Formative Assessments

US252429 Explain the concept of international trade

Name of Learner: Nombulelo Sbahle Mkhungo

Learner number: 10082279

Group: CCF PT

Module 1

Formative Assessment 1.1

1.1

(a) Explain the difference between International and Local Trade by expanding the definition of

each term.

International trade- is the purchase and sale of goods and services by companies in different
countries. Consumer goods, raw material, food and machinery are all bought and sold in the
international market. International trade happens because of differences in resources, endowment,
differences in demand, the presence of government policies.

Local trade- also known as domestic or internal trade. It's the trade which takes place within the
borders of the country. For example, a shampoo made in Durban is getting sold in Cape Town. It also
does not impact the value of the nation currency.

Formative assessment 1.2

(b) Complete the below table by listing 3 differences between international and domestic
trade.

International Trade

Exchange of capital goods and services across international borders and territories.

Fundamentally restricted to the trade of goods and services only.

Time differences, language barriers and trade laws restrict the normal functioning of a trade
transaction.

Local Trade

Exchange of capital gpods and services within the borders of a country.

Provides for manufacturing and production trade.

Local trade is simplified with fewer restrictions that could otherwise hinder the transactional
trade process.
Formative Assessment 1.3

(a) List three (3) reasons why international boarders are protected, reference your answer to
the concept of international trade.

● To ensure that all import/export and other trade related revenue due to the state of a
perticular territory is collected.
● To ensure that the borders comply with the international trade regulations made by the
World Trade Organization(WTO)
● To ensure that the borders compy with the international Customs regulations made by the
World Trade Organization(WTO)
(b) List three (3) consequences of failing to protect territories boarders.

 Will experience a breakdown in political power

 Breakdown in law enforcement
 Breakdown in civil society

Formative Assessment 1.4

(a) Define in your own words the concept of free trade

 policies that permit low-cost imports and exports, free from tariffs and other trade
restrictions

(b) List Five (5) examples /characteristics of free trade

 Trade of goods without duties and taxes or other trade restrictions

 Trade in services without duties and taxes or other trade restrictions
 Free access to markets
 Free access to market information
 The free movement of capital between and within countries

Formative Assessment 1.5

(a) List Four (4) examples of trade policies that protect international trade i.e trade protection.

 Tariffs
 Import Quotas
 Administrative Barriers
 Export Subsidiaries

(b) Highlight the global impact of trade protection

 Protectionism is the economic policy of nations, whereby trade is restrained
between countries through methods such as imposing tariffs in imported goods,
restrictive quotas and a variety of government regulations.
 The policy is closely aligned with anti-globalisation and is in contrast with Free Trade,
which encourages government barriers to be kept at a minimum.
 (c) Define in your own words the concept of trade protection.

 the economic strategy of limiting imports from other nations using tools like import
taxes, import quotas, and various other government laws.

Module 2

Formative Assessment 2.1

(a) Explain the theory of comparative advantage relative to containerized cargo in international
trade

 Countries with a strong logistics network will have the competitive edge over a
country with poor infrastructure thus placing them in a stronger position to provide
an improved service to the buyer/seller. This will allow the flow of containerized
cargo to be more efficient in a first world country like Germany as opposed to a
developing country like Zambia.

(b) Explain in your own words your understanding of comparative advantage

 the capacity of a person or group to carry out one economic activity (like
manufacturing a certain product) more effectively than another.

Formative Assessment 2.2

 Define bilateral trade and provide an example of such agreement that exists in South Africa

-It is an exchange agreement between two nations or trading groups that gives each party
favoured trade status pertaining to certain goods obtained from the signatories.

-Bilateral preferential trade agreement-South Africa and Zimbabwe

 Define the term multi trade agreement and provide an example of this agreement which
exists on the African continent.

-trade agreements involving three or more countries. The agreements lower tariffs and
simplify the import and export processes for companies.

