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 and An Bord Bia
can promote/market Irish exports.
Exam Question 2006 P1
Q 3.
•
•
•
•
Balance of Trade
Visible Exports
€540m
Less Visible Imports €400m
Surplus
€140m
Continued..
•
•
•
•
Balance of Invisible Trade
Invisible Exports
€620m
Less Invisible Imports €260m
Surplus
€360m
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