International Trade: notes

Why countries trade

• Reasons: countries lack some resources, and each is better at making certain goods.
• Comparative advantage: a country should make the good it makes at the lowest opportunity cost.
• Visible trade: goods you can touch, such as tobacco. Invisible trade: services, such as tourism and banking.

Accounts

• Balance of trade: visible exports minus visible imports.
• Balance of payments: a record of all money flowing in and out of a country.
• Exchange rate: the price of one currency in terms of another. A weaker currency makes exports cheaper.

Protection

• Tariff: a tax on imports. Quota: a limit on the amount imported. Subsidy: help to local firms.
• Reasons for protection: protect young industries, jobs and avoid dumping.
• Regional blocs: SADC and COMESA cut trade barriers among members.