Introduction: - International trade is known as the business of buying and selling commodities beyond national borders. It is the exchange of goods, capital and services across the borders of different countries. It is the significant share of GDP (gross domestic product) in most countries. The economic interaction among different nations involving the exchange of goods and services, that is, exports and imports. The guiding principle of international trade is comparative advantage, which indicates that every country, no matter their level of development, can find something that it can produce cheaper than another country. International finance, the study of payments between nations, is a related area of international economics. A summary of international trade undertaken by a particular nation is given with the balance of trade. International trade influences a whole range of activities including jobs, consumption and the fight against poverty.
International trade uses a variety of currencies, the most important of which are held as foreign reserves by govt. and central banks.
Benefits of international trade:-
Generate jobs for people: - When a country make deals with other countries for the import and export of goods, not only a single country is involved even people of a country are also involved to it. So the benefits are gained by the country and people as well. In simple saying overseas trade has generate jobs for the millions of people. Even the living standard of people also improved.
Increase in GDP: - International trade allows countries to exchange good and services with the use of money as a medium of exchange. So it influences the gross domestic product to be increased.
Greater variety of goods available for consumption: - international trade brings in different varieties of a particular product from different destinations. This gives consumers a wider array of choices which will not only improve their quality of life but as a whole it will help the country grow.
Allocation of resources: - Efficient allocation and better utilization of resources since countries tend to produce goods in which they have a comparative advantage. When countries produce through comparative advantage, wasteful duplication of resources is prevented.
Drivers of international trade
Advancement of communication:-Communication tends to be regionally organized; global communications has extensive barriers; technology development is often a spin-off and there may be private nets developing; slow divergence of standards and protocols between regions. So there should advanced communication by using means good technology system.
Surplus production:-Economies of scale limited by regional structures, making regional-based manufacturing more expensive; many raw materials and components outsourced.
Global Transportation Infrastructure:-Infrastructure supports national security mandates; regional infrastructure predominates while inter-regional standards diverge; some deterioration owing to lack of maintenance of infrastructure not critical to national security.
Element 1
Examine patterns of international trade:-
Sectors
Agriculture: - High-quality farming exports of dairy products, beef, lamb and wool, have seen New Zealand secure a reputation as a world leader in agriculture. New Zealand is one of the world's most efficient agricultural economies, has a temperate climate and fertile soil, making the country ideal for agricultural production. Together with its support and processing components, the agriculture industry regularly contributes almost a quarter of New Zealand's Gross Domestic Product. New Zealand is one of the top five dairy exporters in the world which supply around 90 percent of dairy products traded on the international market, and the country is widely regarded as leading the international farming community in animal welfare, traceability and food safety, and agricultural sustainability.
Current trend:-New Zealand's major agricultural exports include dairy products, meat and wool. The dairy sector exports over 4 million kilograms of butter a year and over 2 million kilograms of cheese a year. More than 13 billion litres of milk are produced annually on New Zealand's 13,500 dairy farms, containing 1.1 billion kilograms of milk solids (protein and fat).Agriculture is one of New Zealand's largest industries, employing more than 114,000 people in full-time equivalent positions. New Zealand accounts for approximately 35 percent of the world trade in dairy products. New Zealand has 5.8 million dairy cows and a milking herd of 4.6 million.
Locations:- Auckland, Bay of plenty, Hawkes Bay, Otago, Waikato, Marlborough, Blenheim, Taranaki, Wanganui.
Ownership: - Agriculture sector examines the changing patterns of ownership of farm and the industries which transform products produced in farms into consumer commodities. During the late 1980s and early 1990s,a spate of mergers and plant closures occurred among major agribusiness companies in New Zealand. Companies respond to deduct expenditure related to farm by adopting financial policies, reducing labour costs and management policies. In smaller rural towns, they also closed many of their facilities concentrated their operations in regional centres like partnerships, family businesses.
Products: - Milk, sheep meat, corn, wheat, potatoes, lamb, Butter, cheese, wool.
Companies involved:-Fonterra ltd., Jeffco international ltd., farmlands trade society, DuPont agricultural products New Zealand, Allied farmers ltd.
Horticulture: - Horticulture New Zealand represents 7000 commercial fruit and vegetable growers, providing strategic direction and focus, building strong relationships with product groups and associations and working at both a national and regional level. Science has helped improve products and open up new markets. New Zealand horticulture leads the world in many aspects of innovation, production, quality maintenance, distribution and marketing. Science and innovation have been vital in maintaining New Zealand's global competitive position and Hort research scientists have played a leading role.
