Foreign Trade

For up-to-date statistics visit Susan Hayes “The Positive Economist”

Overview What is Foreign Trade? Who are Ireland’s main trading partners? Why does Ireland trade with other countries? Imports and Exports Visible imports and exports Invisible imports and exports Measuring Foreign Trade

What is Home/Domestic Trade? Buying and selling of goods & services in our own country.

What is Foreign Trade? Importing: buying goods & services from other countries. Exporting: selling goods & services to other countries.

Who are our main Trading Partners? COUNTRYCURRENCYLANGUAGE USADollarEnglish BritainSterlingEnglish EuropeEuro + others Various Japan (importing) Japanese YenJapanese

What are imports? Goods and services that we buy from other countries. Money leaves Ireland.

Why do we import? To obtain goods that are not available in Ireland. Eg. oil, tea, coffee …………. To avail of services not in Ireland. Eg. pop groups, foreign holidays……… To have varitey 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 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. 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.

Problems connected with foreign trade. Language Currency – exchange rates may change. Transport Insurance Safety standards are different in each country.

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 and/or borrow. Irish people will lose 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/market Irish exports.

Exam Question 2006 P1 Q 3. Balance of Trade Visible Exports €540m Less Visible Imports €400m Surplus €140m

Continued.. Balance of Invisible Trade Invisible Exports €620m Less Invisible Imports €260m Surplus €360m

Continued… Balance of Payments Total Exports ( ) €1160 Less Total Imports ( ) € 660 Surplus €500

Recap/Review What is Foreign Trade? Who are Ireland’s main trading partners? Why does Ireland trade with other countries? Imports and Exports Visible imports and exports Invisible imports and exports Measuring Foreign Trade