International Trade

Post World War II the economies of Europe were devastated and this continent began to reconstruct its trade. After, in 1947 the General Agreement on Tariffs (GATT) was negotiated as a voluntary agreement. It had some member countries and they tried to promote the exchange of ideas to facilitate trade and prevent protectionism.external image International_Trade.57131757.jpg
When international trade began to take local production advantages, it had goods results such as the capital availability, specialization of labour, abundance of natural resources, skilled labour and management.
International trade is the exchange of goods and services between nations. For example, the exchange of goods and services between Latin America and North America.
The international trade’s goal is to allow us to expand our markets’ for both goods and services that otherwise may not have been available to us. It consists in the export and import of products between countries.
Venezuela has a huge industry that revolves around international trade. While Venezuelan exports are based primarily on oil and its derivatives, are through of the import of petroleum and other products that the majority of the Venezuela's economy is based.
An example of this is PDVSA Company that exports oil to other countries as the USA, China, Japan and India.

International trade has been evolving with the passing of the years becoming the main income for many countries which have many manufacturingexternal image pdvsa2.jpg companies with a huge export potential. Another factor that has influenced this trend is increase changing technology and all trade agreements that have been created. We can’t question the way which the International trade has contributed in the global development but we wouldn’t ignore as this trade affects some nations individually, as the main trade is between developed nations exporting cars, technology and aircraft. However, most nations that can obtain these products are the others developed nations because they have a huge economy, excluding a few the developing countries in Africa, Asia and Latin American which only export staple products such as rice and sugar, we must consider also the restrictions that these countries have for their exports, but little by little these developing countries are joining in the global market, acquiring new technologies, such as is the case of Mexico and Brazil which are the two countries that lead the field in Latin America in terms of international trade.

Domestic Trade

Domestic trade is known as the exchange of goods and services between people or companies who are present in the same country. An example of this is Polarexternal image polar1.gif because it’s the most important company in the country and the main producer with at least 50% of national food.

The difference between International Trade and Domestic Trade
The difference between international trade and domestic trade is that the first one is made between Venezuela and other countries and has the function of import and export goods and services, while the second one is distributing products of one region to others in the same country.

International trade Glossary

· Industrialization: is the process of social and economic change that transforms a human group from a pre-industrial society into an industrial one.
Marbeth's definition: is a set of operations carry out sequentially in industries, machines or in special equipments to transform the raw materials in processed products.


Example: Polar Company transforms the raw material as wheat, corn, rice and milk in processed products as cereals, margarines and jams.

· Globalization: is a process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of communication and trade.

Marbeth's definition: is a process in which markets and companies spread reaching a global dimension that transcends the national borders.

Example: The electronic connections between Venezuela and the world i.e. The World Wide Web.

· Free trade: is a system of trade policy that allows traders to act and or transact without interference from government.

Marbeth's definition: is a process in which the traders are able to realize their business with no restrictions on trade.

Example: the informal market.

· Export: is derived from the conceptual meaning as to ship the goods and services out of the port of a country.

Marbeth's definition: merchandise that is produced in a country is shipped from one country to another.

Example: PDVSA, It company exports oil to others countries as USA, China, Japan and India.


What is the balance of payments?
1. What is an asset?
It's a product that is bought or sold on the global market.

2. What happens when a country has more debits than credits?
If a country has more debits than credits then it has a deficit.

3. What is liability?
It's an amount of money that has no being paid.

4. What are the subdivisions of the BOP?
The balance of payments is calculated by three subdivisions: the current account, the capital account and the financial account.

5. What is the current account?
It’s an account where are recorded the inflow and outflow of goods and services into a country.

6. What is the Balance of Trade?
It makes up the total of imports and exports of a country.

7. What is the BOT surplus and deficit?
The BOT surplus means that a country exports more than imports.
The BOT deficit means that the country imports more than exports

8. What are the unilateral transfers?
They are credits that ar
e mostly work remittances, which are salaries sent back into the home country of a national working abroad.

9. What does the capital account records?
It records all international capital transfers, this means that the acquisition or disposal of assets.

10. What kind of assets those capital accounts refers?
Non- financial assets as land, and non-produced assets as a mine.

11. What kind of assets can a country produce?
A country can produce financial assets, such as stoks, bonds, government-owned assets, etc.

12. What does the Financial Account records?
The financial account records monetary flows related to investment and business, bonds, stoks, etc. It also records government-owned assets such as foreign reserves, private assets held abroad, etc.

13. What happens when the current account has a deficit?
It means that a country imports more than exports.

14. What can add to BOP discrepancies?
The change of the value of money.

15. When is a fixed assets market as a capital account inflow-outflow?
When a country has a fixed asset abroad, the borrowed amount is marked as a CA outflow. And when a country sales a fixed asset, then it would be counted as a current account inflow.

16. What was the main event that beginning the liberalization of the accounts?
The liberalization of accounts was spurred by the raise of global financial transactions and trade in the late 20th century.

17. What were the macroeconomic polices of developing countries?
The macroeconomic polices of developing countries basically prevented foreign ownership of financial and non-financial assets. They also limited the transfer of funds abroad.

18. Why do countries have to innovate their production systems?
If a country innovates its production systems by new technology and efficiency, eventually the nation's overall gross domestic product would increase because it would produce greater volumes of assets.


Global Exchange 2

There are two main reasons to specialize trade between countries, the first is comparative advantage and the second one is economies of scale.

Comparative advantage was first introduced by the 19th century economist David Ricardo and He emphasises the differences between countries resources and productivity levels.

Economy of scale sets degrees of scale and makes the production more efficient, what levels the cost per unit of output.

An example of comparative advantage is the economy of Sweeden, that bases itself in the production of paper and iron, basically because of the natural advantages that they have in their territory such as forests and iron mines; and therefore to produce other products like mangos they would have to spend unnecessarily lots of money building greenhouses to grow them (unlike Pakistan that has a naturally warm weather), being better using later an inter-industry trade between countries that allow them to export the products that they produce with a visible comparative advantage.

In economics between countries is always important to take in account the opportunity cost even though that country has or not a comparative advantage with their products.

An example of opportunity cost is when you have two products such as a cellphone and a iPod, both products have the same price, the opportunity cost is visibly established when you give up to buy one of them for to buy the other.