International Marketing of Agri-products

Syllabus International economics-issues and dimensions; concepts of interregional and international trade, International marketing and international finance; International trade-theories, economic growth and trade, gains from trade, barriers to trade; International marketing-conceptual framework, global environment, policy framework marketing mix, market selection and segmentation; marketing research, market development and export promotion International finance-global. environment, foreign exchange risk management, working capital management, regulations and strategies; Emerging scenario of agricultural trade in WTO era.

International economics-issues and dimensions; concepts of interregional and international trade,

International marketing and international finance;

International trade-theories, economic growth and trade, gains from trade, barriers to trade;

International marketing-conceptual framework, global environment, policy framework marketing mix, market selection and segmentation; marketing research, market development and export promotion

International finance-global. environment, foreign exchange risk management, working capital management, regulations and strategies;

Emerging scenario of agricultural trade in WTO era.

International Economics-Issues &Challenges I.E. is that branch of economics which is concerned with the exchange of goods and services between one country and another ( foreign trade) as distinct from that trade which is carried on within the territory of a nation (domestic trade). Issues : Why is I E. treated as a separate branch of economics? Are not the laws of domestic trade applicable to foreign trade? Can we just extend the general theory of production, value, money etc. to the problem of international trade & transactions? Why there should be a need for a separate theory?

I.E. is that branch of economics which is concerned with the exchange of goods and services between one country and another ( foreign trade) as distinct from that trade which is carried on within the territory of a nation (domestic trade).

Issues :

Why is I E. treated as a separate branch of economics?

Are not the laws of domestic trade applicable to foreign trade?

Can we just extend the general theory of production, value, money etc. to the problem of international trade & transactions?

Why there should be a need for a separate theory?

Need for a separate theory of IT: Classical View Classical economists believed that international immobility of factors is the fundamental criteria for a separate theory of IT. Other factors responsible are: Political & legal differences, Cultural & language differences, Economic differences Differences in the currency units Differences in the marketing infrastructures, trade restrictions, high transportation costs and Differences in trade practices

Classical economists believed that international immobility of factors is the fundamental criteria for a separate theory of IT.

Other factors responsible are:

Political & legal differences,

Cultural & language differences,

Economic differences

Differences in the currency units

Differences in the marketing infrastructures, trade restrictions, high transportation costs and

Differences in trade practices

No Need for a separate theory of IT: Ohlin’sView Bertil Ohlin viewed that IT is a special case of inter local or inter regional trade. Factors of production are interregionally immobile but intra regionally (within the region) freely mobile, hence IT is an integral part of general price theory & there is no need for separate theory of IT. But it was not agreed and it was advocated that specialzed branch of economics must be there to study IT & it should be called Int Economics.

Bertil Ohlin viewed that IT is a special case of inter local or inter regional trade.

Factors of production are interregionally immobile but intra regionally (within the region) freely mobile, hence IT is an integral part of general price theory & there is no need for separate theory of IT.

But it was not agreed and it was advocated that specialzed branch of economics must be there to study IT & it should be called Int Economics.

Inter-Regional & International Trade Inter-regional trade refers to trade between regions within a country (Domestic or internal trade). International trade is concerned with the exchange of goods and services between one country and another. Degrees of interdependence among nations has increased over last 2 decades

Inter-regional trade refers to trade between regions within a country (Domestic or internal trade).

International trade is concerned with the exchange of goods and services between one country and another.

Degrees of interdependence among nations has increased over last 2 decades

Forces behind Internationalisation Technical Progress in Transport & Communication Increased Return to scale in production High Income elasticities for differentiated products

Technical Progress in Transport & Communication

Increased Return to scale in production

High Income elasticities for differentiated products

Inter-Regional & International Trade- Comparison Factor Immobility Differences in Natural Resources Geographical & Climatic Differences Different markets Mobility of goods Different Currencies Problem of Balance of Payments Different Transport Costs

Factor Immobility

Differences in Natural Resources

Geographical & Climatic Differences

Different markets

Mobility of goods

Different Currencies

Problem of Balance of Payments

Different Transport Costs

… ..Contd Different Economic Environment Different Political Groups Different National Policies

Different Economic Environment

Different Political Groups

Different National Policies

Smith’s Theory of Absolute Differences in Costs Country Commodity X Commodity X The division of labor at international level requires absolute differences in costs and every country should specialize in the production of that commodity which it can produce more cheaply than others. A 10 5 B 5 10

Ricardo’s Theory of Comparative Differences in Costs: Assumptions Each country will specialize in the production of those commodities in which it has greatest advantage or the least comparative disadvantage . There are only two countries There are only two commodities produced Similar tastes in both countries Labour is the only factor of production Supply of labour is unchanged All units of labour is homogenous Prices of two commodities are determined by labour cost i.e. the no of labour unit employed to produce each

Each country will specialize in the production of those commodities in which it has greatest advantage or the least comparative disadvantage .

