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Comparative Differences In Comparative Cost Theory

(iii) Comparative Differences in Costs. If the production costs. in the two countries are comparative between two countries, inter-national trade will inevitably take place between them because both will be benefited by the international trade. This can be illustrated with the following example— Suppose—India can produce with one unit of labor either ‘2 units of jute or 1 unit of cotton and Egypt can produce with one unit of labor either 2 units of jute or 2 units of cotton. The ratio between jute and cotton in the two countries …

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Equal Cost Differences In Comparative Cost Theory

Equal Differences in Costs: If there are equal differences in production costs, there is hardly any possibility of international trade between the two countries as there is no gain to either country. The following illustration shall explain it better- Suppose, India can produce with one unit of labor units of jute or 2 units of cotton. Egypt can produce with one unit of labor either one unit of jute or one unit of cotton. In the above example, the costs of production of jute and cotton both the countries are …

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Types Of Cost Differences In Comparative Cost Theory

The Theory of Cost assumed that the factors of production are perfectly mobile within the country but totally immobile between countries. Moreover, it is assumed that there is no cost of transportation to be charged and there are no restrictions on the movement of goods from one country to another. Different Types of Cost Differences. As the theory explains that the relative or comparative cost differences give rise to the international trade. At this time, it is pertinent to know about the different types of cost differences. Three types of …

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Disequilibrium In The Balance Of Payments Of A Country

It is evident that balance of payments is always balanced just like balance sheet of a business concern. The current account may be understood as the income and expenditure account or the profit and loss account of a business concern. Any surplus or deficit in the current account is shown in the capital account to make the latter balance. The difference of total receipts and payments must tally with the surplus or deficit in the current account. In this way, the capital account shows as to what the country owes …

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Difference Between Balance Of Trade And Balance Of Payments

Balance of trade and balance of payments are two important terms in international transactions but both are not the same. To make the two terms clear, I shall first explain the two terms and then make difference between Balance Of Trade And Balance Of Payments. Balance Of Trade : Trade, in general connotation, means the purchase and sale of commodities. In international trade, purchase and sale are replaced by imports and exports. The balance of trade, thus, denotes the difference of imports and exports of merchandise of a country during …

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Methods Of Protectionism In International Trade

The various arguments have been advanced in favor of the policy of protection. Under protectionism, the domestic industries are protected from the competition of foreign goods. The home industries are granted protection in any one or more of the following ways: 1. Protective Duties. With a view to make the imports costly, when the government imposes duties on the imports of foreign goods, such duties are called protective duties. Such duties may be ad-valorem (according to the value of imports) or specific (according to the weight or measurement). When the …

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Importance Of Protectionism In International Trade

Protectionism is the rule of the day. The various arguments have been advanced in favor of the policy of protection. Besides those arguments, there are certain other special reasons to explain why an underdeveloped country adopts the policy of protectionism- 1. To Promote Industrialization. Under developed countries need rapid industrialization. They are predominantly agricultural countries and export primary goods to developed countries which are generally used by them as raw materials. But developing Countries lack in capital resources and necessary technical expertise to establish new industries. By importing necessary expertise, …

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Arguments Against Protectionism In International Trade

Protectionism provides ample opportunities for the expansion of home market for domestic industries. By cutting imports, the government encourages the sale of homemade goods within the country.  But is is not free from criticism. The following arguments can be put forward against the policy of protectionism are given below. Arguments Against Protectionism 1. Encouragement to inefficient Industries. Under free trade policy, there is no place of uneconomic and nonviable or weak industrial units because of tough foreign competition. But, under protectionism, the domestic industries are not warded about the foreign …

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Arguments In Favour Of Protectionism

The Protectionism ensures the protection of home industries from foreign competition, encouraging them to raise production and generate more employment opportunities in the economy. For this purpose government imposes a number of restrict ions on imports and exports of the country through fiscal and other economic measure. Arguments In Favour Of Protectionism Today, almost all the countries of the world have abandoned the policy of free trade and have adopted the ‘protection policy.’ The following arguments can be adduced in favor of protectionism. 1. Protection of Infant Industries. The infant …

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What Is Protectionism In International Trade?

Protectionism or simply Protection refers to the policy of the government under which the government puts various restrictions on the free movement of goods between the countries, in order to protect its domestic industries from foreign competition. The policy may also be known as Restrictive Trade Policy because various restrictions are imposed for encouraging the domestic industries. Protection may be given by either of the following ways — Imposing high duties and levies on imports, Giving concessional treatment for the exports by allowing exporting industries concessions in taxes and duties …

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