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International Trade One Shot | CA Foundation Business Economics | Vishwas CA | Shubham Jagdish Sir🔥

VishwasCA・157 minutes read

International trade involves the exchange of goods, services, and resources between countries, leading to economic growth and innovation through specialization according to comparative advantage. The various theories and benefits of international trade highlight the importance of productivity, technological advancements, and enhancing competition for mutual benefit.

Insights

International Trade involves the exchange of goods, services, and resources between countries, including human resources.
The unit delves into theories and benefits of international trade, emphasizing efficiency, economic growth, and productivity.
Different trade theories like Mercantilism, Absolute Advantage, and Comparative Advantage are discussed, highlighting specialization and mutual benefits.
New International Trade Theory, focusing on Imperfect Competition and increasing returns, promotes mutual benefits and enlarging markets.
Tariffs, subsidies, and non-tariff barriers impact international trade, affecting imports, exports, and market access.
The World Trade Organization (WTO) aims to regulate international trade, ensure fairness, and provide a platform for dispute resolution and liberalization.

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Recent questions

What is international trade?
International trade involves exchanging goods and services between countries.
What are the advantages of international trade?
International trade enhances productivity, stimulates innovation, and supports economic growth.
What are the disadvantages of international trade?
International trade can lead to unequal market access, exploitation, and environmental damage.
What are tariffs in international trade?
Tariffs are taxes imposed on imported goods to regulate trade.
What is the World Trade Organization (WTO)?
The WTO is a global organization regulating trade rules between nations.

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Summary

00:00

"International Trade: The Benefits and Disadvantages"

The unit discussed in the video is International Trade, which is emphasized as important and beneficial.
Reading the unit line by line is recommended for a better understanding.
Completing all multiple-choice questions in the unit will earn 10 marks in the CA Foundation exam.
International trade involves the exchange of goods, services, and resources between countries, including human resources.
The unit explains transactions between residents of different countries, known as international trade.
Trading with multiple currencies is a key aspect of international trade.
The unit delves into theories and benefits of international trade, emphasizing the efficiency and economic growth it brings.
International trade enhances productivity, stimulates innovations, and supports technological advancements.
It broadens the productive base, facilitates export diversification, and contributes to human resource development.
However, international trade can lead to unequal market access, exploitation, environmental damage, and dependence on foreign nations, among other disadvantages.

15:28

Evolution of Economic Policy in Europe

Economic policy trend in Europe from the 16th to 18th century focused on government control of industry and trade to prioritize exports over imports.
The theory of mercantilism emphasized the importance of maximizing foreign exchange reserves to dominate markets through aggressive export strategies.
Adam Smith's theory of absolute advantage highlighted the benefits of countries specializing in producing goods they can make more efficiently than others.
Trade between countries would be mutually beneficial if one country could produce a commodity at an absolute advantage over another, leading to a principle of absolute advantage.
David Ricardo's theory of comparative advantage suggested that countries should focus on producing goods where they have a comparative advantage, even if they are not the most efficient in all areas.
Comparative advantage theory allows countries to benefit from trading according to their strengths, leading to increased production and trade efficiency.
The Hicks and Olin theory of trade emphasized the importance of factors of production, such as labor and capital, in determining a country's export focus.
Competition from foreign firms can lead to increased efficiency and innovation in domestic industries, driving economic growth through trade.
Trade enables greater product variety and efficiency, leading to more efficient investment spending and innovation.
Reduction of tariffs and trade barriers can have a larger impact on trade than conventional models suggest, promoting economic growth and efficiency in international trade.

31:11

Globalization and New Trade Theory Insights

New International Trade Theory called globalization emerged in the 1980s.
The rise of the New Trade Theory retained insights from Traditional Trade Theory, introducing Imperfect Competition.
Imperfect competition includes monopolistic competition and oligopoly, emphasizing increasing returns.
The New Trade Theory promotes mutual benefit through positive sum games, enlarging markets and enhancing competition.
International trade boosts economies of scale, leading to gains beyond comparative advantage.
Traded goods are often produced by oligopolistic industries with external economies of scale.
American Economist Paul Krugman received the Nobel Prize in 2008 for his work on international trade.
Krugman observed that most international trade occurs between countries with similar labor-to-capital ratios.
Krugman defended free trade, highlighting the benefits of cheap labor in developing countries.
The Theory of Comparative Advantage emphasizes a country's ability to produce goods at a lower cost than others, promoting trade for mutual benefit.

46:55

India's Active Free Trade Deal Engagements

India has been actively signing free trade deals, becoming one of the most engaged countries in the world.
The rush began with an agreement with Mauritius on April 1, 2020, followed by negotiations with UAE, Australia, UK, Canada, and the European Union.
On February 18, 2022, a Comprehensive Economic Partnership Agreement (CPA) was signed with UAE.
The next anticipated free trade agreement is with the UK, expected to conclude in October 2022.
Discussions are also ongoing with Canada, the European Union, and the Gulf Cooperation Council countries.
Tariffs are taxes imposed on goods and services during import or export.
Tariffs are applied differently to various commodities, with specific rates for each.
Tariffs aim to regulate imports, protect domestic industries, and generate revenue for the government.
Specific tariffs are fixed amounts based on the weight or measurement of imported goods.
Ad valorem tariffs are calculated as a percentage of the value of the imported goods.

