INTERNATIONAL TRADING

SYSTEM
CONTENTS
 International Trading System

 Ideologies on Trade

 Advantages of Free Trade

 Disadvantages of Free Trade

 Protectionism

 Forms of Protectionism
 INTERNATIONAL TRADING
SYSTEM
 Separation of tasks within a system

 Nations produces a certain product with a cheaper cost

 Excess production can be used to export to other countries

TWO MAJOR IDEOLOGIES ON TRADE:

 FREE TRADE
 One of the fundamental principles
of free trade is that “governments
should not interfere in the trading
activities of the economy”.
 “free traders”(trade deregulation)
in order to reduce government
interference in the economy.
 Trade deregulation refers to the
elimination of trade barriers among
various nations.
ADVANTAGES OF FREE TRADE

FREEDOM OF CHOICE
 Free trade presents a moral issue since they believe people should have the
right to be able to purchase and sell legal goods and services to each other.

ECONOMIC EFFICIENCY
 Free trade benefits the global economy by distributing labor effectively and
creating economic efficiency.

GLOBALIZATION
 Free traders argue that countries are less likely to conflict with each other
under the international trading system since trading provides mutual benefits
to both parties
DISADVANTAGES OF FREE TRADE

CONCENTRATION OF WEALTH
 Lead to the creation of market monopolies and the concentration of
domestic wealth into foreign corporations.

OUTSOURCING OF DOMESTIC
LABOUR
 It would lead to the reduction of domestic jobs, causing higher
unemployment rates within the domestic country.

CREATION OF TRADE DEPENDENCIES

 Argue that trade dependency leaves countries more vulnerable to economic
shocks since a shock affecting one country will inevitably affect the other
due to the trade dependencies that are created in the international trading
system.
 PROTECTIONISM
 One of the fundamental
principles of protectionism is that
“governments should restrict” the
trading activities within the economy.
FORMS OF PROTECTIONISM
TARIFFS
 When governments place heavy tariffs on imports it reduces the demand for foreign
goods and services thus leading to a reduction in the foreign country`s exports
because consumers would not want to spend more money on a foreign good due to
the extra cost.

NON-TARIFFS BARRIERS
 This ensures that cunsumers buy more domestic goods.

SUBSIDIES
 Governments often subsidize domestic manufacturers in order to create a trade
surplus.
DIRECT SUBSIDIES-are lump-sun payments or cheap loans provided to local business
to compete against foreign imports.

EXPORT SUBSIDIES-it is essentially a bonus commission paid by the government to

domestic exporters.
IMPORT QOUTAS
 Governments impose qoutas in order to maintain strict limits on the amount of
goods imported into the country.
THANK
YOU!