Topic 4 of 7 · Form 4
International trade
Differences in natural resources, climate, skills and costs; specialisation and comparative advantage; access to goods not produced locally.
Notes for this topic 1 file, in order
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Reasons for international trade
Differences in natural resources, climate, skills and costs; specialisation and comparative advantage; access to goods not produced locally.
Visible and invisible trade
Balance of trade (visible exports − visible imports) and balance of payments (including services and income).
Worked example: Visible exports US$4.5 billion; visible imports US$6.0 billion. Find the balance of trade.
4.5 − 6.0 = −US$1.5 billion (deficit)
Barriers and documents
Barriers: language, currency, distance, regulations, tariffs and quotas. Documents: export invoice, bill of lading, air waybill, certificate of origin, customs declaration, letter of credit.
Customs authorities
Collect duties, control prohibited goods, collect statistics; bonded warehouses allow duty to be paid when goods are released.
Trading blocs and free trade areas
Advantages and disadvantages of membership (e.g. reduced tariffs, larger markets vs loss of control, competition).
Help for exporters
Government export agencies, export credit insurance, trade missions and exhibitions.
Check yourself
- Give two examples of invisible trade.
- What is the purpose of a bill of lading?
- Give one advantage of a bonded warehouse to an importer.
Show answers
- Any two: tourism, insurance, banking, transport services, education services.
- It is a receipt for goods shipped, evidence of the contract of carriage and a document of title.
- Duty is paid only when goods are removed, helping cash flow; goods can be prepared or re-exported duty-free.
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