International trade esp

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International trade esp

  1. 1. I. Overview of International trade 1. International trade: Purchase, sale, or exchange of goods and services across national borders. 2. Foreign Direct Investment (FDI): Purchase of physical assets or a significant amount of the ownership of a company in another country to gain a measure of management control. 3. Portfolio Investment: Investment that does not involve obtaining a degree of control in a company.
  2. 2. II. Benefits of International trade  Open doors to new entrepreneurial opportunity across nations.  Provide a country’s people with greater choice of goods and services.  An important engine for job creation in many countries.
  3. 3. III. Theories of International trade 1.Mercantilism: Trade theory holding that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports. 2. Absolute advantage: Ability of a nation to produce a good more efficiently than any other nation.
  4. 4. 3. Comparative advantage: Inability of a nation to produce a goods more efficiently than other nations, but an ability to produce that good more efficiently than it does any other good. 4. Factor proportions theory: Trade theory holding that countries produce and export goods that require resources (factors) that are abundant and import goods that require resources in short supply.
  5. 5. Gain or loss?
  6. 6. Terms of trade Terms of trade or TOT is the relative prices of a country's export to import (TOT=PE /PI) An improvement in a nation's terms of trade(the increase of the ratio) is good for that country in the sense that it has to pay less for the products it imports, that is, it has to give up fewer exports for the imports it receives.
  7. 7. Gain from trade  According to the orthodox economists: All countries have its own comparative advantage and they gain from trade  According to the neo-Marxists: the LDCs lost from trade
  8. 8.  Comparative advantage explains how trade can create value for both parties even when one can produce all goods with fewer resources than the other. The net benefits of such an outcome are called gains from trade. It is the main concept of the pure theory of international trade.
  9. 9. IV. The balance of trade  Visible trade consists of all those goods which can be seen and touched such as machines, televisions, motorcycles, refrigerators, food, raw materials…  Invisible trade refers to all those items which we export, which cannot be seen or touched such as sales of insurance, banking services, airline seats or sea cargo….  The balance of trade is the difference in value between imports and exports of goods over a particular period.
  10. 10. V. The balance of payments  In economics, the balance of payments (BOP) measures the payments that flow between any individual country and all other countries.  IMF definition: "Balance of Payments is a statistical statement that summarizes transactions between residents and nonresidents during a period.”  It is used to summarize all international economic transactions for that country during a specific time period, usually a year.
  11. 11.  The balance of payments comprises the current account, the capital account, and the financial account. "Together, these accounts balance in the sense that the sum of the entries is conceptually zero.”
  12. 12. 1. Current account  Current account is a national account that records transactions involving the import and export of goods and services, income receipts on assets abroad, and income payments on foreign assets inside the country  Current account surplus (a trade surplus): When a country exports more goods, services, and income than it imports.  Current account deficit (a trade deficit): When a country imports more goods, services and income than it exports.
  13. 13. 2. Capital account  Capital account: A national account that records transactions involving the purchase or sale of assets
  14. 14. 3. Financial account  The financial account records transactions that involve financial assets and liabilities and that take place between residents and nonresidents.
  15. 15.  A balance of payments equilibrium is defined as a condition where the sum of debits and credits from the current account and the capital and financial accounts equal to zero; in other words, equilibrium is where Current account + (Capital + Financial account) = 0
  16. 16.  This is a condition where there are no changes in Official Reserves. When there is no change in Official Reserves, the balance of payments may also be stated as follows: Current account = - (Capital + Financial account) Or Current account deficit (or surplus) = Capital and Financial account) surplus (or deficit)
  17. 17. Balance of payments identity  Current Account = Capital Account + Financial Account + Net Errors and Omissions
  18. 18. VI. Exporting 1. Export procedures -Transport the goods to the docks or airport -Pass them through customs -Clear them through another set of customs on arrival -Present them to the correct customers
