Globalisation of trade flashcards

Topic 3: Globalisation of trade

Why do countries trade internationally?

No country can produce everything efficiently. Trade gives wider choice, cheaper imports from lower-cost producers, export markets, investment and jobs.

Give four difficulties of international trade

Language and distance, payment and exchange-rate risk, customs duties and documentation, and different laws, as well as the risk of non-payment.

Is tourism visible or invisible trade?

Invisible trade: it is a service, like banking, insurance and shipping. Visible trade is trade in goods.

What does the balance of payments include that the balance of trade does not?

Trade in services and financial flows such as investment. The balance of trade covers goods only.

Exports of goods $400m, imports of goods $350m: what is the balance of trade?

$400m − $350m = +$50m, a surplus.

Why might a government restrict imports?

To protect infant industries and jobs, to reduce a trade deficit, or to retaliate against another country’s restrictions.

How does a tariff affect consumers?

It is a tax on imports, so imported goods become more expensive and consumers pay higher prices or buy fewer imports.

What is a global supply chain?

The network of suppliers, manufacturers, agents, wholesalers and retailers in different countries that moves a product from raw materials to the final consumer.

Give three risks to a global supply chain

Natural disasters, political change such as new tariffs or embargoes, and financial risk such as currency changes. Ethical, environmental and technological risks also apply.