The Effect of Trade and Investment

In: Other Topics

Submitted By newbiestanley
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The effect of trade
Balance of payment = CA (current account) + CI (capital account) (trade) (investment) (Export/import) (Cash inflow/cash outflow)
Trade is buying and selling
Investment is invest
When you export > than import = Surplus
When you import > than export = Deficit
Cash inflow > Cash outflow = Surplus
Cash outflow >Cash in flow = Deficit

* Exports balance the trade account * Attainment of economies of scale is a benefit of exporting * Imports expose firms to new competition * US has had a trade deficit since 1975 * Singapore on the contrary has a trade surplus over a long period of time * Imports expose firm or company to new competition * Imports may compete with local production which in turn may result in job losses * Export may deprive the local market and may force up the price

The effect of international investment * Foreign Direct Investment (FDI) is a substitute for trade activities * Investment targets are diversifying, for example, China and Brazil (BRICS) * China is a magnet for FDI, attracting more FDI inflows than the whole of Africa combined * The most important new development FDI in this century is outflow of FDI from China ($1b in 2000 to $68b in 2010)
Following methods * ‘Voluntary’ import restraints * Tariffs * Non-tariff barriers * Many actions are contrary to what we know is good for the world and its citizens
Increase tax
All this is becoz they want to have more surplus (want more export than import) they restrict import
Problem of import control
*Limited access to innovation products
*cost of goods will go up and increase
*service level go down
*efficiency of competitiveness go down as no more competitive
*standard of living come down
*limited availability of product variation
Example : North Korean (only)…...

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