  19. 19. 2. Export documents -Bill of lading (BL): containing details of the goods being shipped, their destination and which ship they will be traveling. -Export invoice: The ‘bill’ to the customer, requiring payment once he has received the goods. -Certificate of origin: To prove the goods have come from UK for example and are not being imported under false pretences from a different country whose goods might be prohibited from entry. -Certificate of value: To prove the goods are worth what the invoice says they are worth. -Customs declaration: A signed statement of what
  20. 20. 2. Export documents -Declaration of dangerous goods: Required by international law for certain classes of goods such as explosives or volatile chemicals. -Certificate of insurance: Needed by the shipping company, or airline, or by your customer, so that they can be assured that the value of the goods is covered should an accident happen. -Health certificate: Needed for drugs and similar products and for transport of animals. -Import licence: Permission to import your goods. Needed for certain countries and products.
  21. 21. VII. Reasons for governmental intervention in trade  Cultural motives -The cultures of countries are slowly altered by exposure to the people and products of other cultures. -Cultural influence of the United States: the United States, more than any other nations, is seen as a threat to national cultures around the world.
  22. 22. Reasons… 2.Political motives -To protect jobs -To preserve national security -To respond to ‘unfair’ trade -To gain influence
  23. 23. Reasons… 3. Economic motives -To protect infant industries -To pursue strategic trade policy
  24. 24. Protectionism  Protectionism is the economic policy of restraining trade between nations, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other restrictive government regulations designed to discourage imports, and prevent foreign take-over of local markets and companies. This policy is closely aligned with anti- globalization, and contrasts with free trade, where government barriers to trade are kept to a minimum. The term is mostly used in the context of economics, where protectionism refers to policies or doctrines which "protect" businesses and workers within a country by restricting or regulating trade with foreign nations.
  25. 25. Quota  An import quota is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. Quotas, like other trade restrictions, are used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy.Critics say quotas often lead to corruption (bribes to get a quota allocation), smuggling (circumventing a quota), and higher prices for consumers.In economics, quotas are thought to be less economically efficient than tariffs which in turn are less economically efficient than free trade.
  26. 26. Tariff  A tariff is a tax imposed on goods when they are moved across a political boundary. They are usually associated with protectionism, the economic policy of restraining trade between nations. For political reasons, tariffs are usually imposed on imported goods, although they may also be imposed on exported goods.
  27. 27. VIII. Methods of restricting trade 1. Tariffs: Government tax levied on a product as it enters or leaves a country. -To protect domestic producers -To generate revenue
  28. 28. 2. Quotas: Restriction on the amount (measured in units or weight) of a good that can enter or leave a country during a certain period of time. -Reasons for import quotas: +To protect domestic producers by placing a limit on the amount of goods allowed to enter the country. +To force companies of other nations to compete against one another for the limited amount of imports allowed.
  29. 29. -Reasons for export quotas: +To maintain adequate supplies of a product in the home market. +To restrict supply on world markets, thereby increasing the international price of the good.
  30. 30. 3. Embargoes: Complete ban on trade (imports and exports) in one or more products with a particular country. 4. Local content requirements: Laws stipulating that a specified amount of a good or service be supplied by producers in the domestic market.
  31. 31. 5. Administrative delays: Regulatory control or bureaucratic rules designed to impair the rapid flow of imports into a country. 6. Currency controls: Restrictions on the convertibility of a currency into other currencies
  32. 32. IX. Organizations in international trade 1. The International Monetary Fund (IMF)- set up in 1974 to ensure that the world’s currencies were kept at reasonably stable rates against each other. 2. The United nations Conference on Trade and Development (UNCTAD) - set up in the mid-1960s. 3. The General Agreement on tariffs and trade (GATT) – set up after World War II 4. World Trade Organization (WTO)
  33. 33. Thank you for your attention!
  34. 34. 1.Company structure and strategies 2. Motivation 3. Marketing 4. International trade 5. Financing International trade 6. Mergers and acquisition 7. Accounting and financial statement 8. Stock and bond

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