InternationalTradepage


 * International Trade page **

1. What is International Trade?  International trade is exchange of products/goods, services and capital between two or more countries. International trade permit a country specialize in the production of a product more efficiently, creating scales economy, whit lower cost; also it allows a State consume more than they could if they break out in autarky. For example, when Japón export cars to USA, Japon and USA are exchaging a tangible product. 2. What is Domestic Trade?  Domestic Trade is exchange of products and services in the same country, so it isn’t across a border. For example, when you go to a store and buy something, you are exchanguing something for money (capital) into your country. 3. What are the differences that exist between the two?  - International trade is between two or more different countries. But, Commercial Trade is into the same country.  - International trade is commonly more expensive than domestic trade, because a border typically imposes additional costs such as taxes.

 - In Domestic trade factors of production (capital and labor) are more mobile than in International Trade

READ MORE! (for summary 1)

International trade is the exchange of goods and services between nations. Countries trade because they are different, everyone has different resources and different production factors for trade. This is the reason because the countries that trade have a comparative advantage in any resource or production factor.

Comparative advantage is a theory created by David Ricardo. He said that every country has to specialized in the production of the product that it can produce better whit the lower opportunity cost, and after it has to trade this product whit other country that produce other thing by the same form, so both countries can consume more and better of both product.

Opportunity cost is the cost of a product “A” in terms of a product “B”. For example: if a country can produce 2 pants in 6 hours and can produce a car in the same time, the opportunity cost to produce 2 pants is to produce a car.

Absolute advantage is a theory created by Adam Smith. He said that a country has the absolute advantage in the production of something when it can produce it at a lower cost than other country using the same resources.

Protectionism exist when a country put barriers to other country for trade, it’s a form to protect domestic market. Examples of this are: ü Quotas: is a limitation in the quantify of the imports for a products. Example: USA impose a quota to Japan, so Japan just can export to USA 300 cars in a month. ü Tariff or other taxes: Is an additional cost that a country impose for import a product. Exists two type of tariff: specific and ad valorem. A specific tariff is a quantify of money that the importer has to pay for import something (like 20$ for any car that they want to import). An ad valorem tariff a specific percent of the value of the product that they have to pay for import it, like 25% in the value of the car, if the price of the car is 100.000$, the ad valorem is 25.000$, so they have to pay 125.000$.

.