local economy or specific industry because local producers cannot compete.
  • Large manufacturers may dump products to get rid of excess quantity.
  • Dumping can result in penalties for the companies involved.

Import Quotas

  • Equalize the balance of importing and exporting.
  • Protect the local economy.
  • Support new or vulnerable industries.
  • Help with job security.

Health Risks

  • Taking certain food products or plants across international borders can be illegal due to health risks.
  • Risks include introducing bacteria or viruses to a new environment.
  • Customs may confiscate such items, sometimes with fines.

International Trade Organizations

IMF and World Bank

  • These organizations aim to enhance international trade.
  • The World Bank has previously been involved in loaning money to developing countries to pay back debt, often at lower interest rates.