01:04:08

Impact of Tariffs on International Trade Relations

Developing manufacturing industries in exporting countries impacts trade between developed and developing nations.
Restrictive tariffs are imposed on raw materials and finished goods to protect domestic industries.
Import subsidies are payments or discounts given to importers to promote domestic production.
Anti-dumping duties are tariffs imposed on foreign imports priced below fair market value to protect domestic producers.
Tariffs create trade barriers, decrease imports and exports, and affect market access.
Tariffs make imported goods more expensive, reducing consumption by domestic consumers.
Tariffs promote domestic industries, increase producer surplus, and boost employment.
Tariffs prevent countries from benefiting from comparative advantage and distort trade.
Tariffs generate government revenue for the importing country.
Non-tariff measures include technical and non-technical barriers to trade, such as import quotas and price control measures.

01:19:53

Import Price Control Measures and Regulations Summary

Price control measures aim to ensure that the price of imported goods matches domestic prices.
Non-automatic licensing and prohibitions are implemented to regulate the quantity of imported goods, regardless of their origin or supplier.
India prohibits the import and export of arms and related materials from Iraq, as well as items falling under specific age codes.
Financial majors focus on increasing import costs by regulating foreign exchange access and defining payment terms.
Financial majors may require importers to pay a percentage of the goods' value in advance and restrict foreign exchange for certain imports.
Majors affecting competition involve granting exclusive privileges to limited economic operators, imposing import channels, and restricting imported goods' levels.
Government procurement policies may mandate a percentage of purchases from domestic firms and give preferences to local tenders.
Trade-related investment majors include rules on local content requirements and the use of locally made components in goods.
Distribution restrictions involve limitations on selling imported goods, requiring licenses, and restrictions on post-sale services.
Administrative procedures are mandatory for importing foreign goods, involving costly and time-consuming processes that may hinder trade.

01:35:54

Trade Barriers and Strategies for Fair Trade

Voluntary export restraints restrict the quantity of goods exported from a country during a specific period.
Anti-dumping duties are imposed on construction to offset the effect of exporting firms charging unfair prices in foreign markets.
Dumping duty and additional import duties are imposed to counteract exporting firms' unfair pricing strategies.
Subsidies, not government intervention, are the focus in the matter of dumping and import duties.
Countervailing duties are charges by importing countries to ensure fair pricing of imports and protect domestic markets.
Tariffs create obstacles to trade, increase import and export volumes, and benefit domestic consumers.
SPS and TBT measures under WTO aim to protect developing countries from losing competitive advantages due to more developed countries dumping products.
Import quotas, countervailing duties, and pre-shipping product inspection are non-tariff barriers to trade.
Tariff rate quotas promise to impose tariffs on imports from non-member countries while allowing limited quantities at lower rates within a preferential trade agreement.
Regional trade agreements aim to reduce trade barriers among countries in the same geographical area, with various types like unilateral trade agreements, bylaw trade agreements, and regional preferential trade agreements.

01:51:39

Uruguay Round: Birth of WTO and Trade Agreements

The Uruguay Round addressed various trade policy issues, establishing 15 groups to work on limiting restrictions in areas like tariff and non-tariff barriers, tropical products, natural resources, textiles, clothing, agriculture, and safeguarding against sudden import surges.
The round began in September 1986 in Uruguay and was scheduled for completion by December 1990 but faced delays due to controversies, particularly over agriculture, concluding in December 1993.
The Uruguay Round involved 123 countries and was the most ambitious multilateral trade negotiation, with the agreement signed on April 15, 1994, and taking effect from July 1, 1995, marking the birth of the World Trade Organization (WTO).
The WTO is the only global organization dealing with trade rules between nations, aiming to ensure smooth, predictable, and free trade flow, facilitating international trade and cooperation among countries.
The WTO's objectives include setting and enforcing rules for international trade, providing a forum for trade liberalization negotiations, resolving trade disputes, increasing decision-making transparency, and assisting developing countries in benefiting from global trade.
The WTO's structure includes a Secretariat in Geneva, a Ministerial Conference as the top decision-making body, a General Council, Goods Council, Services Council, and Intellectual Property Trips Council, overseeing the implementation of WTO agreements.
The WTO has around 164 members, with 117 developing countries and separate customs territories, working towards guiding principles like Most Favored Nation treatment, national treatment, and free trade through progressive liberalization.
Important agreements within the WTO include those on agriculture, sanitary and phytosanitary measures, textiles and clothing, technical barriers to trade, trade-related investment measures, anti-dumping, customs valuations, pre-shipment inspection, rules of origin, and import licensing procedures.
These agreements aim to regulate various aspects of international trade, such as subsidies, safeguards, trade in services, intellectual property rights, and trade policy reviews, ensuring fair and transparent trade practices among member countries.
The WTO's Trade Policy Review Mechanism conducts periodic reviews of members' trade policies and practices, ensuring compliance with WTO agreements and promoting a stable and predictable global trade environment.

