International Trade short answers

Study Notes

Engages in international trade; vital for countries with small domestic markets, like Ireland.
Openness measured by the GDP percentage related to imports and exports.
Ireland exports nearly 80% of its goods due to a small domestic market, contrasting with more closed economies like the USA and UK.

Economies of Scale: Large production scales reduce costs for firms like Kerry Group, enabling competitive pricing.
Access to Larger Markets: Less reliance on the small Irish market allows Irish firms to tap into the 500 million consumer EU market, boosting sales and profits.
Increased Efficiency: Competition from trade necessitates operational efficiency, lowering consumer prices.
Ireland’s Green Image: The country's environmentally friendly reputation enhances marketing potential, especially in tourism and food.
IT Developments:Advanced technology facilitates global communication and marketing, streamlining business operations.
Language Advantage: Proficiency in English aids Irish businesses in international dealings, enhancing trade capabilities.
Emerging Markets: New markets like China offer opportunities for Irish exports, particularly in food and beverages.
Variety: International trade expands access to diverse raw materials, skills, and services for Irish businesses and consumers.

High Cost Base: Elevated raw material and labor costs in Ireland hinder competitiveness.
Distribution Costs: Ireland's geographical position increases distribution costs, affecting export pricing.
Global Competition: Irish exporters face challenges from global firms offering lower prices and higher quality.
Language Barriers: Navigating multiple languages in the EU complicates marketing strategies.
Exchange Rate Fluctuations: Currency volatility impacts pricing and profitability for Irish exporters in non-Euro regions.
Payment Problems: Different legal frameworks abroad can complicate payment recovery for Irish exporters.
Customs Duties: Increased trade barriers with non-EU countries can make Irish exports less competitive.
Cultural Differences: Understanding foreign customs is essential for effective marketing abroad.

Governments may impose trade restrictions, known as protectionism, to safeguard domestic industries.
Protectionist measures aim to reduce imports and improve balance of payments for home countries.

Free Trade Area: Member countries trade with reduced or no tariffs (e.g., NAFTA).
Customs Union: Members trade tariff-free internally while applying common tariffs externally (e.g., EU).
Common Market: Trade barriers in goods, services, capital, and labor are eliminated; shared policies may exist (e.g., EU’s Common Fisheries Policy).

Defined as purchasing goods and services from abroad, resulting in money leaving Ireland.

Visible Imports: Physical goods purchased from abroad (e.g., wine from France).
Invisible Imports: Foreign services purchased (e.g., holidays in Spain).

Occurs when domestic producers create and sell previously imported goods, fostering local competition.

Encourages global trade by promoting negotiation among member governments and advocating for open trading environments.

Globalization: Higher Irish production costs make it difficult to compete against global firms.
Currency Fluctuations: Strengthening Euro increases Irish export prices, potentially lowering sales.
International Differences: Understanding local customs, cultures, and languages is essential for successful foreign marketing.

Visible Exports: Physical Irish goods sold abroad (e.g., beef to the UK).
Invisible Exports: Irish services provided to foreign customers (e.g., online training sessions).

Balance of Trade (BOT): Difference between visible exports and imports; a surplus indicates exports exceed imports.
Balance of Invisible Trade (BOIT): Difference between invisible exports and imports; a surplus indicates services sold exceed purchases.
Balance of Payments (BOP): Overall measure of money entering and leaving a country; a surplus indicates exports outpace imports.

Currency Fluctuations: Changes in currency valuation affect export costs and sales.
MNC Influence: Multinational corporations contribute significantly to Irish exports and can impact the economy if they relocate due to cost changes.
Protectionism Trends: Tariffs from influential countries may lower demand for Irish products.
Emerging Markets Growth: Rising economies offer new opportunities for Irish exporters but also increase competition.
New EU Member States: Eastern European countries may provide lower-cost production options, challenging Irish exporters.
Technology Developments: Advances in communication and e-commerce enable efficient marketing and international operations.