What is trade??

Why nations
trade?
HANG
MAN!
 SSE 6 - MICROECONOMICS

INTERNATIONAL
TRADE
INTERNATIONAL TRADE
International trade is referred to as the exchange or
trade of goods and services between different nations
and it contributes and increases the world economy.
 TYPES OF
INTERNATIONAL TRADE
1. Export Trade - a product or service produced in one
country but sold to a buyer abroad.
2. Import Trade - a good or service bought in one
country.
3. Entrepot Trade - When goods are imported from
one country and are exported to another country
 Liberalism in 18th Century
Adam Smith demonstrated in his
book the advantages of removing
trade restrictions.

Mercantilism in 16th and 17th

Century
A nation's wealth was measured by its
gold reserves and net exports (exports
minus imports).
The Silk Road
The first major trade route that connected the
East and the West and was also known as "the
road of silk“.
 Present
International trade and the
factors influencing global
trade are much better
understood.

20th Century
Emergence of international
organizations and trade
agreements.

Resurgence of Protectionism in 19th

century
Many Western countries adopted a systematically
protectionist policy.
1. General Agreement on
Tariffs and Trade (GATT)
Was signed in 1947 by 23 countries,
is a treaty minimizing barriers to TRADE
international trade by eliminating or AGREEMENT
reducing quotas, tariffs, and
subsidies.
 2. World Trade
Organization (WTO)
Is an international organization that
deals with the global rules of trade
between nations. It was established TRADE
on January 1, 1995, replacing the AGREEMENT
General Agreement on Tariffs and
Trade (GATT).
 WHY NATIONS TRADE?
Reasons:
1. Comparative Advantage - they can produce more
efficiently goods.
2. Access to a Larger Market - access a much
larger customer base.
3. Diversification - reduce their reliance on a single
market or product.
 WHY NATIONS TRADE?

4. Resource Allocation - allows to have

resources they lack.

5. Competition and Innovation -

Increased competition means being more
innovative
 BASIS OF INTERNATIONAL TRADE

1. Theory of Absolute Advantage (By Adam Smith) - a

country's ability to produce a good more efficiently than
other countries.
2. Theory of Comparative Advantage (By David
Ricardo) - countries should specialize in producing
efficient goods/services than other countries.
 BASIS OF INTERNATIONAL TRADE

3. Factor Endowment Theory (By Heckscher and

Ohlin) - Specializing goods with their abundant
resources.

4. Product Life Cycle Theory (By Raymond Vernon)

– how a product evolves over time and how this
evolution affects international trade.
 BASIS OF INTERNATIONAL TRADE

5. Geographical Factors - Countries with

advantageous geographic locations may serve as
transit hubs or have easier access to global
markets.
 BLINDFOLD
CONVERSATION
1. President Ferdinand Marcos Jr. impose price and wage controls,
and promote exports of finished goods and imports of raw
materials, while at the same time limiting it to encourage exports
and discourage imports. In accordance with the history of
international trade, in what era does the stated concept belongs?

a. Silk Route c.16 th to 17th Century

b. 18th century d. 19th century

2. The following statements is/are true about international trade, which is/are
inaccurate?
I. Sanji learned that international trade occurs when goods are produced in one country
and sold in another country.
II.The country of Skypeia is more suitably placed to produce more goods than the Wano
country due to uneven distribution of natural resources.
III. After the class, Doflamingo remembered that the Anglo-French Treaty happened
during mercantilism in 16th to 17th Century.
IV. Kaido understand that import trade is when goods or services are brought into one
country from another, where they were originally manufactured or created.
a. i, ii, iv b. iii, ii, i, iv c. i, iii, iv d. ii, iii
3. Comparative Advantage suggests that countries should specialize in
producing goods or services in which they have a comparative advantage,
meaning they can produce more efficiently than other countries. The
statement is ?

A. True, because according to Adam Smith countries with an absolute advantage can produce
a good at a lower cost, and this can form the basis for trade.
B. True, as Hecksher and Ohlin said that a country that is relatively abundant in a factor of
production should export good.
C. True, because according to David Ricardo it is the ability of an economy to produce a
given good or service more efficient and competitive than others.
D. False, as geographical advantages can influence the basis for international trade.
The following is an example of the effects of international
trade, which is not?

A.Goten decided to produce more quality of automobile due to

high competition.
B.While buying imported fruits, Beerus was shocked when he
looks at the price.
C.Gohan’s wage increase as he qualified for the requirements set
by his employer.
D.Guko learned how to trade.
 INTERNATIONAL TRADE
BARRIERS
Trade barriers are government-imposed
restrictions on the flow of goods and services
between countries.
 TYPES OF INTERNATIONAL
BARRIERS
1. Tariff Barriers - Tariffs are taxes or duties imposed
on imported goods.

2. Non - Tariff Barriers - restrictions to control the

import and export of goods without imposing a
traditional tax or tariff.
 TYPES OF INTERNATIONAL
BARRIERS
3. Quota - A government-imposed trade restriction
limiting the number or monetary value of goods.

4. Product Standards - set of rules and guidelines

a product must meet to be sold.
 TYPES OF INTERNATIONAL
BARRIERS

5. Subsidies - can distort competition and make

it difficult for foreign companies to compete in
the domestic market.
BALANCE OF PAYMENT (BOP)

It is the method countries use to monitor all

international monetary transactions in a specific
period and usually calculated every quarter and
every calendar year.
How to determine the amount of money that is
going in and out of a country?

 Credit - If a country has received money.

Debit - if a country has paid or given money

 The trade balance can be:

 Trade Surplus – more exports of goods than

imports. (positive)

 Trade Deficit – more imports of goods than

exports. (negative)
 FOREIGN EXCHANGE
Foreign exchange (Forex or FX) is the
conversion of one currency into another at a
specific rate known as the foreign exchange
rate.
 Foreign Exchange Market - market in which national
currencies are traded for one another such as commercial banks,
forex brokers, etc.

 Exchange rate - rate at which one unit of currency of a country

can be exchanged for the number of units of currency of another
country.
EFFECTS OF INTERNATIONAL
TRADE
1. Market Structure - international trade can increase
competition, affecting the market share of domestic producers,
driving innovation, and shaping consumer choices.
 EFFECTS OF INTERNATIONAL
TRADE
2. Labor Market - Trade can lead to both job creation and job
displacement, impact wages and skill requirements, and
contribute to regional disparities.
EFFECTS OF INTERNATIONAL
TRADE
3. Price - international trade can lead to both lower and higher prices,
depending on factors such as exchange rates, trade policies, supply and
demand dynamics, and comparative advantage.
TUMPAKNERS
IN TRADE!!!
 SUMMARY
International trade allows countries to focus on the industries in
which they can be most productive and efficient. Studying it help us
understand the interconnectedness of the global economy, which
has far-reaching impacts on various aspects of life. In summary,
studying international trade is important because it has a profound
impact on economic growth, job creation, resource allocation,
cultural exchange, and global development. It plays a critical role
in shaping the world's economy and international relations, making
it a crucial subject for both academics and practitioners.