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International trade

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Introduction to international trade, international trade theory, international trade trends. Assignment : E-commerce will be booming in 2015, why? Give the global sales of B2C e-commerce in 2012-2013 data, compare with world merchandise export by major group in 2013 (from WTO) to support your reasoning

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International trade

  1. 1. INTERNATIONAL TRADE Course 1 Yudy Yunardy S.E., M.M.
  2. 2. WHO AM I ? Fifteen years of Banking experience, six years’ experience in Trade Finance Operations background with Unsecured Loan experience, equipped with another seven years’ experience in Management Information Analyst and Dashboard Reporting. Vastly experienced in Bank Indonesia reporting (LBU, SID, LBBU, BMPK etc.)
  3. 3. EMPLOYMENT SUMMARY 2014 Present Indonesia Banking School 2013 2014 Deutschebank AG 2011 2012 Misys Plc 2010 2011 DBS Indonesia 2010 2010 ANZ Bank 2005 2010 RBS Bank 2004 2005 Vendor at Bank Mandiri, BCA and Circle K 1999 2004 HSBC Bank 1998 1999 MetLife Insurance 1997 1998 Demographic Institution FEUI 1996 1997 Private Investment Manager
  4. 4. RULES 1.Disable your comm. device 2.Presence 80% minimum 3.Time alloc. 08.00 – 10.30
  5. 5. TEXTBOOK Koch, Timothy (2015), Bank Management, The Dryden Press
  6. 6. GRADING EVALUATION 1. Participation 5% 2. Quiz / exercise 10% 3. Assignment 15% 4. Midterm 35% 5. Final 35%
  7. 7. INTRODUCTION TO INTERNATIONAL TRADE
  8. 8. INTRODUCTION TO INTERNATIONAL TRADE • Swarm of Chinese products • Goods and services
  9. 9. • Winning the competition • Definition of international trade • Specialization in international trade INTRODUCTION TO INTERNATIONAL TRADE
  10. 10. CAUSES OF INTERNATIONAL TRADE 1.Uneven distribution of resources 2.Advantage of resources 3.Increase consumption 4.Decrease domestic dependencies 5.Increase economic growth 6.Efficiency 7.Taste
  11. 11. INTERNATIONAL TRADE THEORY
  12. 12. 1. Mercantilism 2. Absolute Advantage 3. Comparative Advantage 4. Heckscher-Ohlin INTERNATIONAL TRADE THEORY
  13. 13. The holdings of country’s treasure primarily in the form of gold constituted its wealth 1. Increase export 2. Decrease import 3. Expand/colonize 4. Monopolize MERCANTILISM
  14. 14. The ability to produce more number of a good product or service than competitors, using the same amount of resources ABSOLUTE ADVANTAGE
  15. 15. Production of cloth and car before trade : Cloth Car Indonesia 100 yd/1 day 10 car/4 days USA 100 yd/2 days 10 car/1 day ABSOLUTE ADVANTAGE
  16. 16. Production of cloth and car in specialization : Cloth Car Indonesia USA ABSOLUTE ADVANTAGE 200 yd/1 day xxxx xxxx 20 car/1 day
  17. 17. Production gain after trade : Day 1 Day 2 Day 3 Day 4 Indonesia 100 yd 10 car After trade 100 yd 10 car USA 10 car 100 yd After trade 10 car 100 yd ABSOLUTE ADVANTAGE 1 day
  18. 18. Production of handphone and chair before trade : hp chair Sweden 50 /2 days 10 /2 days China 50 /1 day 10 /3 days ABSOLUTE ADVANTAGE
  19. 19. Production of handphone and chair in specialization : hp chair Sweden China ABSOLUTE ADVANTAGE xxxx 20 /2 days 100 /1 day xxxx
  20. 20. Country specialization in trade : Day 1 Day 2 Day 3 Day 4 Sweden 10 10 China 50 50 ABSOLUTE ADVANTAGE
  21. 21. Production gain after trade : Day 1 Day 2 Day 3 Day 4 Sweden 50 10 After trade 50 10 China 50 10 After trade 50 10 ABSOLUTE ADVANTAGE 1 day
  22. 22. Potential gains from trade between countries that arise from differences in their factor endowments or technological progress COMPARATIVE ADVANTAGE
  23. 23. COMPARATIVE ADVANTAGE Production of cloth and rice : Cloth Rice Exchange rate India 20 yd 40 ton 1 yd = 2 ton 1 ton = 0.5 yd Indonesia 60 yd 48 ton 1 yd = 0.8 ton 1 ton = 1.25 yd
  24. 24. COMPARATIVE ADVANTAGE Opportunity cost of cloth and rice : Cloth Rice Gain India 2 ton 0.5 yd Indonesia 0.8 ton 1.25 yd 1.25 – 0.5 = 0.75 yd 2 – 0.8 = 1.2 ton
  25. 25. COMPARATIVE ADVANTAGE Production of cloth and wine : Cloth Wine Exchange rate UK 20 yd 125 btl Portugal 25 yd 60 btl 1 yd = 6.25 btl 1 btl = 0.16 yd 1 btl = 0.42 yd 1 yd = 2.4 btl
