Understanding International Trade Effects
Free international trade involves the unrestricted movement of goods and services across borders, leading to increased imports and exports. This increased competition can significantly affect domestic industries.
Analyzing Industry Impact
Consider the effects on different types of industries when international trade becomes freer:
- Industries with no trade: These are largely insulated from direct short-term impacts of changing trade policies.
- Industries selling domestically and abroad: These might experience mixed effects. While exports could grow, increased import competition domestically could still cause challenges.
- Industries selling only abroad (exporters): These might benefit from freer trade, potentially seeing increased demand, not immediate unemployment.
- Import competing industries: These are domestic industries that produce goods similar to those being imported. When trade barriers lower, imports become cheaper and more readily available, directly increasing competition for these domestic firms.
Identifying Unemployment Cause
The increased competition faced by import competing industries means domestic producers may struggle to compete on price or volume. This can lead to:
- Reduced sales and profits for domestic firms.
- Production cutbacks.
- Layoffs, resulting in short-term unemployment.
Therefore, the movement towards freer international trade is most likely to generate short-term unemployment in industries that compete directly with imports.
Important Questions from International Trade
Consider the following statements about the international financial sources :
I. A Global Depository Receipt (GDR) is a bank certificate issued in more than one country for shares in a foreign country.
II. A GDR is very similar to American Depository Receipt (ADR).
Select the correct option.
Which of the following documents is not required for obtaining export license?
_________ was set up with prime objective of professionalizing the country’s foreign trade management by providing training, research and data dissemination.
Which one of the following does not fall within the ambit of WTO operations ?
The following statements relate to Restrictive Trade Practices (RTP). Choose the correct code for the statements being correct or incorrect.
Statement I: Often the low price is the result of the predatory pricing strategy; prompting selling at prices below cost.
Statement II: This is done with an aim to drive out existing competitors because predatory pricing is a restrictive trade practice.
