International Trade and the Bahamian Economy
International trade is the exchange of goods and services across national borders. Candidates must know why countries trade: differences in resources, climate and skills, economies of scale, and the desire for goods they cannot produce. Learn absolute advantage (producing more efficiently than another country) and comparative advantage (producing at a lower opportunity cost). Understand exports, imports, the balance of trade (visible exports minus visible imports), the balance of payments (a wider record including services and transfers), and terms of trade.
Know the tools of trade policy: tariffs, quotas, embargoes, subsidies, standards and exchange controls, and their effects on prices, quantity and local producers. Understand trading blocs and agreements (free trade areas, customs unions, CARICOM's single market) and the role of foreign exchange and exchange rates.
Apply this to The Bahamas: a small, open, tourism- and financial-services-dependent economy that imports most food, fuel and manufactured goods, runs a visible trade deficit, and relies on tourism, financial services and foreign investment to earn foreign currency. Traps: confusing balance of trade with balance of payments; assuming a trade deficit is always harmful; and forgetting that services such as tourism are exports.
Worked example. The Bahamas exports tourism services and imports food. Visible imports exceed visible exports (trade deficit), but tourism earnings and financial services reduce the current account gap. A tariff on imported food would help local farmers but raise consumer prices - a classic trade-off question.