TRADE DEFINITION, TERMS OF TRADE, FACOTRS AFFECTING, FREE TRADE, ADVANTAGES OF FREE TRADE ETC.

1. INTERNATIONAL BUSINESS
F. JOSEPHINE LENTA,
ASSISTANT PROFESSOR,
DEPARTMENT OF COMMERCE,
COLLEGE OF SCIENCE AND HUMANITIES,
SRM IST
RAMAPURAM

2. UNIT 2
 FREE TRADE AND ITS ARGUMENTS

3. FREE TRADE:
Free trade is a trade policy that does not restrict
imports or exports. In government, free trade is
predominantly advocated by political parties that
hold economically liberalpositions, while
economic nationalist and left-wing political
parties generally support protectionism, the
opposite of free trade.

4. TERMS OF TRADE:
Theterms of trade (TOT)is the relative price of exports
in terms of imports and is defined as the ratio of export
pricesto import prices.It can be interpreted as the
amount of import goods an economy can purchase per
unit of export goods.

5. GAINS FROM TRADE
specializationin production fromdivision of
labor, economies of scale,scope, and agglomerationand
relative availabilityof factor resources in types of output
by farms, businesses,locationand economies
a resulting increasein total output upossibilities
trade through markets from sale of one type of output for
other, more highly valued goods

6. INTERNAL TERMS OF TRADE:
Internal Termsof Trade also known as
Domestic Trade restrictionimposedon the buying and
selling of goods and serviceswithin the confines of the
international boundaries of a nation. So while import and export
are important for the economy of a nation, most of its GDP
contribution comes from internaltrade.

7. FACTORS AFFECTING TRADE:
 ECONOMIC GROWTH
 TARIFF
 AVAILABILITY OF SUBSITITUTES
 NATURE OF SUPPLY
 TRADE POLICY
 RATE OF EXCHANGE
 SIZE OF THE COUNTRY

8. ADVANTAGES OF FREE TRADE:
 SPECIALISATION
 OPTIMUM UTILIZATIONOF ECONOMY RESOURCES
 CHEAPERPRICE
 LARGERPRODUCTION
 WIDELYIN TO THE MARKET
 TERCHNICALDEVELOPMENT
 CREATEGLOBALDEMAND
 PROMOTE CO-OPERATION AMONG NATIONS

9. DISADVANTAGES OF FREE TRADE:
 IMBALANCEDEVELOPMENT
 ABSENCEOF PERFECT COMPETITION
 INFERIORGOODS ARE ALSOO TRADED
 STIFF COMPETITION
 EXCESS DEPENDENCE OF FOREIGN COUNTRIES
 GIVERIGHTSTO MNC ANDMONOPOLY
 DUMPING

10. PROTECTION TRADE
PROTECTION TRADEMEANS PROTECTING THE DOMESTIC
INDUSTRIESFRM FOREIGN INTERVENTION.
 INFANT INDUSTRIESARGUEMENT
 DIVERSIFICATIONOF INDUSTRYARGUMENT
 DEFENCE ARGUMENT
 EMPOLYMENT ARGUMENT
 FISCALAGREEMENT
 WAGES ARGUMENT
 DUMPING ARGUMENT
 COLLECTING ADVERSEBALANCE OF PAYMENT
ARGUMENTS AGAINST PROTECTION OF TRADE: