International specialization and trade - Chapter 8.1 (p.424)

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International specialization and trade - Chapter 8.1 (p.424) by Mind Map: International specialization and trade - Chapter 8.1 (p.424)

1. Arguments for and against trade

1.1. Free Trade - The exchange of goods and services, usually for money, without barriers

1.1.1. Advantages 1.International trade allows countries to benefit from specialization 2.International trade increases consumer choice 3.International trade increases competition and efficiency 4.International trade creates additional business opportunities 5.Free trade enables firms to benefit from the best workforces, resources and technologies from anywhere in the world 6.International trade increases economic interdependency and therefore reduces the potential for conflict

1.1.2. Disadvantages 1.International trade with low-cost economies is threatening jobs in many developed economies and reducing opportunities for growth in less-developed economies 2.International trade is contributing to rapid resource depletion and climate change 3.International trade may increase the exploitation of workers and the environment 4.International trade may be increasing the gap between rich and poor countries

1.2. Protectionism - Practice of shielding a country's domestic industries from foreign competition by taxing imports

1.2.1. Advantages 1.To protect infant industries 2.To protect sunset industries 3.To protect strategic industries 4.To protect domestic firms from dumping 5.To limit over-specialization 6.To correct a trade imbalance 7.Because other countries use trade barriers

1.2.2. Disadvantages 1.They restrict consumer choice 2.They restrict new revenue and employment opportunities 3.They protect inefficient domestic firms 4.Other countries may retaliate

2. Globalization - The process by which businesses develop international influence or start operating on an international scale

2.1. Oppertunities to buy and sell products world wide

2.1.1. Open economy national economy that takes part freely in world trade

2.1.2. Closed economy / Autarty Very self suffiecent economy

2.2. Increasing reliance of economies on each other through international trade

2.2.1. Items produced in national economy Some proportion of food Military Items

2.2.2. Items imported / exported Some proportion of food Consumer goods

2.3. Increasing oppertunities for labour and capital to move worldwide

2.3.1. Cheaper Labour in different countries

2.3.2. Less tax on items produced

2.4. Growth of global finacial markets

2.4.1. Types of firms spread world wide McDonals, Nike, Microsoft

2.4.2. Types of local firms Pears, Bananas(localy grown food)

2.5. Impact on amount and scarce resource allocation

2.5.1. Open economy Take benefits from "Absolute advantage" Take benefits from "Comparitive advantage"

2.5.2. Closed economy / Autarty More recourses are used to produce same goods in different countries Lots of rules to imports / exports (see trade barriers)

2.6. balance of international payments

2.6.1. Help achive macro economic objective of balanced trade

2.6.2. Countries dont need to be self sufficeint

2.7. economic growth and living standards in countries

2.7.1. Deveoped countries can send suport to help increase standard of living to another

3. By Robin & Jas

4. Trade barriers - Goverment measures designed to restrict international trade and competition

4.1. Embargo

4.1.1. Ban of importation of particular product or from a spesific country Positve for: Domestic Producers Negative for: Domestic Consumer Foreigen producers Global resource allocation No effect for: Government

4.2. Excessive quality standards and bureaucracy

4.2.1. Increases paper work to export into the spesific country Positve for: Domestic producer Negative for: Domestic Consumer Goverment Foreigen producers Global resource allocation

4.3. Quotas

4.3.1. A limit on number of imports allowed per month/year Positive for: Domestic producer Negative for: Domestic Consumer Foreigen producers Global resource allocation No effect for: Government

4.4. Subsidies

4.4.1. Grands paid to domestic producers Positive for: Domestic producer Domestic Consumers Negative for: Foreigen producers Government Global resource allocation

4.5. Tarrifs

4.5.1. Indirect taxes on the priceof imported goods Positive for: Domestic producer Government Negative for: Domestic Consumer Foreigen producers Global resource allocation

5. Comparative advantage and Absolute advantage

5.1. Absolute advantage

5.1.1. A country’s ability to produce a certain good more efficiently than another country

5.2. Comparitive advantage

5.2.1. A country’s ability to produce a particular good with a lower opportunity cost than another country

5.3. Specialisation

5.3.1. Country’s decision to specialize in the production of a certain good or list of goods because of the advantages it possesses in their production