International Trade multiple choice

Questions and Answers

What effect does rising costs or changes to tax rates have on MNCs in Ireland?

They will increase their exports significantly.

They will lower prices to maintain market share.

They may choose to relocate, leading to a decrease in Irish exports. (correct)

They are unaffected and continue operating as usual.

Which factor contributes to the attractiveness of Ireland for multinational corporations (MNCs)?

A skilled workforce and low corporation tax. (correct)

High corporation tax rates.

Preferential trade agreements with all countries.

Limited access to the European market.

What impact do tariffs imposed on Irish exports to the UK potentially have?

They will make Irish goods more expensive for UK consumers, reducing sales. (correct)

They decrease the price of Irish goods in the UK.

They will not affect the market for Irish exports.

They may increase Irish sales to the UK.

What challenges do Eastern European countries pose to Irish exporters?

They have lower wage rates and provide quality goods at lower prices. Signup and view all the answers

Which of the following is an opportunity for Irish exporters emerging from developing economies?

Rising income levels in markets like China and India. Signup and view all the answers

Which of the following technologies has NOT contributed to helping Irish firms market products globally?

Mature telecommunications systems. Signup and view all the answers

How has technology influenced the operational costs of Irish businesses?

Enabled employees to work remotely, reducing business costs. Signup and view all the answers

What is one potential consequence of the UK's exit from the European Union?

Possibility of introducing trade barriers affecting Irish exports. Signup and view all the answers

What is one characteristic of emerging markets like Brazil and India that benefits Irish exporters?

They are transitioning from developing to developed economies with rising income levels. Signup and view all the answers

Why might the agri-food sector in Ireland be particularly vulnerable to tariffs?

Tariffs could raise prices for consumers, decreasing sales. Signup and view all the answers

Study Notes

International Trade

Importing and exporting goods and services between countries.

Open Economy

Engages in international trade; reliant on exports and imports.
Ireland exemplifies a small open economy with nearly 80% of goods exported.
Openness measured by GDP fraction from trade.

Benefits of Irish International Trade

Economies of Scale: Large production lowers costs, increasing competitiveness.
Access to Larger Markets: Reduces reliance on the domestic market of 5 million; EU offers over 500 million consumers.
Increased Efficiency: Trade promotes competition, pushing businesses to improve efficiency and lower prices.
Ireland’s Green Image: Attractive for food and tourism sectors, boosts marketing.
IT Developments: Enhance global communication; marketing and distribution improved via the Internet.
Language Advantage: English as the primary trade language benefits international business.
Emerging Markets: Opportunities in economies like China enhance Irish exports in sectors like food.
Variety: Wider access to resources and consumer choices via international trade.

Challenges for Irish International Trade

High Cost Base: Higher costs in Ireland for materials and labor affect competitiveness.
Trade Barriers: Tariffs, quotas, embargoes, subsidies, and administrative regulations hinder free trade.

Trade Barriers

Tariffs: Taxes on imports increase costs compared to home-produced goods.
Quotas: Limit imports to bolster domestic sales, e.g., EU clothing quotas from China.
Embargoes: Total bans on specific imports or exports for political/economic reasons.
Subsidies: Financial assistance helps domestic firms remain competitive against imports.
Administrative Regulations: Customs delays add costs, discouraging international competitors.

Deregulation

Reduction of trade barriers fosters competition, efficiency, and lower consumer prices.

Trading Blocs

Groups facilitating free trade; include Free Trade Areas, Customs Unions, and Common Markets.

Trading Bloc Types

Free Trade Area: Member countries trade freely with reduced or no tariffs, e.g., NAFTA.
Customs Union: Tariffs eliminated among members, common external tariffs imposed on non-members, e.g., EU.
Common Market: Allows for free trade of goods, services, labor, and capital; also features harmonized policies.

Imports

Purchase of goods/services from foreign countries, impacting Ireland’s economy.

Reasons for Importing

Limited domestic raw materials and climate constraints, e.g., reliance on oil and coffee imports.
Certain services not available domestically; imports provide variety for consumers.

Import Substitution

Domestic production of formerly imported goods to compete in local markets.

World Trade Organization (WTO)

Forum for negotiating trade agreements, aiming to lower global trade barriers.

Challenges for Irish Exporters

Globalization: Increased competition from efficient global companies necessitates innovation in Irish firms.
Currency Fluctuations: Exchange rate changes can affect sales pricing and competitiveness.
International Differences: Understanding local customs is crucial for marketing in diverse markets.

Measuring International Trade

Balance of Trade: Difference between visible exports and imports indicates surplus or deficit.
Balance of Invisible Trade: Difference in services traded; manages invisible exports/imports.
Balance of Payments: Overall financial transactions; surplus indicates more money entering than leaving.

International Economy Effects on Ireland

Currency Fluctuations: A stronger Euro can decrease demand for Irish exports in key markets.
MNCs in Ireland: Low taxes and skilled labor attract multinationals, essential for export strength.
Protectionism: Trade barriers from external factors could diminish Irish exports.
Emerging Markets: Growth in regions like China creates fresh opportunities along with increased competition.
New EU Member States: Countries with lower production costs can challenge Irish exporters.
Technology: Advances improve global marketing and reduce operational costs for Irish businesses.

Description

Explore the principles of international trade and the significance of an open economy in global commerce. This quiz highlights how countries like Ireland engage in importing and exporting goods and services, and examines the measure of openness through GDP ratios. Test your knowledge on trade dynamics and the implications for small economies.