However, there are advantages and disadvantages of international trade in the simulation that cause the world’s economy to fluctuate and leave certain countries astray. One of the advantages to international trade that I found for countries was the monetary gains and having the ability to keep their own markets honest causing the local producers to improve its goods for the reason citizens have more choices available to them. The disadvantages of international trade have to deal with countries of higher power that try to take advantage of smaller countries by swindling their government into unorthodox trading during a crisis within those countries. Another disadvantage is the possibility of local producers becoming weak, causing the unemployment rate to rise because local producers are unable to compete with international
'International aid brings both benefits and problems for a country trying to develop its economy' with the aid of named examples evaluate this view. (30 marks) International aid can bring many problems to a country in need of development, this is usually through the ill-use, ill-deployment and abuse of International aid by both the donor countries and the recipient countries. However, effective aid brings more benefits to developing countries than problems is the aid is properly allocated to the area most in need and the aid is not ties so that it benefits the donor. International aid can bring problems to a developing country as it can be an obstacle to development and can provide other problems put forward by the political right. Aid can become an obstacle to development because of the tied nature of much aid, which benefits the donor country more than the recipient, in economic terms.
In determining which goods to import from which country and which goods to export, I encountered some of the advantages and some limitations of the international trade. According to the theory of comparative advantage, a country should specialize in the production and export of commodities that it can produce at a lower opportunity cost than other countries while it should import commodities that are produced at a lower opportunity cost than other countries. Limitations such as imposing a quota or tariff can raise the price of products and lead to a loss in consumer surplus or cause retaliation from the country therefore reducing the goods a country is able to export. There are factors that influence the foreign exchange rate which also has an impact on a country’s importing and exporting. Regardless of these things, international trade is important to a countries
For example if Engineering Tech pay suppliers in Australian dollars, wages/salaries and utilities in Ethiopian currency but receives payments in US dollars, unfavorable shifts in the exchange rate of the currencies may affect Engineering Tech’s profit margin. A foreign exchange guarantee facility can help ET protect its profit from exchange rate fluctuations by locking in exchange rate and allowing ET to hedge its currency exposure. The more of foreign exchange it can hedge, the greater the control over foreign exchange risks. d) Political Risk Insurance: Political risk insurance is critical in this project because it involves commercial risks and it’s a project in a least developed country, with an uncertain political environment. E.g.
The increasing interconnectedness of societies has allowed crime to spread across national borders and the spread of transnational organised crime. This has resulted in a supply and demand model where products and services, such as drugs and sex workers, are demanded by richer western countries and they are supplied by third world countries. While globalisation is helping to increase the wealth in developing countries, it is not increasing wealth in the third world countries. As well as this, a global risk consciousness has been created. This refers to a risk that is seen as being global as insecurities and fears, whether they are rational or not, are no longer tied to a certain place.
Protectionism can also include import quotas, or the restrictions on the quantity of imports allowed to enter a country. Also, slower economic growth and global tension, which can lead to conflict between nations. 19. Identify how exchange rates are determined in markets and how governments can influence these
Sheltering new industries may pay off later 4. Free trade allows companies the possibility of outsourcing the production of goods for domestic sale. Question No.3: Identify the major fallacies of international trade? Answer: 1. One fallacy is that trade is a zero sum activity, if one trading party gains, the other must lost.
Globalisation Globalisation is the phenomenon whereby the trading of information, merchandise, services and ideas is instigated on a global scale. The roots of globalisation would appear to be mainly grounded in international trade and many see it as solely a capitalist enterprise, which serves only to further line the pockets of first world entrepreneurs. The term is increasingly used, however, to describe the growing interconnectedness of people globally in terms of the sharing and utilising of aspects of art, science, culture, psychology, technology and political thought on a global scale. Globalisation has positive and negative aspects and its effect on the human population is difficult to pinpoint, as it exists in a rapidly changing
They distort prices by imposing trade costs on the trading parties involved. Hence the first effect of a preferential trade arrangement is to reduce tariff adjusted prices of imports from members in relation to the prices of imports from non-member countries. This shifts expenditures, reshapes trade flows and affects output levels. The tariff-adjusted prices of intra-union imports fall in relation to the prices of imports from the Rest Of the World (ROW). As a result, expenditures are shifted away from extra-union produced goods, thereby increasing profits for and encouraging production by union firms.
It can be argued that free trade is not fair trade. This is because free trade eliminates tariffs. It gives the economic advantage not only to those producers that are more efficient production-wise (largely because they are more capitalized) but also to those industries blessed with governments capable of delivering massive subsidies. In other words, to the already industrialized and wealthy nations. When tariffs are eliminated, consumers will switch to imported goods and services.