There are only two countries

There are only two commodities produced

Similar tastes in both countries

Labour is the only factor of production

Supply of labour is unchanged

All units of labour is homogenous

Prices of two commodities are determined by labour cost i.e. the no of labour unit employed to produce each

Assumptions contd… Commodities are produced under law of constant costs or returns Technological knowledge is unchanged Trade takes place on the basis of barter system Factors of production are perfectly mobile within each country but perfectly immobile between countries Free trade between both countries, there being no trade barriers in the movements of two commodities No transportation costs are involved All factors are fully employed International market is perfect

Commodities are produced under law of constant costs or returns

Technological knowledge is unchanged

Trade takes place on the basis of barter system

Factors of production are perfectly mobile within each country but perfectly immobile between countries

Free trade between both countries, there being no trade barriers in the movements of two commodities

No transportation costs are involved

All factors are fully employed

International market is perfect

Theory contd.. Country Wine Cloth England 120 100 Portugal 80 90

Domestic Exchange Ratio England Portugal Wine 120 : 100 Cloth 1:1.2 Wine 80 : 90 Cloth 1:0.89 Cloth 100 : 120 wine 1:0.83 Cloth 90: 80 Wine 1:1.13

Criticism Unrealistic assumption of Labour Cost No similar tastes Assumption of Fixed Proportions Unrealistic assumption of constant costs Ignores Transportation Costs Factors not fully mobile internally Two country two commodity model unrealistic Unrealistic assumption of free trade Unrealistic assumption of full employment Neglects the role of technology

Unrealistic assumption of Labour Cost

No similar tastes

Assumption of Fixed Proportions

Unrealistic assumption of constant costs

Ignores Transportation Costs

Factors not fully mobile internally

Two country two commodity model unrealistic

Unrealistic assumption of free trade

Unrealistic assumption of full employment

Neglects the role of technology

Haberler’s Theory of Opportunity Costs OC theory says that if a country can produce either commodity x or y the OC of commodity X is the amount of the other commodity Y that must be given up in order to get one additional unit of commodity X. Thus the exchange ratio is expressed in terms of their OC . There are only two countries Each country can produce two commodities Each country possess 2 factors of production L,K Perfect competition in both factor and commodity market P of each commodity equals its marginal money costs P of each factor equals its MVP in each employment

OC theory says that if a country can produce either commodity x or y the OC of commodity X is the amount of the other commodity Y that must be given up in order to get one additional unit of commodity X. Thus the exchange ratio is expressed in terms of their OC .

There are only two countries

Each country can produce two commodities

Each country possess 2 factors of production L,K

Perfect competition in both factor and commodity market

P of each commodity equals its marginal money costs

P of each factor equals its MVP in each employment

Opportunity Costs……. All factors are fully employed Supply of each factor is fixed Factors are immobile between countries Factors are mobile within countries Technological knowledge is unchanged Trade between two countries is free and unrestricted

All factors are fully employed

Supply of each factor is fixed

Factors are immobile between countries

Factors are mobile within countries

Technological knowledge is unchanged

Trade between two countries is free and unrestricted

Opportunity Costs……. Trade under constant OC : If the amt of Y required to be given up to get additional qt of X remain constant PPC would be straight line and it would indicate constant OC Trade under increasing OC : If more amt of Y required to be given up to get additional qt of X PPC would be concave to the origin and it would indicate increasing OC Trade under decreasing OC : If in order to get additional qt of X the less amt of Y is required to be given up PPC would be convex to the origin and it would indicate decreasing OC

Trade under constant OC : If the amt of Y required to be given up to get additional qt of X remain constant PPC would be straight line and it would indicate constant OC

Trade under increasing OC : If more amt of Y required to be given up to get additional qt of X PPC would be concave to the origin and it would indicate increasing OC

Trade under decreasing OC : If in order to get additional qt of X the less amt of Y is required to be given up PPC would be convex to the origin and it would indicate decreasing OC