Topic 1 Introduction to International Trade.ppt

Topic 1 Introduction to International Trade.ppt - Topic 1...

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Topic 1: INTRODUCTION TO 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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1.1 Definition and meaning of International Trade International trade is the exchange of capital, goods and services across international borders or territories. International trade is the trade that takes place between one country and other countries. i.e. it is a trade transaction that takes place between one or more countries. It is different from domestic trade which takes place within a country and uses local currency. International trade involves the use of international currency(ies) and to obtain this, one has to go through some procedures. 09/11/18 Dr. Martine Oleche, School of Economics, University of Nairobi 2
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Definition and meaning of International Trade Contd.. Czinkota etal defined international trade to consists of transaction that are devised and carried out across national boarders to satisfy the objectives of individuals and operations. International trade uses a variety of currencies, the most important of which are held as foreign resent by governments and central banks. The US dollar is the most sought-after currency, with the Euro in strong demand as well. 09/11/18 Dr. Martine Oleche, School of Economics, University of Nairobi 3
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1.2 Nature and scope of International Trade In most countries, international trade represent a significant share of Net National product and Gross Domestic Product. International trade as the meaning implicate has been presented throughout much of history, its economic social and political importance has been on the rise in recent centuries. Industrialization, advanced transportation, globalization, multinational corporations and outsourcing are all having a major impact on the international trade continuance of globalization. Without international trade, nations would be limited to the goods and survives produced within their own borders. The main difference is that international trade is typically more costly than domestic trade. 09/11/18 Dr. Martine Oleche, School of Economics, University of Nairobi 4
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Nature and scope of International Trade Contd.. International trade is, in principle, not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not. The reasons is that a border typically imposes additional costs such as tariffs, time costs due to border delays and cost associated with country differences such as language the legal system or culture. In international trade, the factors of production such as capital and labor are typically more mobile within a country than across countries.
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