International Trade and Finance

Topics: International trade, Economics, International economics Pages: 3 (762 words) Published: June 4, 2012
In some ways the United States and Japanese are the biggest competitors in the international trade because both countries are producing many of the same goods. For example, Toshiba’s biggest competitor in the personal computer is Dell. After the emergence of world trade organization the volume of the international trade has increased too large and countries are actively participating in the trade to push their gross domestic product. This active participation in the trade allows them to specialize in what they do best and to enjoy a greater variety of goods and services. This paper (speech) will examine more deeply about the comparative advantages, exchange rate risks and trade barriers in the international trade and finance. Comparative advantage

In the international trade the role of comparative advantage is enormous and can be referred to as the capability of a country or company to manufacture a particular good or service at a lower opportunity cost than the other competitive country or company. Exchange rate risk

The exchange rate is the price of one country's currency in terms of another country's money. This threat usually has effects on organizations that export or import, but it can also affect stockholders from creating international funds. For example, when the price of primary commodity of a country increases the currency experiences rise and the currency price goes down when the price of primary commodity goes down. The below chart may help to understand clearly,

The demand for domestic currency will come down in the international market when the country faces internal disturbance. The internal disturbance will cause to decrease the domestic production and this will force to decrease the value of the currency through decreasing the investment and demand for local currency in the international currency exchange market. Inflation is another factor that plays an important role to determine the value of the currency, for...
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