International Trade Essay

Only available on StudyMode
  • Download(s) : 344
  • Published : March 29, 2011
Open Document
Text Preview
International Trade Project
1. Describe the benefits and disadvantages of specialisation at regional and national levels.
Economics is about the production, distribution and consumption of goods. A key decision facing workers, firms and nations is what goods to produce. The economic concept of specialisation helps answer this question. Under specialisation, economic actors concentrate their skills on tasks at which they are the most skilled. For the same reasons entire countries have specialized in the production of particular goods and services and trade internationally.

Benefits| Disadvantages|
* Countries can get goods and services that they don’t have or cannot produce. For example, Japan has specialized in technology providing the world with 3D televisions and computers that are controlled by the owner’s eyes where as Germany has specialised in producing cars. | * A disadvantage would be that large businesses would move from countries with high costs to developing countries to produce at much lower costs in both resources and labour nut also taking control of it by threatening to move elsewhere. In other words, the business will be in control of the country. | * Countries can obtain goods and services at a cheaper price than producing it themselves. For example, counties such as Iceland can grow fruits and vegetables but only in very expensive and costly greenhouses because of the cold climate. However, they can import these fruits and vegetables and save themselves a huge amount of money.| * Because businesses are always moving to cheaper places, this is affecting the developed countries by increasing it unemployment rate. Also, it is polluting the world by constant transportation across borders and changing the global climate.| * Another advantage of international trade would be taking advantage of cheap labour from other countries. The perfect example would be China because it has both cheap labour and cheap resources. Businesses from other countries gain from this because they produce at very low costs and are able to compete.| * Resources are scarce and products that are produced by only one country will eventually run out and become extinct. For example, Egypt produces cotton and exports it to all over the world. If it was the only country that produced cotton, then over time, resources will run out and there will be no one to produce cotton. |

2. Describe the structure of the current account of the balance of payments Changes in the balance of payments accounts are always topical because they reflect the country’s international trading performance and affect the foreign exchange markets. The balance of payments data also affect the perception of our economy on the international scene. The Canadian economy is very open, both in terms of the share of output traded and the amounts of capital which flow in and out of the country. Since Canada has a relatively small population base and limited domestic capital available, it must look to foreign countries, such as the United States, to meet the nation’s capital requirements. The balance of payments therefore takes on special significance. It constitutes a statement of all transactions between Canada and the rest of the world during a given year. The balance of payments also indicates whether or not the country has sufficient foreign currency (or foreign currency earnings) to cover its liabilities to foreign countries.

The current account records all receipts and payments from goods and services transactions with foreigners. These transactions are divided into three distinct categories: goods and services, investment income and current transfers. In addition to various goods, "goods and services" includes travel, transportation, commercial services and government services. Investment income includes interest as well as profits and dividends on direct investments, portfolio investments and other investments....
tracking img