INTERNATIONAL

TRADE

Prepared by Yelyzaveta Kolodyazhna,

a student of RK-203
What is International Trade?

International trade is an exchange involving a good or

service conducted between at least two different
countries. The exchanges can be imports or exports.
 Export Import
An export refers to a good or An import refers to a good or
service sold to a foreign country. service brought into the domestic
country.
Why Does International Trade Occur?

International trade occurs because

one country enjoys a comparative
advantage in the production of a
certain good or service, specifically if
the opportunity cost of producing
that good or service is lower for that
country than any other country.
Sources of Comparative Advantage
 International
differences in climate

International differences in climate play a

significant role in international trade.
For example, tropical countries export
products like coffee and sugar. In
contrast, countries in more temperate
areas export wheat or corn. Trade is also
driven by differences in seasons and
geography.
 Differences in factor endowments
Differences in factor endowments
imply that some countries are
more resource-rich than others
in land, labor, capital, and
human capital.
A country enjoys a comparative
advantage in production if the
resources are abundantly
available within the country
Canada exhibits a
comparative
advantage in the
forestry industry. It is
primarily driven
because the
opportunity cost is
lower for a country
rich in the related
resource.
Differences in technology

Differences in technology are most

commonly observed in superior production
processes seen in different countries. For
example, consider Japan in the 1970s – a
country that is not overly resource-rich yet
enjoys a comparative advantage in
automobile manufacturing. The Japanese
are able to produce more output with a
given input than any other country, and it
comes down to superior Japanese
technology.
 Benefits Drawbacks

Price Stability Adverse Effect on Domestic

Enhances Technological Consumption:
Know-How: Political Influence
Environmental Cost
Who benefit from international trade?

It provides consumers with a variety of

options and increases competition so that
businesses must produce cost-efficient
and high-quality goods, benefiting these
consumers. Nations also benefit through
international trade, focusing on
producing the goods they have a
comparative advantage in.
International Trade Barriers
 Tariffs Quotas

Tariffs are taxes on Quotas are quantity limits

imports. When a on imports. When a country
country imposes a imposes a quota on a
product, only a certain
tariff, that makes quantity of this product can
imports more be imported into the
expensive. country.
International Trade: Examples
In 2022, Europe started
importing natural gases
from Qatar instead of
Russia. Before the war,
Russia fulfilled almost 40%
of Europe’s natural gas
requirements.
Consequentially, Qatar has
signed various long-term
contracts with the US
(natural gas imports).
There are two countries Ukraine and
Norway. Ukraine produces grain at a
very low price (in comparison to
Norway). Ukraine is a developing
nation. Norway, on the other hand,
cannot grow grain on its land despite
having a flourishing economy—due to
the unfavorable climate and soil.
In such a scenario, international trade
takes place between Ukraine and
Norway. To fulfill domestic demands,
Norway can buy as much as it needs
from Ukraine.
 Conclusion
International trade is an
exchange of a good or service
involving at least two
different countries.
Comparative advantage allows
for gains from international
trade, ultimately leading to
increased consumption of
goods.
Two major barriers are tariffs
and import quotas.
Thank you for your attention!
Have a nice day