The Global MarketplaceThe Global Marketplace

International TradeInternational Trade

International trade involves the International trade involves the exchange of goods and services exchange of goods and services between nations.between nations.

Goods and services purchased Goods and services purchased from other countries are called from other countries are called importsimports..

Goods and services sold to other Goods and services sold to other countries are called countries are called exportsexports..

Why International Trade?Why International Trade?

Because nations are not self-Because nations are not self-sufficient, they find it sufficient, they find it

advantageous to trade with advantageous to trade with each other.each other.

There are two types of There are two types of advantages in international advantages in international

trade - trade - ComparativeComparative and and AbsoluteAbsolute..

ComparativeComparative and and AbsoluteAbsolute

ComparativeComparative - the value that - the value that a country gains a country gains by selling the by selling the goods it goods it produces more produces more efficiently than efficiently than other goods.other goods.

AbsoluteAbsolute - when - when a country has a country has special natural special natural resources or resources or capabilities to capabilities to allow it to produce allow it to produce a given a given commodity at a commodity at a lower cost than lower cost than any other nation any other nation in the world.in the world.

GOVERNMENT GOVERNMENT INVOLVEMENTINVOLVEMENT

All All nationsnations control control and monitor their and monitor their trade with foreign trade with foreign business.business.

AllAll people people and and goodsgoods that enter that enter the United States the United States are search by U.S. are search by U.S. officials.officials.

Balance of TradeBalance of Trade: : the difference in the difference in value between value between exports and imports exports and imports of an nation. of an nation.

PositivePositive: when a : when a nation exports more nation exports more than it imports.than it imports.

NegativeNegative: imports : imports more than exports.more than exports.

TRADE BARRIERSTRADE BARRIERS

When a nation’s government When a nation’s government wants to limit trade, it imposes wants to limit trade, it imposes trade barriers. These are controls trade barriers. These are controls that restrict the flow of goods.that restrict the flow of goods.

BUSINESS INVOLVEMENTBUSINESS INVOLVEMENT

While governments negotiate While governments negotiate trade agreements, it is businesses trade agreements, it is businesses that actually trade with one that actually trade with one another.another.