A.S
Unit 39 – International Business
Assignment 1
29/01/2020
Promoting international trade information pack
What is International Business?
International business is understood in many different formats, for example it can include
the movement of goods from country to another, (exporting, importing and trade).
International business also includes contractual agreements that allow foreign firms to use
products, services, and processes from other nations, these can be licensing or franchising.
It can also include the formation and operations of sales, manufacturing, research and
development, which are all a part of distribution facilities in foreign markets.
Why international trade is important to the UK economy?
International trade is important for the UK economy and Britain in general, because around
28% of what is produces is actually abroad, exported, and the UK also benefits from
importing. When good and services are sold across the borders, they can face some barriers
and these can include tariffs, limits on the amount and standards which can potentially be
different from seller’s home market.
Over the last 50 years, the UK has seen a significant increase in the value of trade. However,
the pattern of trade has slightly changed over time. The trade in machinery and transports
has been gradually declining over time whereas trade between chemicals and commodities
has increased over time. The UK imports either same or similar products often from
different countries around the world because of difference in the characteristics of products
and the quality of them, also depending on different suppliers. For example the UK has
imported watches from 39 countries and coffee from 71 countries back in 2012.
UK has loads of different shops where products are sold from all around the world, for
example branded clothing, Apple products, shoes and clothing is all imported from other
countries. Because of the UK leaving the EU, the importation of the products has had a
significant difference on importing products to the UK, in terms of importing products to the
UK is not as easy anymore, as all goods imported to the UK will be subject to border tax or
tariffs, which will affect the economy.
Benefits of international trade to UK businesses
There are many benefits of international trade to the UK businesses, the main ones are
growth, spreading risk, increasing sales and profits and spreading technical knowledge.
Growth is one of the benefits to trade to UK businesses, this is because expanding to new
international markets allows businesses to have flexibility and have a variety in their
products, which also allows businesses to grow quicker and easier, this can be exposure to
more customers or being offered cheaper materials.
, A.S
Unit 39 – International Business
Assignment 1
29/01/2020
Spreading risk is when a business trades internationally in a number of different locations,
an example of this would be if the UK side of the business experiences a fall in demand then
the EU business may grow and similarly can happen when a business can source materials
from different locations around the world, they are less likely to be affected.
A business who is able to access materials or a larger amount of potential customers are
likely to make higher profit and more sales, and this is another benefit of trading
internationally, which is referred to as increasing sales and profits.
All countries have different levels of knowledge in technical knowledge, and having to trade
internationally allows business to benefit from this as that way they can learn and find out
more about products that way as well as give the business better ideas.
Free trade agreements
As of 29 December 2020, the UK had secured 34 trade agreements with 91 countries.
Essentially a trade agreement is when countries agree to trade with eachother with a variety
of products, including a wide-ranging taxes, tariff and investment guarantees. The trade
agreement in the UK not only covers the trade in goods and services but also a wide range
of areas in the EU’s interest, these can include investment, competition, state aid, tax
transparency, air and road transport, energy and sustainability, fisheries, data protection
and social security coordination.
There are many reasons to why having free trade agreements with other countries is a good
idea. One of the main advantages of having trade agreements is increased economic
growth, meaning that businesses are more likely to grow and earn more profit when they
trade. Free trade agreements also allow global firms to access to business opportunities and
these include mining, oil drilling, and manufacturing. Local companies also receive access to
the newest technologies from their multinational partners, which also a form of trade
agreement, the job opportunities also grow as the local economies grow, having said that,
multi-national companies provide job training to local employees.
The UK has a trading agreement with Egypt, this agreement covers trade in goods, including
provisions on preferential tariffs, tariff rate quotas and rules of origin, as well as trade in
services, sanitary and phytosanitary measures, intellectual property, government
procurement.
Economic trading blocs
A trade bloc is a type of intergovernmental agreement, also known as a part of regional
intergovernmental organisation, this is where barriers to trade are minimised. A trade bloc
is an agreement between several nations rather than an agreement between just two
countries. There are different forms that a trade bloc can take, this includes Free trade area,
customs union, common market and economic union.
