nternational Trade Powerpoint

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CHAPTER 15 – INTERNATIONAL
TRADE
-
TRADE
 Trading
is the Buying (importing) & Selling
(exporting) of different products between
countries.
 An
Open Economy is an economy that
engages in international trade.
TRADE
 Domestic
Trade is the buying and selling of goods
& services in our own country.
 Foreign
trade (or international trade) means
selling goods and services to, and buying goods
and services from, other counties.
INTERNATIONAL TRADE
 Some
countries have a natural advantage
over other countries in the production of one
or more good or services.
 Can
you think of examples of these
countries?
 Countries
tend to concentrate on the
production of the goods & services in which
they have an advantage & import the other
goods they need.
INTERNATIONAL TRADE

International trade is subdivided into visible and
invisible trade.

Visible trade deals with physical products that can
be seen going out of, or coming into the country.

Invisible trade deals with services. No physical
product can be seen going out of, or coming out of
the country as a result of the sale or purchase of
services.
WHO ARE OUR MAIN TRADING PARTNERS?
WHO ARE OUR MAIN TRADING
PARTNERS?
COUNTRY
CURRENCY
LANGUAGE
USA
Dollar
English
Britain
Sterling
English
Europe
Euro
+ others
Japanese Yen
Various
Japan
(importing)
Japanese
TRADING GAME

You are a country and on your card you have a
certain amount of commodities such as Energy,
Manufactured Goods, Food & Nuclear Waste.

On your card is what you need to achieve – the
amount of commodities stated on your Country
Card.

You have to trade with each other in order to
achieve your needs.

There is no stated exchange rate – you decide on
what you will buy and sell commodities for.
IMPORTS
 An
import is any good or service purchased
by the residents of a country that causes
money to go out of the country.
 Importing:
buying goods & services from
other countries.
 Foreign
goods and services that we buy in
Ireland.
 Money
leaves Ireland.
VISIBLE IMPORTS
 Goods
which are bought from other
countries.
 Money leaves the country.
 Examples include:
 Citrus fruit
 Wine
 Cars
INVISIBLE IMPORTS
 Services
that are bought from other countries.
 Money leaves the country.
 Examples include:
 Irish person on holiday in USA
 JLS playing in concert in Dublin
 French horse winning Irish Grand National
EXPORTS
 An
export is a good or service provided by the
residents of a country that causes money to
come into the country when sold.
 Exporting:
selling goods & services to other
countries.
 Irish
goods and services that we sell to foreign
countries.
 Money
comes into the country.
VISIBLE EXPORTS
 Irish
goods that are sold to foreign countries.
 Money comes into the country.
 Examples include:
 Irish beef sold abroad.
 Guinness sold to France
 Waterford Crystal sold to USA.
INVISIBLE EXPORTS
 Irish
services that are sold to foreign countries.
 Money comes into the country.
 Examples include:
 Bressie playing a concert in Wembley in London.
 US citizen on holiday on Ireland.
 Irish horse winning the English Grand National.
HOMEWORK 22.02.13
 Find
an example of an import
(visible/invisible) and an export
(visible/invisible) over the weekend and take
a photo of it using a camera phone.
 Share
the file using Google drive so we can
make a class video explaining what imports
and exports are.
HOMEWORK 22.02.13
 For
example, Irish farmer selling eggs in
Tesco in England – visible export.
HOMEWORK 22.02.13
 For
example, Irish person travelling to
England for a gig – invisible import.
Item
CLASSWORK
Justin Bieber playing at a concert
in the O2 in Dublin
An Austrian restaurant buys Irish
beef
Irish football supporters travelling
to Poland for the Euros
An Irish restaurant buys lemons
from Spain
Tourists from Italy visit Kerry on
their holidays
Irish golfer Rory McIlroy wins the
US Open
An Irish family go to Greece on
their holidays
A Welsh rugby team travel on
Irish Ferries for a match in the
Aviva
A fancy bar in New York buys
Waterford Crystal glasses
An Irish businessman purchases
a BMW car
Visible
Export
Invisible
Export
Visible
Import
Invisible
Import
CLASSWORK
INTERNATIONAL TRADE
Monday, 25th February 2013
WORKBOOK QUESTION 1 PAGE 87
WORKBOOK QUESTION 2 PAGE 87
WORKBOOK QUESTION 3 PAGE 87
HOMEWORK CORRECTIONS

Get a new Business Studies copybook!

Your book was printed in 2010 but our economic
situation is constantly changing. Your book outlines
the advantages of economic growth but not the
consequences of negative economic growth
(recession).

State & explain, expand & give an example.

Don’t forget to state whether your budget is a
surplus/deficit.

