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International trade involves the exchange of goods and services across international boundaries.

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International trade involves the exchange of goods and services across international boundaries BENEFITS FROM INTERNATIONAL TRADE As well as the costs and uncertainty involved in international trade there are benefits. Indeed, firms engage in international trade because they believe that the benefits outweigh the costs. Engaging in international trade gives firms access to larger markets enabling them to take greater advantage of economic of scale. Consumer can also gain from international trade. They are able to purchaser goods not made in their own countries, have access to a greater variety of products and can benefit from increased competition in the form of lower-priced and better quality products THE PATERN OF UK TRADE Export and import figures are from 2000 UK trade in service THE BASIS OF TRADE International trade arises because the production of different kinds of goods requires different kinds of resources used in different proportions and the various types of economic resources are unevenly distributed throughout the world. ...read more.


The term 'surplus' and 'deficit' refer to the manner in which the account as been balanced. If outflows exceed inflows (i.e. there is deficit), the account will be balanced by withdrawals from the foreign currency reserves, by borrowing overseas, or by the sale of external assets. These items are counted as inflows (i.e. credit items). If inflow exceed outflows (i.e. there is a surplus), the account will be balanced by items which show how the surplus has been distributed, for example by additions to the foreign currency reserves, the repayment of overseas loans, or the purchases of external assets. These items are treated as outflows (i.e. debit items). CAUSES OF DEFICITS ON THE BALANCE OF PAYMENTS Most attention is usually paid to current account positions and particularly current account deficits. A deficit in current account may arise from high-income levels in the home country. This is because when incomes are high the people will buy more goods and services. ...read more.


Import controls also have the potential to increase domestic inflation. Tariffs directly raise the price of imports on the domestic market and quotas, by limiting the supply of imports, are likely to push up their price. Domestic firms, seeing rival goods from abroad rising in price, may raise their own prices knowing they will be able to remain competitive. OTHER MEASURES TO REDUCE DEFICIT A lack of price competitiveness and high marginal propensity to import are not the only possible causes of a deficit. Firms may be poor at marketing and in order to rectify this government may promote trade fairs and give awards to top exporters and encourage university and other courses in marketing. The quality of goods may be poor and here measures may be undertaken to improve education, training, researches and development. The country may also be producing products that are not in high world demand. In this case government may give financial assistance to improve industry up to standards. Reference: G F Stanlake and S T Grant, (6th edn.), Introductory Economics, Longman, 1995 http://www.statistics.gov.uk/downloads/theme_economy/UK_Trade_In_Services_2000.pdf ...read more.

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