  26. 26. 1. Which country has absolute advantage of cloth production? 2. Which country has absolute advantage of wine production? 3. Which country has comparative advantage of cloth production? 4. Which country has comparative advantage of wine production? Portugal UK UK Portugal COMPARATIVE ADVANTAGE
  27. 27. Production of cloth and wine in specialization : cloth wine UK Portugal Wine importer will import 100 btl of wine, exchange rate 1 yd = 5 btl xxxx 250 btl 50 yd xxxx COMPARATIVE ADVANTAGE
  28. 28. Production of cloth and wine in trade : cloth wine UK Portugal 20 yd 150 btl 30 yd 100 btl COMPARATIVE ADVANTAGE
  29. 29. Production gain/loss in trade : Before after gain/loss UK Portugal 20 yd 0 yd 150 btl 25 btl 20 yd 125 btl 30 yd 5 yd 100 btl 40 btl 25 yd 60 btl COMPARATIVE ADVANTAGE
  30. 30. Differences in factor endowments are the cause of international specialization and trade HECKSCHER - OHLIN
  31. 31. And the base of comparative advantage : 1. Endowment, factors of production (land, labor and capital) 2. Intensity, level of technology HECKSCHER - OHLIN
  32. 32. SO? WHAT’S THE DIFFERENCE WITH COMPARATIVE ADVANTAGE? Heckscher-Ohlin trade based on resource availability David Ricardo • trade based on comparative advantage based on difference in opportunity cost • Opportunity cost based on technology difference
  33. 33. IMPACTS OF TRADE
  34. 34. 1. Increase bilateral relationship 2. Fill demand gap 3. Push optimal production 4. Advance science and technology 5. Specialization 6. Create additional employment BENEFITS OF INTERNATIONAL TRADE
  35. 35. 1. Currency difference 2. Unskilled labor force 3. International payment risk 4. Import policy 5. War 6. Regional Economic organization BARRIERS OF INTERNATIONAL TRADE
  36. 36. 1. Rapid depletion of exhaustible natural resources 2. Import of Harmful Goods 3. Over specialization 4. Import dependencies 5. Danger of starvation 6. Consumerism 7. Smothering small business 8. One Country Gains at the Expense of Other 9. May Lead to War NEGATIVE EFFECTS OF INTERNATIONAL TRADE
  37. 37. TRENDS IN INTERNATIONAL TRADE
  38. 38. 1. Forced Dynamism 2. Cooperation among countries 3. Liberalization of cross-border movements 4. Transfer of Technology 5. E-Commerce TRENDS IN INTERNATIONAL TRADE
  39. 39. 1. Businesses are constantly pushing the frontiers of economic growth, technology, culture, and politics which also change the surrounding global society and global economic context 2. Factors external to international trade (e.g., developments in science and information technology) are constantly forcing international trade to change how they operate FORCED DYNAMISM
  40. 40. 1. To gain reciprocal advantages 2. To attack problems they cannot solve alone 3. To deal with concerns that lie outside anyone’s territory 4. Countries set agreements on how to commercially exploit areas outside any of their territories COOPERATION AMONG COUNTRIES
  41. 41. 1. So-called open economies (having very few international restrictions) will give consumers better access to a greater variety of goods and services at lower prices 2. Producers will become more efficient by competing against foreign 3. If they reduce their own restrictions, other countries will do the same LIBERALIZATION OF CROSS- BORDER MOVEMENTS
  42. 42. Technology transfer is the process by which commercial technology is disseminated TRANSFER OF TECHNOLOGY
  43. 43. With the rise of interconnected network (internet) shopping online becomes more and more convenient ELECTRONIC COMMERCE
  44. 44. E-commerce (electronic commerce or EC) is the purchasing, selling and exchanging of goods or services, or the transmitting of funds or data, over an electronic network ELECTRONIC COMMERCE
  45. 45. 1. B2B 2. B2C 3. C2C 4. C2B 5. B2E 6. G2G 7. G2E 8. G2B 9. B2G 10. G2C 11. C2G E-COMMERCE CLASSIFICATION
  46. 46. E-COMMERCE TRANSACTION 1. Cash on delivery 2. Bank transfer 3. Payment mediation service 4. PayPal 5. Western Union 6. Credit Card
  47. 47. ASSIGNMENT •E-commerce will be booming in 2015, why? Give the global sales of B2C e-commerce in 2012-2013 data, compare with world merchandise export by major group in 2013 (from WTO) to support your reasoning
  48. 48. THANK YOU

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