International Trade and Globalisation

International Trade and Globalisation

What is international trade? International trade is the buying (importing) and selling (exporting) of goods and services between different countries.

Visible Trade: Physical products that can be seen going out of and coming into Ireland, eg, food, cars.

Invisible Trade Services: No physical product that can be seen going out of or coming into Ireland as a result of the sale of purchase of services, eg, insurance, banking, tourism

IMPORTING

Buying products or services from other countries. This means money leaves the country.

Visible	Invisible
Physical products that Ireland buys from other countries. Coal, oil, fruit, cars	Services that Ireland buys from other countries Irish students going on school tour abroad. Foreign music bands performing in Ireland

Why does Ireland import goods and services?

• Climate
• Raw materials
• Choice for consumers
• Natural skills
• Cost
• Small domestic market

EXPORTING

Selling goods or services to other countries. Money comes into Ireland

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International Trade and Globalisation

International Trade and Globalisation

Visible	Invisible
Physical products that Ireland sells to other countries Meat, dairy products, livestock, pharmaceuticals	Services that Ireland sells to other countries Spanish students coming to Ireland to learn English. An Irish band performing in another country.

Why does Ireland export goods and services?

• Earn foreign currencies
• Increased sales / profit
• Employment creation
• Demand

How is international trade measured?

• Balance of payments: Total exports - Total imports
• Balance of Trade: Visible exports - Visible Imports

Benefits V. Challenges of International Trade for Irish Businesses:

Benefits

Challenges

Increased sales: Irish market = small by exporting Irish businesses can increase sales Spread risk: Not relying on local market only. Raw material: Need to import some 'rm' as we do not produce them here, eg. oil Lower costs: Irish businesses have to increase production to satisfy demand abroad. The more products that's made, the cheaper it becomes to make each one → economies of scale

High Costs: Island transportation. Expensive for Irish Exporters Languages: Websites available in many different languages. Exchange rates: if the euro increase in value, the price of Irish products is non euro countries will become more expensive. Getting paid: Collecting payments from businesses in other countries = more difficult. Competition from low-cost economies: Cheaper (wages wise) to produce goods in Asia and Africa. Difficult for Irish manufacturers to compete.

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International Trade and Globalisation

Enterprise Ireland

State agency that assists Irish businesses that want to sell their products / services to other countries.

• Provides market research information.
• Organises trade fairs and exhibitions.
• Provides advice on foreign trade

Barriers to Trade

Tariff: Tax that a country adds to imports to make the products more expensive.

Quota: Limit on the amount of a good that can be imported into a country.

Embargo: Complete ban on goods being imported from a certain country.

Subsidy: Direct payment to a producer. Reduces the cost of production and makes exports cheaper. Boosts employment and balance of trade. Eg → Irish farmers obtain direct farm payments from the EU.

Globalization

The process by which the world becomes interconnected as a result of increased trade and cultural exchange.

Global business: Sees the world as one marketer and production location. Provides the same product Worldwide. Uses a global marketing strategy (4Ds).

Reasons for the development of global companies

• Increased sales
• Mass Production
• Development in ICT