Chapter 23 International Trading Environment

What is Home/Domestic Trade? Buying and selling of goods & services in our own country.

Open Economy Is a country that imports & exports goods & services. Ireland is a Small Open Economy. We export approx 80% of what we produce. Open economies have a wide choice of raw materials & finished products.

What is International Trade?

Importing: buying goods & services from other countries. Exporting: selling goods & services to other countries.

Who are our main Trading Partners? COUNTRYCURRENCYLANGUAGE USADollarEnglish BritainSterlingEnglish EuropeEuro + othersVarious Japan (importing) YenJapanese

What are imports? Foreing 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 Foreign 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.

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. Note Norway & Sweden members of.....

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.

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.

Department of Enterprise, Trade & Employment. Gives advice on documents used & regulations to be followed when exporting. Provide Export Credit Insurance: This is where the government pay the Irish exporter if a foreign customer does not pay.