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Understanding Fundamental Concepts of International Trade

This overview encapsulates essential definitions and principles of international trade, focusing on key concepts such as comparative advantage, which suggests countries should specialize in efficiently produced goods for export while importing those they produce less efficiently. It also explains the roles of freight forwarders in managing shipping logistics, the importance of letters of credit in facilitating payments, the implications of tariffs, the nature of trade, and the significance of trade surpluses and value-added processes. These definitions form vital knowledge for navigating global commerce.

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Understanding Fundamental Concepts of International Trade

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Presentation Transcript

  1. International Trade Definitions

  2. Comparative Advantage • A central concept in international trade theory which holds that a country or region should specialize in the production and export of those goods and services that it can produce relatively more efficiently than other goods or services, and import those goods and services in which it has a comparative disadvantage.

  3. Freight Forwarder • A person acting as an agent in the shipping of freight to or from foreign countries which includes the clearing of freight through customs, preparation of documents, arranging for shipping, warehousing, delivery, and export clearance.

  4. Letter of Credit • Is a document issued by a bank stating its commitment to pay the exporter/seller a stated amount of money on behalf of an importer/buyer so long as the exporter meets the importer’s terms and conditions of the sale.

  5. Tariff A schedule of duties or taxes assessed by a government on goods as they enter or leave a country.

  6. Trade • TRADE –” is the business of buying and selling or bartering commodities. An act of trading or other transactions involving an exchange of property.” • Webster’s II New College Dictionary

  7. Trade Surplus • A nation’s excess of exports over imports during a specified period of time.

  8. Value - Added • The process of adding value to a raw product through processing, packaging, transportation, etc.

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