Level 2 Global Business Communication WJEC

International trade and global economy

International Trade

• International trade refers to the exchange of goods and services across international borders.
• Trade between different regions and countries has been at the heart of historical economic development.
• Countries trade globally for many reasons, including to obtain resources they do not have, to sell excess production, and to benefit from specialisation.
• Comparative advantage includes the ability of a country to produce goods and services at lower cost or more effectively than other countries.
• Exporting is the act of producing goods or services in your home country and selling them to other countries.
• Importing is when goods or services are brought into your country from elsewhere for sale.

Global Economy

• The global economy refers to the interconnected economy of all the world's countries, viewed as a single economic system.
• Globalisation has increased the interdependence of nations in the world economy.
• Financial markets, trade in goods and services, and capital flows are the main factors driving economic globalisation.
• The global economy is governed by organisations like the World Trade Organisation (WTO), the International Monetary Fund (IMF), and the World Bank.
• Developed countries like the USA, Germany, and Japan generally have diversified economies and strong global influence.
• Developing countries are economies that are industrialising and growing rapidly, such as India, China, and Brazil.
• Understanding the balance of trade (exports minus imports) and the balance of payments (financial flows from investments, transfers and other movements) is crucial in the global economy. They measure a country's economic health and its economic relations with the rest of the world.

Impact of International Trade on Global Economy

• International trade allows for expansion of markets, boosting economic growth and development.
• Trade can increase competition, leading to increased efficiency and innovation.
• Trade may lead to job creation in areas focused on exports but may also result in job losses if domestic industries cannot compete with foreign competition.
• Global trade can lead to income disparities both within and among countries. Some industries or workers may benefit more than others.
• Increased trade can lead to environmental degradation as industries may produce more pollution and waste.
• International trade can open up new channels for cultural exchange and can help to spread new ideas and innovations.