Foreign Trade in Venezuela

Objective

The major objective of this assignment is to examine the trade barriers of import and export between the U.S. and Venezuela.

Introduction

Venezuela got mixed economy which is dominated by the sector of petroleum, and that accounts for one third of the GDP roughly, around exports of 80% and more than ½ of the revenues of government. It is also suffering from high level of corruption. The GDP per capita for 2009 was USD 13000, and ranks 85th on the world ranking. Thirty percent of population of the nation lives just on USD 2 each day. This country's petrol is the least costly in the whole globe because the cost for consumer is heavily subsidized.

Since the oil discovery in the 20th century, the country became one of the oil exporting companies in the world, and this became the primarily member of OPEC. Early an underdeveloped export country for commodities of agricultural like cocoa and coffee, then oil quickly got dominated on the exports and revenues of the country. The oil glut of 1980s resulted in an outer crisis of debt and then a long term crisis of economy, which then resulted in 100% inflation in the year 1996 and the level of poverty has increased to 66% in 1995. As each capita income dropped to the level which was in 1963, down one third from its 1978 rise. There was also crisis of banking in 1994. The revival of the prices of oil boosted after 2001 and that economy was boosted too which facilitated the social spending.

Importance of Foreign Trade

Foreign trade is the exchange of goods, services and capital beyond the international territories or borders. In most of the nations, it represents a significant portion of the Gross Domestic Product (GDP). While foreign trade has its existence throughout much of the history, its economic, political and social importance has increased in the recent centuries. Industrialization, globalization, advanced transportation and outsourcing are all having a major impact on the foreign trade system. Increasing foreign trade is crucial for the continuance of the globalization. Without foreign trade, countries would be limited to the services and goods that they are producing within their own territories. Foreign trade is basically not different from that of domestic trade because the behavior and motivation of the parties that are involved does not change fundamentally irrespective of whether the trade is taking place within or outside the borders.

The major difference is that foreign trade is typically expensive than the domestic trade. The reason being that the trade which takes across borders have some costs such as tariffs and restrictions associated with country differences for example the legal system, its culture, its language etc. Another difference between the domestic and the international trade is that the factors of production like labor and capital are typically mobile inside the country rather than across the borders. Therefore international trade is restricted masterly to trade in services and goods, and to some extent only to trade in labor, capital ...