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Business JC New
International Trade & Globalisation
| Term | Definition |
|---|---|
| International Trade | This occurs when Ireland buys goods and services from other countries or sells goods and services to other countries. |
| Why does Ireland import goods and services? | (i) Raw materials – Ireland needs oil and steel for production. (ii) Unsuitable climate – Ireland cannot produce banana’s, oranges, tea etc. (iii) Variety – Irish consumers want choice. (iv) Natural skills – Irish consumers desire French wine etc. |
| Visible Imports | These are physical goods that Ireland buys from other countries, e.g. fruit, cars, oil, coffee, clothes. |
| Invisible Imports | These are services that Ireland buys from other countries. Money flows out of Ireland. Examples: (i) Irish people holidaying abroad (ii) Foreign horse winning Irish Derby (iii) Beyoncé playing a concert in Ireland |
| Why does Ireland export Goods and Services? | (i) To earn foreign currency to pay for imports (ii) To increase sales and sell surplus production, e.g. beef (iii) Irish market is too small. (iv) Irish goods desired abroad, e.g. Kerrygold butter. (v) Helps our Balance of Payments |
| Visible Exports | These are physical goods that Ireland sells to other countries, e.g. meat, dairy products, live animals. |
| Invisible Exports | These are services that Ireland sells to other countries. Money flows into Ireland. Examples: (i) U2 playing a concert in Barcelona (ii) Foreign tourists in Ireland. (iii) Foreigners buying tickets on Ryanair |
| What are the difficulties for Irish firms in trading internationally? | (i) More difficult to get payments (ii) Different languages (iii) Different currencies to convert (iv) More transport and insurance costs (v) Local laws and regulations must be obeyed (vi) Exchange Rate changes. |
| Exchange Rate | This is the cost/price of buying another currency. |
| What is the‘We sell’ rate | The rate at which a bank will sell foreign currency. Rule: you multiply your Euro's by the bank 'sell' rate |
| What is the 'We buy' rate | The rate at which a bank will buy foreign currency. Rule: you divide your foreign currency by the bank 'buy' rate. |
| Balance of Trade | This is the difference between Visible Exports and Visible Imports. It can be a surplus or a deficit. |
| Balance of Payments | This is the difference between Total Exports (Visible + Invisible) and Total Imports (Visible + Invisible) over a period of time, usually one year. It can be a surplus or a deficit.] |
| What is the currency of the United Kingdom | Pound Sterling |
| What is the currency of Sweden | Krona |
| What is the currency of Denmark | Krone |
| What is the currency of Poland | Zloty |
| Importing | Buying goods & services from other countries and money leaves the country |
| Exporting | Selling goods & services to other countries and money comes into the country. |
| Benefits of International Trade for Irish Business | 1. Increased Sales and Profits 2. Spreads risk of failure as not relying on home market. 3. Access to essential raw materials. 4. Economies of Scale - The more products made, the cheaper the per unit cost of production. |
| Barriers to Free Trade | 1. Tariff 2. Quota 3. Embargo 4. Subsidy |
Created by:
adrianw