02:08:43

Global Trade Policy Trends and Implications

Trade Policy Review Mechanism discussed in the 15th agreement, with the last agreement focusing on Plural Trade Agreements involving multiple countries.
Negotiations evolving in Antayas Cutting Parties for Trade Agreements with common interests among several countries but not under the WTO framework.
More than two or three countries part of WTO engage in negotiations among themselves without impacting the WTO.
Doha Round, formally known as the Doha Development Agenda, launched at the WTO Fourth Ministerial Conference in Doha, Qatar, in November 2001, focusing on lower trade barriers and revised trade rules.
Doha Round aimed at negotiations in 20 areas of trade, including agriculture, service trade, market access for non-agricultural products, trade facilitation, environment, geographic indications, and intellectual property issues.
G20 economy lifted some trade restrictions measures, emphasizing the need to keep markets open and predictable, particularly for food and fertilizer flow.
G20 economy introduced new trade facilitating measures and trade restrictive measures, with a significant impact on imports and exports.
WTO members implemented export restrictions on food, feed, and fertilizers, with some gradually lifted but many remaining in place.
G20 economy experienced a decline in trade remedy investigations and new Covid-19 related trade measures, impacting industries and regions differently.
WTO agreements, including agriculture, textiles, and intellectual property rights, have significant implications for member countries, with developing nations affected more than developed ones.

02:24:46

"Fixed exchange rates impact trade and investment"

Fixed exchange rate system is determined by the government or central bank, avoiding currency fluctuations and risks.
Fixed exchange rates enhance international trade and investment by imposing discipline on a country's monetary authority.
Stability in a fixed exchange rate system encourages greater trade and investment, enhancing a country's monetary policy credibility.
Real exchange rate determines the net exports of goods and services between countries, impacting trade flows.
The formula to calculate the real exchange rate involves the nominal exchange rate and domestic and foreign price indices.
The foreign exchange market involves spot and future transactions, with spot exchange rates for immediate transactions and forward exchange rates for future delivery.
Depreciation of a country's currency increases the price of foreign goods, affecting domestic spending and trade.
Depreciation can lead to increased exports, cheaper imports, and potential benefits for labor-intensive industries.
Depreciation may also lead to consumer price inflation, affecting policy rates and business borrowing costs.
Appreciation of a currency can reduce export prices, increase imports, and potentially lead to a current account deficit, impacting economic growth prospects.

02:39:21

Impact of Exchange Rates on Imports and Exports

Not importing goods from the US will prevent an increase in the supply of dollars, potentially leading to a decrease in the dollar value and an increase in remittances from employees abroad.
Increasing the supply of dollars may cause the exchange rate to rise, impacting consumer imports and leading to increased demand and exchange rates.
Repayment of foreign money may increase if the country does not import goods, affecting the exchange rate.
Consumers in India choosing to buy more imported goods may lead to currency depreciation and a shift in the demand curve for the dollar.
The nominal exchange rate is expressed in units of one currency relative to another, adjusting for price levels.
Matching terms related to exchange rates, such as floating and fixed exchange rates, can be challenging due to potential typing errors in questions.
Home currency appreciation and foreign currency depreciation occur when the home currency price of foreign currency increases.
Foreign exchange is crucial in international trade, with an increase in supply potentially leading to a decline in the exchange rate.
Currency devaluation may increase the price of imported commodities, reduce international competitiveness, and boost exports.
Foreign capital inflows into an economy can come in various forms, including foreign aid, grants, loans, and investments like FDI and FPI.

02:56:44

Foreign Direct Investment: Benefits, Modes, and Challenges

Licensing agreements with foreign producers may be beneficial due to rapid technological innovations.
Foreign Direct Investment (FDI) allows for control over the percentage of investment made, ensuring control in the business.
FDI is pursued for diversification, especially when one economy is thriving while another is struggling.
FDI is utilized to create new markets and penetrate emerging markets like India.
Modes of FDI include opening subsidiaries or associate companies in foreign countries, acquiring equity, and greenfield or brownfield investments.
Benefits of FDI include economic growth, job creation, and fostering competition in domestic markets.
FDI can accelerate growth in emerging and developing countries by providing much-needed capital.
Potential problems with FDI include capital-intensive production methods, regional disparities, and tax incentives affecting domestic savings.
India has seen record levels of FDI inflows in various industries, with significant investments in technology, telecommunications, and automobiles.

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