Free and International Trade, Barriers, Trading Bloc, Trends, Exchange Rates and NICs

1. Explain free trade, including the theory of absolute and comparative advantage.
The concept of free trade supposes that countries benefit when they trade goods and services without government interference and trade restrictions. The theory of absolute and comparative advantage is a concept in international trade. The theory of absolute advantage highlights that a country must specialize and export what it knows how to do better than the trading patterns.
Absolute advantage is the ability of an individual, company, region, or country to produce a greater quantity of a good or service with the same quantity of inputs per unit of time, or to produce the same quantity of a good or service per unit of time using a lesser quantity of inputs, than its competitors.
The theory of comparative advantage is that nations must specialize and export where there are lower opportunity costs than the trading patterns to improve production efficiency and improve the standard of living. Comparative advantage is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.

Beef

British Gin

The United Kingdom

15000

60000

Australia

35000

5000


0.42

12

In the free trade agreement between the United Kingdom and Australia, when I put the labor force as input in the transaction process between the two sides, a comparison in the number of transactions between the two sides can be obtained, the UK has an absolute advantage in British gin. In comparing the opportunity cost of producing beef, we can see that Australia has a relatively low opportunity cost. So Australia has a comparative advantage in producing beef.
2. Identify three gains from international trade.
International trade promotes economic growth where there is increased competitiveness as international trade facilitates access to wider markets. When the economy grows, there is also an increase in income levels. .China's economy has grown rapidly since becoming a WTO member in 2018.
International trade encourages large-scale production where there is specialization. Large-scale production, in turn, helps to stimulate and meet demand, while specialization reduces the price of goods and services.
New businesses are more likely to emerge when there is international trade and companies. Foreign traders are likely to invest in countries with a favorable business environment and international trade increases productivity.
3. Describe two forms of trade barrier that might be employed by a country to protect its industry and markets, giving real life examples of these measures.
 The most common trade barriers are tariffs and non-tariffs. Tariffs protect key industries where there is an imposition of tariffs on imports, making them more expensive. For instance, in 2018 and 2019, President Trump levied tariffs on products and commodities such as steel and aluminum, mainly targeting the Chinese. The purpose of this one of his policies is to protect the price of local steel in the Uni...