INTERNATIONAL TRADE TRADE WITH TWO OR MORE COUNTRIES

REASONS FOR FOREIGN TRADE  different natural resources climate geographical position  different capital resources - factories - machinery - roads / infrastructure

 labour force (skilled / unskilled)  greater efficiency  a greater variety of goods/services  greater output  greater employment through expanding export markets  higher living standards (higher income)

PROBLEMS  documentation – more documents  foreign languages – labels, leaflets, brochures, instructions  foreign currency –  debt collection – the language, legal system  distance and transportation – extra packaging, time  duties and restrictions

FREE TRADE Buying goods and services from all countries without any barriers when they cross frontiers

REASONS FOR FREE TRADE  ABSOLUTE ADVANTAGE resources are put to their best possible use - the highest productivity, the ability to produce more of a good or service than any other country  COMPARATIVE ADVANTAGE low-cost production – countries produce more cheaply than others

REASONS AGAINST FREE TRADE  cheaper production in some countries leads to destruction of industries and jobs in other countries  countries may protect their own industries from international competition PROTESTS AGAINST GLOBALISATION

TRADE RESTRICTIONS (PROTECTIONISM) 1.TARIFFS - tax or customs duty on imported or exported goods 2. QUOTAS - the limited amount of goods 3.SUBSIDIES – money paid by the government reduce the cost of producing goods to keep prices low

4. EXCHANGE CONTROL - limiting the amount of local currency that people can sell or the price at which they can sell 5. EMBARGO - official order to prevent trade with another country

VISIBLE TRADE VISIBLES: goods sold / bought (visible exports/imports) food, cars, books, furniture….

INVISIBLE TRADE INVISIBLES: Services / investments (invisible exports/imports) banking, education, tourism, insurance, transportation

THE BALANCE OF TRADE The difference between a country’s visible imports and exports. The balance is favourable (in surplus) when exports are higher than imports. The balance is adverse (in deficit) when imports are higher than exports.

or Visible exports Visible imports Balance of trade – surplus Visible exports Visible imports Balance of trade - deficit

THE BALANCE OF PAYMENTS A record of all transactions – goods and services and investments – between one country and the rest of the world over a particular period. visible + invisible trade It shows whether the country is making a profit or loss in its trade

Write the words into the spaces in the sentences: scale budget deficit quota surplus infrastructure trade barriers globalization WTO balance of trade balance of payments free trade subsidies 1. The _____________________has established rules of trade between nations. 2. A country exporting more than it imports has a trade ____________________. 3. Countries that export a lot of oil tend to have a positive ________________________ 4. A limit to the quantity of goods that can be importde is a _______________________. 5. The import and export of goods is called the _________________________. 6. Producing in large quantities becomes cheaper because of economies of _________ 7. „The world is one big market“. This is one way of describing __________________. 8. The absence of trade barriers is known as ____________________________. 9. Import tariffs and quotas are types of _________________________. 10.Buildings, roads, railway lines, telephone netwirks and power supplies are all part of a country's ______________________. 11. If government expenditure is higher than government income, the result is a _____________________. 12. European farmers receive large sums of EU money in the form of________________

MK: p Vocabulary – Match up the words and definitions p For and against free trade a) Classify the statements: in favour of / against b) Which sets of arguments do you find the most convincing?

Trade Justice - why world trade rules need to change _______________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________

Play the video. Take the quiz. Answer the questions to the best of your ability. Print your results and put them into your portfolio.

Why do companies restrict trade? 1._____________________________ 2._____________________________ 3._____________________________ 4._____________________________ 5.___________________________