International Trade and Globalization

Open Economy

Open economy - Is an economy in which goods and services are freely traded with other economies.

The Irish Economy is an open economy. This means that people and businesses can trade (exchange) goods and services freely with other countries.

Imports and Exports

• Imports are the goods and services bought from other countries (e.g. foreign-made cars).
• Exports are the goods and services sold to other countries (e.g. Irish beef).

Visible and Invisible Trade

• Visible trade is the trade of tangible (visible) goods.
• Invisible trade is the trade of services.

Visible or Invisible imports are goods or services coming to Ireland and the money going out. For E.g. when we import coffee from Kenya the good is coming in and the money is going to Kenya.

Visible or Invisible exports are goods or services from Ireland going out and the money coming in. For E.g. when Ireland exports Irish beef to the USA the good is going out and the money is coming in.

This is why all countries want more exports than imports because in imports we are losing money while in exports we are earning money.

                       Irelands visible and invisible imports and exports 

	Visible	Invisible
Imports	Oil.                    Tea and Coffee. Motor vehicles. Clothes. Wine. Electronic equipment. Perfumes and cosmetics.	Irish people banking with foreign banks. Irish people going abroad on holiday. Sportspeople from other countries winning Irish tournaments.
Exports	Irish food. Pharmaceuticals. Organic chemicals. Data-processing equipment and software. Baby Formula.	Foreign tourists coming to Ireland. Foreign people using Irish financial services. Irish artists or musicians earning money abroad.  An Irish service setting up abroad.

  Balance of Trade and Balance of Payments

   Balance of Trade

The difference between the value of a country's visible imports and visible exports is called the balance of trade.

The balance of trade is calculated as follows:

            Balance of Trade = visible exports - visible imports             

• If visible exports are greater than visible imports, there is said to be a surplus balance of trade.
• If visible imports are greater than visible exports, there is said to be a deficit balance of trade.

   Balance of Payments

The difference between the value of a country's total (visible and invisible) imports and exports is called the balance of payments.

The balance of payments is calculated as follows:

            Balance of Payments = total exports - total imports             

• If total exports are greater than total imports, there is said to be a surplus balance of payments.
• If total imports are greater than total exports, there is said to be a deficit balance of payments.