International Trade
Question - What is meant by trade balance? Explain the types of trade balance.
Answer -
Different countries trade (import-export) some goods or services with each other. The difference between this import and export is called trade balance.
Types of trade balance -
There are two types of trade balance.
- Negative balance - the value of imports exceeds the value of exports.
- Positive Balance - If the value of exports is more than the value of imports then it is a positive trade balance.
Question - How does the difference in national resources affect international trade? Explain with examples.
Answer -
There is a difference in resources in all the countries of the world. This difference is at both the levels of natural resources and human resources. There is also a difference in their quality and quantity. Therefore, the possibility of trade between two countries increases.
Example-
1. Due to the difference in geographical structure, one nation has different agricultural crops than the other nation. For example, coffee production is high in Brazil and hence coffee is exported from there to other countries.
2. Minerals are also unevenly distributed. Precious minerals from South Africa are exported to other countries. Developed countries like Japan import minerals.
3. Diversity arising from climate also ensures diversity of production which affects trade. For example, wool can be produced only in cold areas, banana, rubber, coffee can be produced in tropical areas.
Question - What is free trade? Explain its merits and demerits.
Answer -
When trade barriers between two countries are removed, such as abolishing customs duties, it is called free trade.
Property
- Domestic products and services get international competition
- The quality of production increases.
- There is an increase in business.
Shortcoming
- Due to lack of proper development in developing countries, developed countries send their products in large quantities to their markets
- Due to which the economy of developing countries gets affected and their own industries start closing down.
Question: Explain the meaning and characteristics of port?
Answer -
Ports are called the gateway to international trade. Ports are vital for trade because a large scale international trade is carried out through sea routes only.
Features of the port
1. Provide shelter for ships to stop and stay.
2. Provide facilities for loading, unloading and storage of goods.
3. State of the art facilities, refrigerators, small boats.
4. Provide labour and managerial facilities.
5. Make arrangements for the maintenance of ships.
Question: Explain the main problems related to international trade with examples.
Answer -
1. International trade is mutually beneficial to nations if it leads to higher levels of production, availability of goods and services, and equalization of prices and wages.
2. International trade may be harmful to countries if it leads to dependence on other countries, unequal levels of development, exploitation and rivalry leading to war.
3. The use of natural resources is increasing due to international trade. This is causing environmental and health related problems. Resources are depleting rapidly.
Question - What is the role of the WTO as an international organization? Why has the WTO been criticized by some countries? Explain.
Answer -
The World Trade Organization is an international organization that resolves disputes between nations. This organization also includes trade in services such as telecommunications and banking and other subjects such as intellectual property rights in its work.
Criticism :-
1. WTO has promoted free trade and globalisation due to which rich countries are becoming richer and poor countries are becoming poorer.
2. Developed countries have not opened their markets to the products of developing countries.
3. Only a few influential nations dominate this organization.
4. WTO ignores environmental issues, child labour, workers' health and rights.
Question - What is the basis of international trade? Explain?
Answer -
Every country in the world has specialisation in the production of one or other goods. This specialisation becomes the basis of international trade.
1. Variation in national resources
2. Population size
3. Stage of economic development .
4. Limit on foreign investment.
5. Transportation.
