DEPT.: BUSINESS MANAGEMENT
FACULTY: MANAGEMENT SCIENCES
COURSE CODE: ECO 102
COURSE TITLE: INTRODUCTION TO ECONOMIC II
QUESTION: INTERNATIONAL TRADE THEORY
FACULTY: MANAGEMENT SCIENCES
COURSE CODE: ECO 102
COURSE TITLE: INTRODUCTION TO ECONOMIC II
QUESTION: INTERNATIONAL TRADE THEORY
INTRODUCTION
International trade arose out of the fact that no nation is self sufficient and different nations have varying quantities of diverse resource (human and material). For instance, Nigeria has an abundance of crude oil while South Africa boast of gold and diamond. Again while climate influences favour the growing of palm trees in Nigeria, countries like Chad, Niger, Algeria etc. can never produce same.
International trade is the necessity, uneven distribution of natural endowment, the existence of special skills and climatic differences hence a theory of comparative cost.
INTERNATIONAL TRADE
International trade may be defined as the exchange, buying and selling of goods and services between two or more countries. International trade is also known as foreign or external trade, before it can take place, there must be exchange, buying and selling of goods and services across the national boundaries of two or more countries.
THE MAJOR FORMS OF INTERNATIONAL TRADE• Bilateral international trade:- this is the exchange, buying and selling of goods and services between two countries.
• Multi – lateral international trade: this form of trade involves the exchange, buying and selling of goods and services among more than two countries
• Multi – lateral international trade: this form of trade involves the exchange, buying and selling of goods and services among more than two countries
REASONS FOR INTERNATIONAL TRADE• Inequitable distribution of national resources:- redistribution of the unevenly distributed natural resources is one of the reasons why international trade take place.
• Differences in climate conditions:- differences agricultural products are produced in different areas as a results of climate differences hence, the need for exchange.
• Differences in skills and technical know how:- these leads to differences in products produced and the need for exchange.
• Differences in the level of industrialization:- this brings about disparity in the level of production which will necessitate exchange.
• The quantity and quality of labour force:- this leads to differences in level of production which will give rise to exchange of goods and services.
• Differences in climate conditions:- differences agricultural products are produced in different areas as a results of climate differences hence, the need for exchange.
• Differences in skills and technical know how:- these leads to differences in products produced and the need for exchange.
• Differences in the level of industrialization:- this brings about disparity in the level of production which will necessitate exchange.
• The quantity and quality of labour force:- this leads to differences in level of production which will give rise to exchange of goods and services.
OBSTACLES ENCOUNTERED IN INTERNATIONAL TRADE * Problem of distance: International trade involves two or more countries that are far from one another.
* Problem of transport and communication: Problem arises when transport and communication are not efficient as what happens in West Africa.
* Currency Differences: Before a country buys anything from another country, she must convent her currency to the other country’s currency because every country has it’s own currency.
* Language problem: Certain aspects of people’s culture constitute stumbling block to international trade.
* Problem of Politics: Differences in political opinion and ideologies cripple free flow of trade between countries.
* Climate problem: The harsh climatic conditions of some countries scare away traders from other parts of trade between countries of the world.
BENEFITS OF INTERNATIONAL TRADE1. Equitable Re-distribution of Natural Resources: Natural resources found in one country are used in other countries of the world through international trade.
2. Enjoyment of special skills: through this trade, countries that do not possess enough skill enjoy the special skills of other countries that have enough.
3. Exchange of products: this trade makes it possible for a country to get products she cannot produce.
* Problem of transport and communication: Problem arises when transport and communication are not efficient as what happens in West Africa.
* Currency Differences: Before a country buys anything from another country, she must convent her currency to the other country’s currency because every country has it’s own currency.
* Language problem: Certain aspects of people’s culture constitute stumbling block to international trade.
* Problem of Politics: Differences in political opinion and ideologies cripple free flow of trade between countries.
* Climate problem: The harsh climatic conditions of some countries scare away traders from other parts of trade between countries of the world.
BENEFITS OF INTERNATIONAL TRADE1. Equitable Re-distribution of Natural Resources: Natural resources found in one country are used in other countries of the world through international trade.
2. Enjoyment of special skills: through this trade, countries that do not possess enough skill enjoy the special skills of other countries that have enough.
3. Exchange of products: this trade makes it possible for a country to get products she cannot produce.
CRITICISMS OF INTERNATIONAL TRADE 1. It leads to exploitation of poorer countries: The poorer nations are always at the mercy of the richer ones that dictate and determine prices in the world market.
2. It leads to dumping of goods: The industrialized nations use less industrialized countries as dumping ground for their manufactured goods.
3. It encourages Dependency: Dependency has a destabilizing effect because the economy of the dependent country will be affected if anything happens to the economy of the country it is depending upon.
SOME TOOLS USED IN CONTROLLING INTERNATIONAL TRADE
1. Tariff: Also known as import duty is tax imposed on goods that come from other countries into a particular country.
2. Import quota: It specifies the quantity of goods that will come form different countries.
3. Preferential duties: Discriminate duties are charged on certain goods in order to encourage and discourage the importation of certain goods from certain countries.
4. Import Licence: This is authority to import specified goods given to an importer by the government of a country.
5. Devaluation: When country’s currency value is reduced imports will cost more while exports will be cheaper thereby encouraging the citizens to export and discouraging them to import.
CONCLUSION
International trade is one of the best trade in the world because it makes it possible for a country to get product she cannot produce, it also makes goods which could not have been sold in the countries where they were produced, find ready markets in other countries of the world.
It makes every country to tries to be friendly with others so that trade can take place between the countries.
REFERENCES
H. Mgint “the classical theory of international trade and the under-developed countries” E.J. 1958.
H.W. Singer “The Distribution of Gains between investing and Borrowing countries” 1950.
John Black (Oxford Dictionary of Economics)
Johnson, ANYAELE, U. Comprehensive economic for Senior Secondary Schools 2003.
M.H. Watkins “the staple theory of economics growth “Canadian Journal of economics and political science” 1063.
M.I. Jhingan (The economics of Development and planning.
Okeke C.S.C. Economics for Senior Secondary School Jet publishers Onitsha 1986.
R. Prebisch “The economic Development of Latin America and it’s principal problems 1950.
S. Blinder (trade and trade policy or development; 1967)
Todaro, Michael P. Economic for a Developing world Longman London, 1977.