International Trade and the Role of Trade

Organizations, an Imperative for Growth.

Free TradeFree trade means that countries can import and export goods without any tariff barriers or other non-tariff barriers to trade.

Benefits Of Free Trade Include:

Increased exports.Economies of scale.Increased competition.Trade is an engine of

growth.Make use of surplus

raw materials.

Theory of Comparative Advantage (By David Ricardo)

A country has a comparative advantage if it can produce a good at a lower opportunity cost than another country.

Theory of Absolute Advantage (By Adam Smith)

Absolute advantage means that an economy can produce a good for lower costs than another.

What is 'Protectionism'

Protectionism refers to government actions and policies that restrict or restrain international trade, Types of protectionism

Tariffs Quotas Subsidies

Barriers to TradeA barrier to trade is a government imposed restraint on the flow of international goods or services.

Trade Barriers

Tariff Non - Tariff

Tariff BarriersThis is a tax which is imposed on imported goods and services. It makes imported items more expensive to customers.

E.g. Tariffs on imports of Chinese tires into US. The US. Imposed tariffs of 35% on imports of tires from China.

Non – Tariff Barriers.

This is a wide variety of barriers which refers to the changes in government policies.E.g.

Import quotas, Embargoes, Sanctions, Licenses and Voluntary export restraints.

Why government raise barriers to international Trade?

To protect “INFANT INDUSTRIES”.

To protect non-renewable resources.

To provide more revenue.

The World Trade Organization is an intergovernmental organization which regulates international trade.

Roles of World Trade Organisation

Provides a forum for the trade negotiations between its member countries.

Handling trade disputes between the member countries through the established rules and regulations.

Corporation with other international organizations.

Administering WTO trade agreements

NAFTA – North American Free Trade Agreement

NAFTA is a comprehensive trade agreement that sets the rules of trade and investment between Canada, the United States, and Mexico.

Roles of NAFTA• Eliminate trade barriers in various service

sectors belonging to its member nations.• Reduce high tariffs and help to promote

agricultural exports.• Assure fair market value to investors by

reducing risk and offering the same legal rights that are enjoyed by local investors.• Help investors to claim against a

government by offering legal help.

Thank you…

•Countries want to give newly developing industries (known as infant industries) time to grow and become competitive. However, in some cases the government protection never ends and these industries become competitive only because they have been given the benefit of the trade barrier.