Foreign Trade For up-to-date statistics

Foreign Trade

• For up-to-date statistics visit Susan Hayes “The Positive Economist”

Overview • What is Foreign Trade? • Who are Ireland’s main trading partners? • Why does Ireland trade with other countries? • Imports and Exports • Visible imports and exports • Invisible imports and exports • Measuring Foreign Trade

What is Home/Domestic Trade? • Buying and selling of goods & services in our own country.

What is Foreign Trade? • Importing: buying goods & services from other countries. • Exporting: selling goods & services to other countries.

Who are our main Trading Partners? COUNTRY CURRENCY LANGUAGE USA Dollar English Britain Sterling English Europe Euro + others Japanese Yen Various Japan (importing) Japanese

What are imports? • Goods and services that we buy from other countries. • Money leaves Ireland.

Why do we import? • To obtain goods that are not available in Ireland. Eg. oil, tea, coffee …………. • To avail of services not in Ireland. Eg. pop groups, foreign holidays……… • To have varitey and choice of goods & services.

Visible Imports • Goods which are bought from other countries. • Money leaves the country • Eg. citrus fruit, wine, cars……. .

Invisible Imports • Services that are bought from other countries. • Money leaves the country. • Eg. • Irish person on holidy in USA • BEP in concert in Dublin French horse winning Irish Grand National

What is Import Substitution? • Buying Irish goods instead of foreign goods. • Eg. buying Irish potatoes instead of Spanish potatoes.

What are Exports? • Irish goods and services that we sell to foreign countries. • Money comes into the country.

Why do we export? • To obtain foreign currency needed to buy our imports. • Ireland is a small country so we need a wider market such as EU, USA etc. • Selling more means more jobs are created.

Visible Exports • Irish goods that are sold to foreign countries. • Money comes into the country. • Eg. Irish beef sold abroad. • Tullamore Dew sold to UK Waterford Crystal sold to US.

Invisible Exports • Irish services that are sold to foreign countries. • Money comes into the country. • Eg. • Westlife playing in Wembly. • US citizen on holidy on Ireland. • Irish horse winning the English Grand National.

Problems connected with foreign trade. • • • Language Currency – exchange rates may change. Transport Insurance Safety standards are different in each country.

What is the Balance of Trade? (TV) • Visible Exports – Visible Imports

What is the Balance of Invisible Trade? • Invisible Exports – Invisible Imports

What is the Balance of Payments? § Total Exports – Total Imports

Balance of Trade/Payments can be……. • Surplus: Exports greater than Imports • Deficit: Imports greater than Exports • Balanced: Exports = Imports

Benefits of a Balance of Payments Surplus • More money coming into the country. • This money can be used to pay off some of our debt or reduce tax. • More money and jobs and a better standard of living for Irish people.

What problems will a Balance of Payments deficit cause? • Too much money leaving the country. • Government will have to raise taxes and/or borrow. • Irish people will lose their jobs.

How can a Balance of Payments Deficit be reduced? • Import substiution: Buy Irish! • Government Agencies such as An Bord Trachtala, Failte Ireland An Bord Bia can promote/market Irish exports.

Exam Question 2006 P 1 Q 3. • • Balance of Trade Visible Exports € 540 m Less Visible Imports € 400 m Surplus € 140 m

Continued. . • • Balance of Invisible Trade Invisible Exports € 620 m Less Invisible Imports € 260 m Surplus € 360 m

Continued… • • Balance of Payments Total Exports (540+620) € 1160 Less Total Imports (400+260) € 660 Surplus € 500

Recap/Review • What is Foreign Trade? • Who are Ireland’s main trading partners? • Why does Ireland trade with other countries? • Imports and Exports • Visible imports and exports • Invisible imports and exports • Measuring Foreign Trade