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Jamaica supplies the UK with exotic fruits and coffee beans because in the UK the climate makes it impossible to produce these products at the same low cost. The UK provides Jamaica with agricultural machinery that it does not have the expertise or the factories to produce itself. Investigate what goods and services are traditionally traded between your country and another. Explain why that trade exists and the benefits of that trade, giving examples where you can. Ans: Macau imports machinery, beverages and foodstuffs, automobile etc. Macau exports garments, textiles, beverages, toys etc. Trade exists when there is a process of buying and selling to make a profit. Trade exists because a country is not able to produce all the services or goods the people need. Therefore, a country has to trade with another country in order to get what she wants. Referring to the case, trade exists between Jamaica and UK because both countries cannot produce everything that people need in their home country. Besides, climate is also a main factor for the production of exotic fruits and coffee beans. There are several benefits of the trade in the above case: 1) Earn additional profit. 2) Enhance international reputation and image. 3) Gain more experiences in having trade. 4) Get the products that the country cannot produce by herself. 5) Raise standard of living in the country Take for example, China, our country, produces electronics, vehicles and textiles efficiently and to such high quality standards that large amounts are being exported to the USA. Benefits are that manufacturing industries are booming and people will have more job opportunities. Resources and raw materials are not wasted in mass production and that can reduce costs, thus making the products exported be sold at more competitive prices in the USA. That means the people in the USA can have more varieties of goods to choose and buy them at more reasonable prices. 3. Haresh plc has been manufacturing ethnic clothing in the UK and exporting about $3m-worth of textiles to the USA every year for over 20 years. There are rumours that the USA may introduce a textile import quota. Answer the following questions:

(a) What is a quota and why would the USA introduce one for textiles? Ans: A quota is a legal limit imposed by a government on the amount of a particular product that can be imported into a country. Exporters may find difficulties when they engage in foreign trade. Ans: We agree on this statement. (a) Give details of difficulties which firms may experience when they take part in foreign trade in: Ans: (i) delivering the goods: Exporting organizations may need to transport goods over great distances. They limit the availability of goods rather than simply increasing their price. . though the price of the goods may also rise. (ii) language: Communications with overseas traders must be carefully translated. 4. (c) “Quotas restrict free trade. (b) What impact might this quota have on Haresh plc and other textile manufacturers selling to the USA? Ans: The impact is that as quotas enable USA to limit the aggregate imports within specified limits. When imports are limited there may be shortages. They need to pay taxes or be limited the quantity of goods being imported. Exporters have to decide the most suitable form of transport. Name 5 problems faced by exporters which do not affect people in home trade. Ans: (i) language: Communications with overseas traders must be carefully translated. (iii) import restrictions: Trade barriers are main difficulties faced by exporters. a quota aims to allow domestic goods to compete more successfully. forcing traders and retailers to source them from home manufacturers. These shortages benefit the home suppliers because the consumers have no choice but to purchase their goods from them rather than going to cheaper international suppliers. 4. while publicity material and instructions which accompany goods must be prepared in several languages. By limiting foreign goods. while publicity material and instructions which accompany goods must be prepared in several languages. they help to improve the balance of payments position of the USA. causing prices to rise.” Explain this statement. The USA introduces one for textiles because suppliers are limited.

They need to pay taxes or be limited the quantity of goods being imported. (2) Mate’s Receipt: A mate’s receipt is issued by the ship’s mate when the cargo is delivered direct to the ship and put aboard. (5) They control the risk of infectious diseases entering the country. (3) They control the movement of banned goods and ensure that prohibited goods are not imported or exported. 5. Describe briefly the functions of Customs Authority. It is used when transporting goods by sea. In this receipt. (v) Payments: Different currencies are used and they need to be exchanged in the foreign exchange market. It is also a quasi-negotiable instrument as the holder of the bill can transfer the title of the goods by endorsing it to someone else. (4) They control and supervise bonded warehouses so that goods do not enter the country unless customs duties are paid. (iv) Customs regulations: Exporters have to obey the customs regulations which create more work for them. (3)Export licence: A document indicating that a government has granted an exporter the right to export specified goods to specified countries. Describe some of the documents used in foreign trade. the shipping company acknowledges the receipt of goods from exporters. Ans:(1) Bill of lading: It is a receipt issued by shipping company. 6. (4) Letter of Credit: It is a commitment on the part of buyer's bank to pay or . This is also an evidence of a valid contract of carriage between the consignor and the carrier. (iii) Cultural differences: Exporters need to make market research to know more about the markets of foreign countries.(ii) import restrictions: Trade barriers are main difficulties faced by exporters. (2) They compile of a wide range of statistics showing the pattern of trade and movement of goods. Ans: The customs authorities perform the following functions: (1) They collect customs duties imposed on goods imported to or exported from a country.