28 mins per question!
2012 EXAM PAPERS QUESTION 3
2008 EXAM PAPERS QUESTION 3
28
VISIBLE EXPORTS AND VISIBLE
IMPORTS

Visible exports are
physical products
produced by the residents
of a country that cause
money to come into the
country when sold.
Examples of Ireland’s
visible exports are:

Visible imports are
physical goods purchased
by the residents of a
country that cause money
to go out of the country.
Examples of Ireland’s
visible imports are:
29
INVISIBLE EXPORTS AND INVISIBLE
IMPORTS

Invisible exports are
services provided by the
residents of a country that
cause money to come into
the country. Examples:
incoming tourists and the
sale of financial services
abroad.

Invisible imports are
services purchased by the
residents of a country that
cause money to go out of
the country. Examples:
outgoing tourists and
“foreign” pop groups
playing in Ireland.
THE BALANCE OF TRADE
 The
Balance of Trade is the difference
between the value of visible exports and
visible imports.

Ireland’s Balance of Trade figures (1990 – 2011)
THE BALANCE OF TRADE
 If
the value of visible exports is greater than
the value of visible imports  Positive figure
 Surplus  Favourable Balance of Trade
Balance of Trade
Total value of visible
€20,000 million
exports
Total value of visible
€15,000 million
imports
Balance of Trade
€5,000 million
THE BALANCE OF TRADE
 If
the value of visible exports is less than the
value of visible imports  Negative figure 
Deficit  Unfavourable Balance of Trade
Balance of Trade
Total value of visible
€20,000 million
exports
Total value of visible
€28,000 million
imports
Balance of Trade
(€8,000 million)
THE BALANCE OF TRADE
If the value of visible exports equals the value of
visible imports  Balanced Balance of Trade
Balance of Trade
Total value of visible
€30,000 million
exports
Total value of visible
€30,000 million
imports
Balance of Trade
0
WORKBOOK QUESTION 4 PAGE 88
WORKBOOK QUESTION 5 PAGE 88
BALANCE OF INVISIBLE TRADE
 The
Balance of Invisible Trade = Invisible
Exports – Invisible Imports
WORKBOOK QUESTION 6 PAGE 88
WORKBOOK QUESTION 7 PAGE 88
BALANCE OF PAYMENTS
The Balance of Payments is the difference
between the value of all goods and services that
Ireland exports and imports.
Balance of Payments = Total Exports –
Total Imports
The BOP shows both visible and invisible trade.
BALANCE OF PAYMENTS CAN BE…….
 Surplus:
Exports ________________ Imports
 Deficit:
Imports ________________ Exports
 Balanced:
Exports ______________ Imports
CALCULATING BALANCE OF PAYMENTS –
TEXTBOOK QUESTION 14, PAGE 153

Balance of Payments
Total Exports (€500 + €400)
€900m
Less Total Imports (€450 +
€500)
(€950m)
BOP Deficit
(€50m)
TEXTBOOK QUESTION 15, PAGE 153
Balance of Trade
Visible exports
€800 million
Less Visible imports
(€650 million)
BOT Surplus
€150 million
Balance of Payments
Total Exports
€1,350 million
Less Total Imports
(€1,320 million)
BOP Surplus
€30 million
2NK BUSINESS STUDIES
Friday, 1st March 2013
GROUP WORK EXERCISE
 As
a group, you need to decide whether the
items on your Country card are visible
imports or exports?
 When
you have decided what category the
item belongs to – you need to calculate the
country’s Balance of Trade, Balance of
Invisible Trade and the Balance of
Payments.
GROUP WORK ANSWERS
Country
Ireland
Spain
Germany
Netherlands
France
Italy
Balance
of Trade
Balance of Balance of
Invisible
Payments
Trade
OVERCOMING A
BALANCE OF TRADE DEFICIT
 Increase
exports
 Reduce imports
 Buy Irish (import substitution)
 Source raw materials at home
 Only use Irish services
IMPORT SUBSTITUTION
What is Import
Substitution?
WHAT IS IMPORT SUBSTITUTION?
 Import
Substitution is the replacing of imported
goods with domestically produced goods on the
home market.
 Buying Irish goods instead of foreign goods.
 Eg. buying Irish potatoes instead of Spanish
potatoes.
BENEFITS OF A BALANCE OF PAYMENTS
SURPLUS
 More
money coming into the country.
 This money can be used to pay off some of our
debt or reduce tax.
 More money and jobs and a better standard of
living for Irish people.
WHAT PROBLEMS WILL A BALANCE OF
PAYMENTS DEFICIT CAUSE?
 Too
much money leaving the country.
 Government will have to raise taxes and/or
borrow.
 Irish people will lose their jobs.
HOW CAN A BALANCE OF
PAYMENTS DEFICIT BE REDUCED?
 Import
substitution: Buy Irish!
 Government
Agencies such as Failte Ireland and
An Bord Bia can promote/market Irish exports.
TURN TO YOUR NEIGHBOUR
 Why
does Ireland export goods & services?
 Write down your own list of reasons in your
worksheet.
 Turn to your neighbour and compare your
list of reasons.
 Why
does Ireland import goods & services?
 Write down your own list of reasons in your
worksheet.
 Turn to your neighbour and compare your
list of reasons.
WHY DO WE EXPORT?
 To
earn money and obtain foreign currency
needed to buy our imports.
 Ireland is a small country so we need a wider
market such as EU, USA etc.
 Ireland exports in order to create employment more exports means more jobs are created.
 Ireland exports in order to sell off our surplus
production. Selling the surplus goods abroad
earns extra income for these countries.
WHY DO WE IMPORT?
To obtain raw materials, capital goods & consumer goods that
are not available in Ireland.
 For example, olive oil, televisions and coffee
 To avail of services not in Ireland.
For example, concerts, foreign holidays………
 To have variety and choice of goods & services.

