Topic 2 Basic Components of International Trade.ppt

Topic 2 Basic Components of International Trade.ppt - Topic...

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Topic 2: BASIC COMPONENTS OF INTERNATIONAL TRADE Lecture Notes Prepared by: Dr. Martine Oleche University of Nairobi School of Economics 09/11/18 1 Dr. Martine Oleche, School of Economics, University of Nairobi
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2.1 Major Components of International Trade International trade refers to the exchange of capital, goods and services across international borders or territories. International trade is quite wide. It involves not only merchandising, importing or export but trade in services, licensing and franchising as well as foreign investments. 2.1.1 One of the most controversial components of international trade is the lower costs of production of developing nations. There is currently a great deal of concern over jobs being taken away from the united states, members countries of the European union and other developed nations as countries such as China, Korea, India, Indonesia and others produce goods and services at much lower costs. 09/11/18 Dr. Martine Oleche, School of Economics, University of Nairobi 2
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Major Components of International Trade Contd… Both the United States and the European Union have imposed severe restrictions on imports from Asia nations to try to stem this tide. Clearly, a company that can pay its workers the equivalent of dollars a day, as compared to dollars an hour, has a distinct selling advantage. Nevertheless, American and European consumers are only too happy to lower their costs of living by taking advantage of cheaper imported goods. 09/11/18 Dr. Martine Oleche, School of Economics, University of Nairobi 3
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Major Components of International Trade Contd… 2.1.2 Specialized Industries Even though many consumers prefer to buy less expensive goods, some international trade is fostered by a specialized industry that has developed due to national talent and/or tradition. Swiss watches, for example, will never be price- competitive with mass produced watches from Asia. Regardless, there is a strong market among certain consumer groups for the quality, endurance and even “snob appeal "that owing a Rolex-Patek-Philip or Audemars Piquet offers. German Cutlery, English bone, China, Scottish wool, fine French silks such as Hermes and other such products always find their way onto the international trade scene because consumers in many parts of the world are willing to foster the importation of these goods to satisfy their concept that certain countries are the best at making certain goods.. 09/11/18 Dr. Martine Oleche, School of Economics, University of Nairobi 4
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Major Components of International Trade Contd… 2.1.3 Volume And Value Of Goods Say Oil Total net oil imports in 2010 are over 96 million barrels per day (U.S. Energy Information Administration figures Imports crude oil, natural gas liquids and refined products).
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  • Fall '18
  • Dr. Martine Oleche
  • International Trade, University of Nairobi, SCHOOL OF ECONOMICS, Dr. Martine Oleche

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