International trade

Basis of International Trade

1. INTERNATIONAL MANAGEMENT ASSIGNMENT ON “BASIS OF INTERNATIONAL TRADE AND PRINCIPLES OF ABSOLUTE ADVANTAGES” PRESENTED BY SHUBHAM AHIRWAR

2. S. N0. CONTENT SLIDE No. 1. Introduction 03 2. Classifications of International Trade 04 3. Types of International Trade 05 4. Characteristics of International Trade 06 5. Role or Importance of International Trade 07 6. Benefits of International Trade 08 7. Barriers to International Trade 09 8. Reasons for International Trade 10 9. Problems & Challenges of International Trade 11 10. Advantages of International Trade 12 11. Disadvantages of International Trade 13 12. Theory of Absolute Advantage 14-15 13. Conclusion 16 14. Reference 17 TABLE OF CONTENT

3. INTRODUCTION Trade between two or more countries is called foreign trade or international trade . This involves the exchange of goods and services between the citizens of two countries. When citizens of one country exchange goods and services with the citizens of another country, it is called foreign trade. “ The aim of international trade is to increase production and to raise the standard of living of the people. International trade helps citizens of one nation to consume and enjoy the possession of goods produced in some other nation.”

4. Import  Trade: The inflow of goods in a country is called import trade. Export Trade: The outflow of goods from a country is called export trade. Entrepot Trade: Many times goods are imported for the purpose of re-export after some processing operations. This is called entrepot trade. International trade must be classified into three ways: CLASSIFICATION

5. There are four types of international trade transactions: Direct Business: In direct business the importer places order with manufacturer of the exporting country. Consignment Business: Under consignment business the exporter sends the goods to an agent in the importing country. Indent Firms: The indent firms charge a commission for their services. The indent firms are also called commission agents. Merchant Shippers: This is a class of businessmen who buy goods on their own account and sell them in a foreign country at a profit. TYPES

6. CHARACTERISTICS Territorial specialization International competition Separation of sellers from buyers Long chain of middlemen International rules and regulations Mutually acceptable currency Government control Several documents International trade is characterized by the following features:

7. ROLE OR IMPORTANCE Division of labor and specialization Optimum allocation and utilization of resources Raises Standard of Living of the people Generate employment opportunities Equality of prices Ensures quality and standard goods Facilitate economic development To improve quality of local products Availability of multiple choices The Role and importance of i nternational trade are as follows:

8. BENEFITS There are some benefits of international trade: Efficient Allocation and Better Utilization of Resources Variety of Goods Available for Consumption Promotes Efficiency in Production Utilization of Surplus Produce Consumption at Cheaper Cost More Employment Reduces Trade Fluctuations

9. BARRIERS There are some barriers to international trade: Cultural and social barriers Political barriers Tariffs and trade restrictions Standards Boycotts Anti-dumping Penalties Monetary Barriers

10. REASONS Here are seven reasons for growing globally : Reduced dependence on your local market Increased chances of success Increased efficiency Increased productivity Economic advantage Innovation Growth

11. PROBLEMS OR DIFFICULTIES The following are the special problems of international trade: Distance Different languages Risk in transit Intense competition Difficulties in Payments Import and Export Restrictions Transport and Communications Lack of information about International Traders

12. ADVANTAGES The main advantages of international trade are as follows: Optimal use of natural resources Availability of all types of goods: Advantages of large-scale production Stability in prices Increase in efficiency Promotes Competition Fall of Prices Speedy Industrialization

13. DISADVANTAGES The main disadvantages of international trade are as follows: Exhaustion of Resources Effect on Domestic Industries Effect on Consumption Habits Times of Emergency Economic Dependence Political Dependence Import of Harmful Goods Mis-utilisation of Natural Resources

14. THEORY OF ABSOLUTE ADVANTAGE According to  Adam Smith . if one country has absolute advantage over another in one line of product  on and the other country has an absolute advantage over the first country in  another line of production. then both countries would gain by trading. Absolute advantage is the ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost at which any other entity produces that same good or service.

15. According to him, there are following advantages of this theory . Absolute Cost Advantage: Trade between two countries would be mutually beneficial if the cost of producing a commodity in one country is lesser than the cost of producing the same commodity in another country. Natural Advantage: A country would produce those goods that are naturally favoring its climatic conditions. The type of goods produced would also depend upon the availability of natural resources. Acquired Advantage: This would include advantage in technology and level of skill development.

16. CONCLUSION In conclusion it can be said that, international trade leads to economic growth provided the policy measures & economic infrastructure are accommodative enough to cope with the changes in social and financial scenario that result from it. In order to face the cross border competition challenges, a well functioning, national competition regime is insufficient. International trade opens up the opportunity for develop countries whereby it increases their capacity to produce and acquire goods. It should however be controlled so as to avoid the closure of some local companies.

17. REFERENCE www.study.com www.investopedia.com www.economicskey.com www.letslearnfinance.com www.preservearticles.com www.yourarticlelibrary.com www.economicsconcept.com www.economicsdiscussion.com www.managementstudyhq.com www.managementstudyguide.com

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