Benefits and Costs of International Trade.
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International trade can help and hurt a business or a government. When a business decides to trade internationally there are a whole new set of rules and procedures to follow and different cultures to adapt to. A business like Tesco has to be prepared to understand numerous factors before deciding to operate in a certain country. They cannot rush headfirst into a country expecting them to like the same things that English people like. Even the layout of the store may have to be changed to suit a certain country or the products sold may be promoted in different ways etc. An example of this would be in a Japanese shop David Beckham may be advertising chips but in Iran a different person more well known in the Arab world. Britain has traded with the rest of the world for many years now. They do this for a number of reasons these include: > There are larger markets which means Britain can trade to more people > Could be cheaper > Products that are not produced in the UK are made available > Improves diplomatic relationships > Free trade within the EU > Wider range of choice International trade brings with it advantages and disadvantages.
Quality of products differ for example Belgian chocolate is seen to be the best tasting chocolate so thanks to International trade consumers can now buy chocolate straight from Belgium. The disadvantages of International trade are: > Disadvantaging developing countries > Taste is different > The environment can suffer thanks to International trade > Workers are exploited The above are all costs of International trade. Companies such as Tesco and Nike etc. have all these things to account for when they trade overseas. Disadvantaging developing countries is a complicated, harsh but true process. A Company like Tesco may decide to buy their wheat from Kenya, they pay the farmer £2000 for the wheat and sell the same wheat for triple that price in developed countries. Taste is different for different people around the world so companies must make sure that they study and can understand a countries culture and tastes. Environmental issues are very important because increased International trade means the world will become more busy and must transport more things across the world, by planes, cars, trains etc.
They do this for a number of reasons including: > Infant industries- in this case a government will introduce a tariff or quota when a business is starting up so they can grow before foreign producers arrive. > Unfair competition- e.g. when a company sells goods abroad at a lower cost to capture a market, foreign firms may receive subsides for making certain products. > Balance of payments- reducing imports improves the balance of trade > Strategic industries- to protect the manufacture of essential goods > Declining industries- to protect declining industries from creating further structural unemployment. The result of introducing protectionism is as follows: > Prevents countries enjoying the full benefits of International specialisation and trade > Invites retaliation from foreign governments > Protects inefficient home industries from foreign competitors which means consumers pay more for inferior products. All trade around the world is monitored by one governing body called the WTO (world trade organisation). It was set up in 1955 with the aim to help trade flow smoothly, freely, fairly and predictably. The WTO looks after trade agreements, acts as a forum for trade negotiations, settles trade disputes, reviews national trade policies and assists developing countries in trade policy issues.
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