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Rachel Farrell & Aoife Healion. International Trading Environment. https://www.youtube.com/watch?v=ebRuQTgbZ3o. What is Home/Domestic Trade?. Buying and selling of goods & services in our own country. What is International Trade?. Import. Export. What is International Trade?.
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Rachel Farrell & Aoife Healion International Trading Environment
What is Home/Domestic Trade? • Buying and selling of goods & services in our own country.
What is International Trade? Import Export
What is International Trade? • Importing: buying goods & services from other countries. • Exporting: selling goods & services to other countries.
What are imports? • Goods and services that we buy from other countries. • Money leaves Ireland.
Why do we import? • To obtain natural resources that are not available in Ireland. Eg. oil • We have an unsuitable climate for certain foods such as bananas, coffee….. • To avail of services not in Ireland. Eg. pop groups, foreign holidays, watch making. • To have variey 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. • Diversification means less dependency on one market if a country is in recession. • 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.
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 of borrow. • Irish people will loose 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 Irish exports.
Exam Question • Short Question 2006 Q 6 • Balance of Trade = VE – VI 19 – 11 = 8m 16 - 9 = 7m Surplus 1m • Balance of Payments = TE – TI 19 – 16 = 3m surplus
http://www.finance.gov.ie/what-we-do/economic-policy/publications/presentations/irelands-report-card-september-2014http://www.finance.gov.ie/what-we-do/economic-policy/publications/presentations/irelands-report-card-september-2014
Free Trade • Countries can buy and sell without any trade barriers or restricitions eg. customs duties being imposed. • The 27 countries of the EU enjoy free trade.
Protectionism • Countries try to stop foreign imports. • Countries try to help their own businesses export. • They do this by using trade barriers. • Eg. Tariff, quota, embargo, subsidy.
Trade Barriers 1. Tariff • Is a tax that a coutry adds on to imports. • Eg. customs duty/import duty. • This makes imports dearer & less attractive to consumers.
2. Quota • Countries put a limit on the amount of a good that can be imported. • Consumers then must by from indigenous businesses. • The EU has a quota on the no. of Chinese garments it will allow into the EU.
3. Embargo • Countries puts a complete ban on goods being imported from a certain country. • Consumers have no choice but to buy home produce. • The USA has a trade embargo with Cuba. • During apartheid Ireland had a trade embargo with South Africa.
http://www.thejournal.ie/russia-ban-europe-us-food-imports-1608068-Aug2014/http://www.thejournal.ie/russia-ban-europe-us-food-imports-1608068-Aug2014/
http://www.rte.ie/news/player/2014/0808/20629539-russia-imposes-full-embargo-on-eu-and-us-food-imports/http://www.rte.ie/news/player/2014/0808/20629539-russia-imposes-full-embargo-on-eu-and-us-food-imports/
http://www.irishtimes.com/business/sectors/media-and-marketing/bank-of-ireland-stops-transfers-to-cuba-due-to-us-embargo-1.1906726http://www.irishtimes.com/business/sectors/media-and-marketing/bank-of-ireland-stops-transfers-to-cuba-due-to-us-embargo-1.1906726
4. Subsidy • Is a direct payment to a producer. • It reduces the cost of production. • It makes exports cheaper. • It boosts employment. • It improves the balance of trade. • Eg. Irish farmers obtain direct farm payment from the EU.
Exam Question Distinguish between Grant & Subsidy 2003 SQ no. 7.
Changes in the International Economy 06, 00 1. Globalsation: • Businesses that treat the world as one big market are on the increase. Eg. Coca-Cola, McDonalds…. • Opportunity for Ireland to attract TNC’s. • Challenge for Irish businesses as a result of increased competition.
2. Improved ICT • Many business are trading on the internet. • Small businesses can now compete on the world stage. • Reduction in costs due to no shops being required, lower transport costs. • Quicker decision making. • However, Irish firms face competition…..
3. Increase number of trading blocs • A trading bloc is a group of countries that agree to buy & sell from each other without trade barriers, but may impose barriers to non members. • Eg. North American Free Trade Agreement(NAFTA) Usa, Canada & Mexico • Eg. European Union (EU). • Ireland is the only english speaking…. • Increased competition from EU co.’s
4. Deregulation • Removal of trade barriers & government rules & regulations that prevent free trade. • World Trade Organisation: Is a group of over 150 countries that negotiate in “trade rounds”. • The aim is to increase world trade. • Applies to goods & services. • Good for Irish business as they can increase sales. • Threat for Irish business due to competition.
5. New/Emerging Markets • Former communist countries are beginning to develop. Eg. Poland, Russia, Latvia…. • China is now allowing international trade. • This allows Irish business to increase sales. • However there is a threat of TNC’s relocating to low wage countries. • There is also increased competition for …
6. Powerful TNC’s • TNC’s volume of trade has increased so much that the may be more powerful than some countries in which they operate. • Small firms find it difficult to compete with TNC’s. • TNC’s will locate in the most cost effective country. • They may try to influence the economic policies of some countries. • While Ireland benefits from TNC’s……………..
Exam Question • What are the opportunities & challenges for Ireland in developed & developing markets? • What are the opportunities & challenges for Ireland in international trade? • Question 3 07, 06, 99
Opportunities • 1. Increased Sales: • Ireland is a member of the EU with access to over 500 million consumers. • Deregulation due to the WTO has also allowed Ireland to export all around the world with fewer barriers and regulations.