INTERNATIONAL TRADE
International trade is exchange
of goods and services between two or more countries.
FORMS OF INTERNATIONAL TRADE
1.
Bilateral
Trade: exchange involving two countries.
2.
Multi-lateral
Trade: exchange involving more than two countries
DIVISIONS OF INTERNATIONAL TRADE
1.
EXPORT
These are goods and services sold by a country to other countries of the
world. Ex. Nigeria exports
crude oil to USA
2.
IMPORT
These are goods and services bought by a country from abroad. Ex. Nigeria buys electronics from China or automobiles from America .
Visible
imports and exports:
These are tangible product bought from or sold to other countries.
Examples: mobile phones, automobiles.
Invisible
imports and Exports:
These are services rendered by or to other countries. Examples: banking,
tourism, shipping etc.
3.
ENTREPORT
This is importing goods and services for re-exporting
REASONS FOR INTERNATIONAL TRADE
1.
For even distribution of natural resources
2.
Differences in climatic conditions
3.
Differences in level of technology
4.
Differences in human resources
5.
Differences in the efficiency of the use of
natural resources.
BENEFITS OF INTERNATIONAL TRADE
1.
Increase in revenue
2.
Increase in specialization
3.
Equitable redistribution of income
4.
Fosters friendly relations and world peace
5.
Economic development
6.
Increase in variety of goods
DISADVANTAGES OF INTERNATIONAL TRADE
1.
Leads to excessive production
2.
Stiff competition may result in the collapse of
infant firms
3.
Risks of importing dangerous goods
4.
May lead to unemployment and dependence on
foreign goods
5.
Discourages self-reliance
BARRIERS TO INTERNATIONAL TRADE
1.
Ideological differences
2.
Currency differences
3.
Artificial barrier of regulation
4.
Cultural problems
5.
Different legal systems
RESTRICTION OF INTERNATIONAL TRADE
1. Embargo
This is banning the importation of certain goods.
2. Import Quota
This is restricting the quantity of certain goods to be
imported.
3. Import License
This is granting legal permission to an importer to
import some selected goods
4. Import Duties
This is charging goods and services from other
countries money before they are allowed to be imported.
5. Tariffs
Compulsory tax levied on imported goods by the government.
REASONS FOR RESTRICTING INTERNATIONAL
TRADE
1.
To protect infant industries
2.
To maintain high level of employment
3.
To generate revenue
4.
To correct balance of payment problems
5.
To influence consumption problems
6.
To prevent dumping and importation of harmful
goods
LAW
OF ABSOLUTE ADVANTAGE
This law states that “a country
should produce goods it has absolute advantage on and import goods it has
absolute disadvantage”
LAW
OF COMPARATIVE COST ADVANTAGE
This law, propounded by David Ricardo
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