Current trend:-New Zealand's exports of horticultural products have increased from $200 million to over $2 billion during the past 20 years. Fruit, flowers and vegetables are now exported to over 100 countries. Horticultural exports have increased to be 8% of total merchandise exports from New Zealand in 2009.Domestic sales of horticultural products were estimated at $2.56 billion. The total revenue of the horticultural industry exceeds $5.2 billion.
Locations: - Bay of plenty in north island (kiwis green and gold), Napier(grapes and apples), Auckland region(strawberries).
Ownership: - mostly near about 89.76% are privately owned by small companies and a few of owned by individuals and very less is managed by big firms and companies.
Products:- Apples, grapes, kiwi fruit, avocados, oranges, strawberries.
Companies involved in horticulture sector: - Stara, Seeka, Zespri, Demden International Ltd, Athco Horticultural Supplies ltd.
Forestry:- Forestry in New Zealand has a history starting with European settlement in the 19th century and is now an industry worth four percent of GDP. Much of the original native forest cover was burnt off but it was also logged until 2000. Extensive forests have been planted, predominantly with fast growing cultivars of the Monterey Pine (Pines radiata). Wood chips, whole logs, lumber and paper products are exported from New Zealand. Native forest logging on public land attracted opposition with protests and environmental groups becoming very active until it ended in 2000. Logging of native forests now only occurs on private land if it is shown to be sustainable.
Current trend:- Today mission of ministry of agriculture and forestry is to enhance New Zealand's natural advantage. We do this by encouraging high-performing sectors; developing safe and freer trade; ensuring healthy New Zealanders; and by protecting our natural resources for the benefit of future generations.
Locations: - In New Zealand 80% of total land is covered by forests. Kaingaroa forest, Manawatu-Wanganui region, there are the main forest places in Rotorua region.
Ownership: - 50% of New Zealand's forests are owned and protected by major forest companies, over 35% of planted area being managed by carter holt Harvey and Fletcher challenge forests. Legal entitles included in this category of ownership are private companies partnership and trusts (Maori trusts and incorporations).
Products:- Monterey pine (pines radiata), Woodchips, whole logs, lumber and paper.
Companies involved: - Forest works NZ ltd. Timberlands west coast ltd, Carter holt Harvey and Fletcher ltd., wood metrics.
Mining: - New Zealand has abundant resources of coal, silver, iron ore, limestone, and gold. It ranked 22 in the world in terms of iron ore production and 29th in gold production. The total value of mineral production in New Zealand was $1500 million in 2006 (excluding oil and gas). The minerals extraction industry employs approximately 4,000 people directly, another 8,000 indirectly. The most important metallic minerals produced are gold (10.62 tonnes), silver (27.2 tonnes) and titan magnetite iron sand (2.15 million tonnes).
Current Trend:-In 2010, Gold worth $250M was produced from two large hard rock mines at Waihi and Macraes Flat, several medium sized alluvial operations, and a large number of small alluvial mines. 1.3 million tonnes of iron sand were reported to have been mined in 2009 at the Waikato North Head mine. It was estimated that only 0.1% of New Zealand's land area was used by the mining industry.
Ownership:- In mining sector gold and coal mining have been important economic activities in New Zealand. Since the 19th century, the govt. was major operator in coal mining until the time of 1980s.At that time there were only 100 mines still operating from which 16 belonged to the state and remaining were small owner operated enterprises.
Locations:- Huntly, Rotowaro, Waihi, Ohai, Kaitangata, Otago.
Products: - petroleum products, silver, Gold, coal.
Companies involved:- Dunstan mining limited, Newmont waihi gold, orica mining services NZ, Doug hood mining ltd..
Fishing:- As with other countries, New Zealand's 200 nautical mile exclusive economic zone gives its fishing industry special fishing rights. It covers 4.1 million square kilometres. This is the sixth largest zone in the world, and is fourteen times the land area of New Zealand itself. The zone has a rich and unusually complex underwater topography. Over 15,000 marine species are known to live there, about ten percent of the world's diversity. Many of these are migratory species, but New Zealand's isolation means also that many of the marine species are unique to New Zealand.