This will benefit the home suppliers because consumers have no choice but to purchase their goods. They are used by organizations who import goods to pay their exporting suppliers. materials or services are not available in the home country because a lack of natural resources. 8. (b) Why do countries engage in international trade? Give ONE reason. Besides.accept drafts drawn upon it provided that such drafts do not exceed specified amount. the imported toys need to be of better quality in order to compete with the local products to maintain a share in the market. or largely produced. different countries are engaging in international trade. The importer will ask their bank to draw up a documentary credit. Which kind of trade restrictions is more effective in controlling the quantity and quality of imported toys? Explain your answer. Therefore. The whole payment process is carried out by document and not by electronic transfer of funds. (a) Define international trade. goods and products between countries. to confirm that they were in fact produced. Country A is considering the imposition of a tariff or import quota on the imported toys from Country B. Ans: International trade. The government of Country A imposes a legal limit on the quantity of toys that are imported from Country B to cause prices to rise since there may be shortages in the supply of toys from Country B in the market of country A. also known as foreign trade. Ans: Imposing an import quota is more effective in controlling the quantity and quality of imported toys. signed invoice to show that the goods they wish to receive payment for have definitely been sent. refers to the range of activities concerned with the importing and exporting of materials. an insurance policy. This is then given to the exporter who can use it to get payment from a particular bank as long as they provide documentary evidence such as a bill of lading. (5) Certificate of origin: It is used to accompany duty free goods. Ans: Certain goods. . To protect domestic toy manufacturing industry. human expertise or perhaps even the right climate to grow a certain type of produce. 7. in the exporting country and also to ensure an importing country doesn’t get round tariffs or by re-exporting goods from countries where tariffs do not apply.

Ans: In this case. Trading blocs like EU and ASEAN promote encourage free trade. Suggest 3 advantages of free trade. . it is invisible. (c) A Hong Kong resident makes an annual donation of $4000 to sponsor two Somali children. Hong Kong tourists spent money there and used their services and bought souvenirs there. and whether they are imports or exports. (d) During the 2004 Athens Olympic Games. 3) With free trade. Yet. countries can specialize in producing certain goods and achieve high economies of scale. Hong Kong tourists visited Athens. This encourages a greater choice for consumers when buying goods or services and this helps them to achieve higher standards of living. we can neither touch nor see that. Ans: It is a kind of invisible imports because a Hong Kong resident donates money to sponsor two Somali children and the services and assistance given to the children are intangible. we cannot touch or see his/her voice. Since he/she sings in a concert tour and earns money in other places. The arrangement and organization of the concert tour of the Hong Kong singer is intangible. Imports are goods and services bought by people or firms in a country from foreign countries. 2) Free trade forces local firms to produce better goods and services as they face much foreign competition. Just take for example. we listen to his/her performance . A batch of perfume is visible and they are bought from France by a Hong Kong company. 10. Then they can exchange goods with other countries to maintain a healthy balance of payments. (a) A Hong Kong company buys a batch of perfume from France.9. State and explain whether the following items belong to visible or invisible trade. Ans: It is a kind of invisible imports because Hong Kong tourists went to visit Athens and they got services provided by the people in Athens. Ans: The 3 advantages of free trade are: 1) Free trade encourages firms to import and export. it is considered as a kind of export in Hong Kong's economy. Therefore. Ans: They are visible imports. (b) A Hong Kong singer makes a concert tour in the mainland and earns one million in box-office receipts. it is a kind of invisible exports.

2) It raises the standard of living and encourages liberal social programs 3) When a country has a trade surplus. which may be problematic once the foreign demand dries up. (b) What does it mean by a balance of trade surplus? Ans: Countries want their balance of payment to actually ‘balance’. some local workers may become unemployed. 5) Firms in foreign countries may ‘dump’ lots of cheap imports into the country.Are there any drawbacks for free trade? Ans: The drawbacks for free trade are: 1) Local businesses cannot be protected from foreign competitions and some may close down eventually. 2) New and infant businesses become more difficult to develop due to the foreign competitions. 3) As goods are imported from foreign countries and the production of goods by local industries will be reduced. there is more money flowing into the country than out of it. it has more control over its own currency 4) Trade surplus increases inflation as a rise in net exports will force production to meet foreign demand by increasing demand for labor and resource goods and services . 11. 4) Firms in foreign countries may import harmful or desirable goods. It is considered to be a good practice because the country will have more revenue or income from exporting. If a country’s balance of payments is in surplus. (c) What is the effect if a country has a balance of trade surplus? Ans: 1) A surplus may come to rely on foreign demand for its industry.(a) What is the balance of trade? Ans: The difference between total visible imports and total visible exports is known as the ‘current balance’ or ‘balance of trade’.