Chapter 12 - International Trade Practices and Policies

2.  If we look around us, we will see many items we
use which are imported from abroad or which
have components imported abroad.
 “No man is an island”. We cannot afford to close
our doors from the influences of other countries
and other people.
 Commerce, communication, and trade have
brought countries of the world closer together.
We import some of the goods that other
countries produce and, in turn, we export to
other countries some of the goods they desire.
In this way, interdependence benefits nation.

3.  The barangay was an outgrowth of the
extended family system of the Malayo-
Indonesian immigrants who came to the
Philippines at different stages of our history.
 It was headed by traditional leaders.
 Barangay is a self sufficient economic unit
living on substinence agriculture. The need
of the barangay is very limited, production
for a surplus is unnecessary.
 Production, therefore, during the barangay
era as dictated more by tradition and, in the
case of some sultanates, by command.

4.  One of the most self-sufficient communities
in our midst is the Mangyan tribe in
Mindoro. It is also one of the most
backward.
 One of the most economically dependent
countries in the world is Japan. She cannot
survive without trading with other countries.
 Most of Europe had gone through the
feudalistic era of the Middle ages. There too,
they had communities of families, bound
together by common assent, carrying out
their economic activities according to
tradition, according to intricate sets of rights
and obligations.

5.  Economic and social system of medieval
Europe under which peasants land tenure and
production were regulated, and local justice
and taxation were administered.
 The manorial society as an economically was u
underdeveloped one.
 Production of goods was limited. Hours of
work was long and hard. Technology was
primitive and backward. Division of labor was
unknown.
 The European communities during the feudal
era were practically a hand-to-mouth
existence.

6.  Feudal Europe’s self-sufficient society was
broken as a result of the increasing contacts
of Europeans with the Near East through the
various Crusades organized to reconquer the
Holy Land from the Turks. The Europeans
were gradually enticed by the exotic goods
the Crusaders brought back.
 They become more productive, they utilized
better tools, and depended more on the
division of labor.
 With the surplus goods they accumulated,
they began to trade with other nations.

7. With the growing interdependence of
nations, a “world economy” started to
exist.
Through time, this interdependence
has become more and more
pronounced.
It exists because no country today is
self-sufficient and all must participate
in international trade.

8.  Trade is called a “primary instrument of
development” because this has been its proven role
throughout history.
 Trade became even more important for several
reasons:
The speed at which science and technology
developed the means to create wealth.
The growing investment necessary to transfer
and use the cumbersome technology of industrial
age.
The social impact of trade in bringing traditional
cultures contact in new ideas, technologies, and
goods.

9. World trade has grown spectacularly in
the post-war period, but it has now
slowed down considerably.
 Its main growth in the last four
decades has been in the manufactured
of goods of developed countries.
Between 1960-1971, for instance,
trade in manufactures tripled, while
commodity trade less than doubled.

10.  A major element in the growth of world
trade has been growing diversification in the
nature of the goods traded.
 Developing countries have not participated
in this diversification.

11. Developing countries share of the world’s
industry is so low that the entire
industrial production of developing
countries is less than that the Federal
Republic of Germany.
To increase the developing countries’
share of the world industry, they need to
lower the barriers that keep their
manufactured goods out of rich
countries.

12.  Mercantilism is a political- economic
movement originating in the period 1500-
1750 whose paramount goal of national
policy is to make the nation rich and
powerful the means of which consisted
mainly in the protection of domestic
industry and the
regulation of trade.

13.  A basic economic concept that involves
multiple parties participating in the
voluntary negotiation and then the
exchange of ones goods and services
for desired goods
and services that
someone else
possesses.

14.  The process of exchanging goods
and services between countries. It
involves the buying and selling of
imports and exports.

15.  A country has an absolute advantage
over another if it can produce, with a
given amount of capital and labor, a
larger output than its rival.
 In other words to produce more of a
good or service than competitors,
using the same amount of resources.

16.  Nations should specialize in the
production of goods in which they
have comparative advantage and
import those products of which it
has the least advantage.

17.  Philippine exports have been the main dollar
earner of the country. In recent years, it has
contributed about fifty percent of total dollar
receipts of the country.
 We cannot use our Philippine peso to buy
foreign goods. We need dollars to import
goods or to buy goods from foreign
countries.

18.  Goods or merchandise that we sell
to other countries to earn dollars.
These dollars that we earn will later
be used to buy goods we need from
abroad.

19.  Dollars from gold
◦ We have several gold mines in the country.
With the attractive prices of gold in the
world market, income from the sales of
gold has also helped in our balance of
payments problem
Dollars from invisibles
There are non-commodity items like
foreign government expenditures,
transportation and insurance, travel,
foreign investments and foreign loans, and

20.  The dollars we earn through exports
and other sources are used mainly
to import goods and services we
need. Most of our imports are
composed of industrial and
manufactured items.

21. Our balance of payments is
considered favorable if
dollar inflows or receipts
exceed outflows or
payments
Current transactions refer to
imports and exports of

22.  The balance of trade is called f
avorable if
exports exceed imports.
 The balance of trade is called u
nfavorable
if imports exceed exports.

23.  Overdependence on few
primary products
 Overdependence on few
export markets

24.  Increase revenue by improving tax collection
efficiency and expanding tax base.
 Rationalize expenditure by prioritizing
projects for funding and reengineering
government structure.
 Improve debt management by tapping
concessional loans and etc.
 Pursue an honest-to-goodness privatization
program
 Improve the environment for investments
 Power sector reform with the aim of reducing
the mounting losses of NPC and encouraging
new investments in the sector to develop new