-Customs Union- South Africa, Botswana, Lesotho, Namibia and Swaziland

Formative Assessment 2.3

(a) List three impacts of imposing tariffs on imported goods.

 Can discourage foreign countries or business from trying to sell products in a foreign
country.
 Make the foreign import either too expensive or not nearly as competitive as it would be if
the tariff didn’t exist.
 Domestic producers benefit by ultimately facing reduced competition in their home market,
which leads to lower supply levels and higher prices for consumers.

(b) What are (provide the definition) and how do subsidies promote international trade

 Are government policies in aids of one or more industries, usually carrying a financial
benefit to the industry.
 Producing those things is less expensive thanks to subsidies than it is for export.
Because of this, domestic prices are reduced. Tariffs and subsidies both increase the
cost of imported items in comparison to native goods, which lowers imports.

Formative Assessment 2.4

(a) What are the more popular commodities in developing countries?

 Raw materials
 Unprocessed goods
 Natural material

(b) What are the more popular export commodities in developed countries?

 Cement

Formative Assessment 2.5

(a) List all the roles involved the international trade spectrum in chronological order
 The Shipper
 The Forwarder
 The consolidator
 The Haulier
 Port Authority and Customs Authority
 The Carrier
 The Importer

(b) Explain the role of the carrier in international trade

 The role player is involved in a main leg transportation of cargo to and from or in-
between countries in International trade.
 (c) What is the main difference between the forwarder and clearing agent?

Formative Assessment 2.6

(a) List three (3) ways in which technology has rapidly improved the flow of imports and exports
within national boundaries and what impact has this had on trade at the national boundaries

(b) How has customs modernization transformed international trade?

Module 3

Formative Assessment 3.1

(a) Explain the roles of banks in international trade

 They guarantee payment for around a fifth of world trade, in particular when the
contract enforcement of the importing country is weak

(b) Explain the role of the main carrier in international trade

 The role player is involved in a main leg transportation of cargo to and from or in-
between countries in International trade.

(c) Explain the role of freight forwarder in international trade

 Ensure that goods transition effectively in every stage of their journey and arrive
safely to their destination.

Formative Assessment 3.2

(a) How does sea transport fit into the international trade spectrum?

(b) List three (3) benefits of air transport

 (c) In your opinion, do you think South Africa has a well-developed rail network

Formative Assessment 3.3

(a) List the effect of commodity prices on the choice of transport employed by an importer

(b) With due regard to imports into war torn country transport regulation, how would this effect
the mode of transport

(c) Explain the concept on Ocean liner conference systems and the effect this has on the
importer

Formative Assessment 3.4

(a) Explain how the freight forwarder reduces transit times on a particular shipment for their
client

(b) Explain the role of the freight forwarder in tracking and customs clearing shipments

Formative Assessment 3.5

(a) Explain the role of an expert management company and provide an example thereof

(b) List three types of services typically provided by an EMC

Formative Assessment 3.6

(a) List 3 ways in which the interests of the shipper are protected

(b) List 3 ways in which the interests of the importer are protected

Module 4
Formative Assessment 4.1

(a) List any three (3) types of international payment methods

Formative Assessment 4.2

(a) Define the term “confirming bank”

(b) What is the importance of banks in international trade?

Formative Assessment 4.3

(a) Explain the concept of forward cover in your own words

(b) List three benefits of forward cover to the buyer

Formative Assessment 4.5

(a) Differentiate between revocable and irrevocable letters of credit

(b) List two advantages of both revocable and irrevocable letters of credit

Formative Assessment 4.6

(a) Explain in your own words the use of foreign currency in international trade

Formative Assessment 4.7

(a) List one advantage to the buyer and the seller in respect of employing each method of
international payment listed hereunder.
- Bank collections
- Letters of credit
- Open account

(b) As a first-time importer, suggest an appropriate payment method that will safeguard your
interests, substantiate your answer by listing the associated advantages of your suggested
choice.