Current trend:-New Zealand's wild fisheries captured 441,000 tonnes and earned over NZ$1 billion in exports in the fishing year 2008/09. The aquaculture of mussels, salmon and oysters earned another $226 million. This made seafood the country's fifth largest export earner. There are about two tonnes of fish in the New Zealand fisheries for every New Zealander. Just less than ten percent of this stock is harvested each year.
Ownership:-Trading has separated the ownership of quota from harvesting rights, and reinforced the cultural barriers between the owners and leaseholders of quota processing companies also operate deep ownership of quota and the processing of particular species. The major fishing companies can also achieve economies of scale by distributing peak harvests among several processing plants at various locations around the country.
Products: - Oysters, Salmons, Travelly, Mussels, snapper, kingfish, Marlin, Blue cod, Trumpeter, Grouper, crabs.
Locations: - Bay of islands, Tauranga, doubtless bay, Tutu Kaka, Southland, tongariro river.
Companies involved:- Golden fisheries ltd, Talley group, Solander group, Pursuit group, Aurora Fisheries.
2. (A) Free Trade Agreement and its international trade structures.
Free trade agreement:-Treaty (such as FTAA or NAFTA) between two or more countries to establish a free trade area where commerce in goods and services can be conducted across their common borders, without tariffs or hindrances but (in contrast to a common market) capital or labour may not move freely. Member countries usually impose a uniform tariff (called common external tariff) on trade with non-member countries. Free trade agreement an agreement to abolish tariffs between two or more countries. Notable examples are the agreement to set up the European Free Trade Association (EFTA) in 1960 and the North American Free Trade Agreement (NAFTA), concluded in 1994 between the USA, Canada, and Mexico. Free trade increases the global level of output because free trade permits specialization among countries. Specialization allows nations to devote their scarce resources to the production of the particular goods and services for which that nation has a comparative advantage. The benefits of specialization, coupled with economies of scale, increase the global production possibility frontier. An increase in the global production possibility frontier indicates that the absolute quantity of goods and services produced is highest under free trade. Not only are the absolute quantity of goods and services higher, but the particular combination of goods and services actually produced will yield the highest possible utility to global consumers.
TRADE STRUCTURE
Tradionally trade was regulated through bilateral treaties between two nations. For centuries under the belief in mercantilism most nations had high tariffs and many restrictions on international trade. In the 19th century, especially in UK, a belief in free trade became a paramount. This belief became a dominant thinking in western nations. Controversial multilateral treaties like the General Agreement on Tariffs and Trade (GATT) and World Trade Organization (WTO) have attempted to create a globally regulated trade structure. These trade agreements have often resulted in protest and discontent with claims of unfair trade that is not mutually beneficial. Free trade is usually most strongly supported by the most economically powerful nations, though they often engage in selective protectionism for those industries which are strategically important such as the protective tariffs applied to agriculture by the United States and Europe. The Netherlands and the United Kingdom were both strong advocates of free trade when they were economically dominant, today the United States, the United Kingdom, Australia and Japan are its greatest proponents. However, many other countries (such as India, China and Russia) are increasingly becoming advocates of free trade as they become more economically powerful themselves.
2 (B) Protectionism:-
The government's placing of duties or quotas on imports to protect of domestic industries from global competition. Protectionism is the economic policy of restraining trade between states, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to discourage imports, and prevent foreign take-over of domestic markets and companies. This policy is closely aligned with anti-globalization, and contrasts with free trade, where government barriers to trade and movement of capital are kept to a minimum. The term is mostly used in the context of economics, where protectionism refers to policies or doctrines which protect businesses and workers within a country by restricting or regulating trade with foreign nations. Practice of protecting domestic goods and service industries from foreign competition with tariff and non-tariff barriers. Policy of protecting domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other handicaps placed on imports. Import quotas, which limit the quantities of goods that can be imported, are another protectionist device.
TRADE STRUCTURE
Tariff: - A tariff is a tax on imported products. Tariffs are also known as duties on imported products. They raise the price to customers and make them less attractive. A tariff is a tax placed on a specific good or set of goods exported from or imported to a country, creating an economic barrier to trade. Usually the tactic is used when a country's domestic output of the good is falling and imports from foreign competitors are rising, particularly if there exist strategic reasons for retaining a domestic production capability.
Quotas: - An import quota is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. Quotas, like other trade restrictions, are used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy. These are the limits on the quantity of product that can be imported into a country.
World trade organization:- The World Trade Organization (WTO) is an organization that intends to supervise and liberalize international trade. The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations.
