1. The Global Economy, International Trade

2. International Trade Definition:
buying and selling activity between countries the sale and purchase of goods and services that takes place between trading partners in different countries
It must be remembered that it is not the country or the government that is doing the buying and selling. It is the result of businesses engaging in trade.

3. Trade Transactions
When a business buys some goods from another business in another country, we see a transaction taking place. The buyer receives the good and the seller receives the payment for that good. Money flows out of the country through imports and money comes into the country through exports. Businesses that operate in more than one country are known as Multinational. When firms like Toyota invest in the UK factories they bring in foreign direct investment.

4. What goods are imported?
Divide into groups of 4
Consider what products or services are imported into Britain.
List 4 products

5. It is important to remember the direction in which the money moves – sometimes it is easy to get confused between imports and exports.
Question: If I chose to go to New York to visit tourist attractions such as Central Park, Time Square, would that be classed as an import or an export for the UK?

6. Answer
This is classed as an import for the UK. What I am doing is buying a service from abroad. In this example, the service is the tourist attractions. I would have to change pounds into dollars to pay for the transaction in the United States. The money is effectively leaving the UK.

7. Factors that affect International Trade
Certain imported goods maybe banned, this is known as an Embargo.
A duty may be levied on the value of imported goods entering a country, known as a Tariff.
Use of trade barriers to restrict access to an economy, know as Protectionism. By imposing trade barriers they may protect small and new industries. However a possible downside of introducing trade barriers is that other countries will retaliate.

8. International Trade
An economy that trades freely with others is known as an Open Market. Fast growing economies like China, India and Russia are often referred to as Emerging Markets. The greater gain from International Trade is for specialised markets.

9. UK export and import, top products and trading partners
Exports
Imports
Welsh exports

10. The benefits of International Trade
Access to a wider variety of goods and services
Access to goods that may be much better quality, or cheaper or both
Trade provides the chances for business to access far bigger markets
More sales means opportunities for expansion and this can create more jobs
Spreading the risk, if the home market fails then the overseas market flourishes
Expansion can mean the opportunity to benefit from economies of scale which means prices can be made more competitive
Larger firms have greater opportunities for research and development
Access to new technologies and methods of working, quality and range of products can improve further
For a country greater opportunities to trade can mean increases in economic activity and as a result economic growth
For poorer countries the chance to trade might help them to be able to break out of the cycle of poverty that exists

11. The cost of Trade Changing international conditions in a negative way
Competition from firms abroad can cause demand for a product or service to fall
Employees can find themselves out of work if the competition from abroad means the firm they are working for has to cut back or even close down
As the competitive conditions between countries changes some firms or industries find that they can no longer compete. This can lead to structural changes in the economy. What this means is that some industries such as ship building or coal mining have virtually disappeared in the UK because labour supplies are cheaper in other countries factories may close down or jobs like call centres move to other countries. This can have a significant effect on many communities as well as individuals.
When structural changes occur, it is difficult for some people to find new work especially if they have particular skills.

12. Multinationals
Businesses that operate in more than one country are known as Multinational. In groups consider the advantages and disadvantages to the UK economy.