NOTES
 Balance
of Trade = Visible Exports – Visible
Imports
 Balance
of Invisible Trade = Invisible
Exports – Invisible Imports
 Balance
Imports
of Payments = Total Exports – Total
THE EU
What is the EU?
 The European Union is an economic & political
partnership between 27 democratic European
countries.

What is the Eurozone?
 The Eurozone is a collection of 17 countries that
used a common currency, the Euro.

When was the Euro € introduced?
 2002

HOMEWORK 25.02.13

You were given an EU member country to research
for today’s class.

As part of your research, you had to find out 10
interesting facts about the country including what
language they speak and what currency they use.

Everyone needs to state their country, currency &
language and your top 3 interesting facts about the
country.

You should complete the worksheet while you listen
to your classmates.
HOMEWORK 01.03.13

Read over pages 144 – 150 of “Ready for
Business” Textbook.

We will have a test on Chapter 15 next Friday.
INTERNATIONAL TRADE
HOMEWORK 04.03.13
 Revise
 We
Chapter 15 & study for a class test.
will have a test on Chapter 15 next
Friday in a computer room.
IMPORT SUBSTITUTION
 Did
you think about any goods or services
you purchased over the weekend?
 If they were imports – could you have
substituted them with Irish goods?
 Is Import substitution difficult or easy?
PROBLEMS CONNECTED WITH FOREIGN
TRADE.
 Language
differences makes communications
more difficult.
 Transport: all Irish exports must bear the
additional cost of sea or air transport, as well as
the normal road or rail transport.
 Insurance costs are high due to the additional
handling of goods arising from extra transport
methods required.
 Different countries set different minimum
standards of production and different
specifications for products.
 Currencies change in value on a day to day
basis adding greater risk for importers.
MIDTERM BREAK TRIP
RULES FOR CONVERTING CURRENCY
 Converting
Euro to
foreign currency:
 Multiply by the sell
rate.
 Converting
foreign
currency to Euro:
 Divide by the buy rate.
CURRENCY CONVERSION
have €100 and I
want to convert this
to Dollars.
 €100 x $1.33 = $133
 Bank
Sell Rate
 €1 = £0.85
 €1 = $1.33
I
 Bank
I
Buy Rate
 $1 = €0.74
 £1 = €1.17
have £500 and I
want to convert this
to Euros.
 £500 ÷ €1.17 =
€427.30
WORKBOOK Q 12, PAGE 90
WORKBOOK Q 13, PAGE 90
PAIR WORK
 You
are going on your
holidays to:
 You
are a bank
official. You must
calculate how much
foreign currency the
customer will
receive.
 Remember
to
Multiply by the sell
rate.
2011 EXAM PAPERS - QUESTION 3 PAPER 1
2011 EXAM PAPERS - QUESTION 3 PAPER 1
2011 EXAM PAPERS - QUESTION 3 PAPER 1
2011 EXAM PAPERS - QUESTION 3 PAPER 1
2011 EXAM PAPERS - QUESTION 3 PAPER 1
2011 EXAM PAPERS - QUESTION 3 PAPER 1
2011 EXAM PAPERS - QUESTION 3 PAPER 1
2010 EXAM PAPERS – QUESTION 3 PAPER 1
2010 EXAM PAPERS – QUESTION 3 PAPER 1
EXAM QUESTION 2006 P1 Q 3.
Balance of Trade
 Visible Exports
€540m
 Less Visible Imports €400m
 Surplus
€140m

CONTINUED..
Balance of Invisible Trade
 Invisible Exports
€620m
 Less Invisible Imports €260m
 Surplus
€360m

CONTINUED…
Balance of Payments
 Total Exports (540+620)
€1160
 Less Total Imports (400+260) € 660
 Surplus
€500


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