exam

CONCEPT OF INTERNATIONAL TRADE (3 TYPES)

CONCEPT OF INTERNATIONAL TRADE (3 TYPES)

1. Globalisation
2. Internationalisation

1. Globalisation

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Possibility for everybody from every area of the world to sell everything (goods and service), to everybody in every area of the world.

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Integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology.

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Was introduced in 1960s, when multinational corporations started to disseminate the world with their products, and became widespread in the 80s, when some brands and logos were well known in every country (i.e.coca cola, mc donald’s, kfc, exxon-esso,

2. Internationalisation

can be referred to: - economies - companies

When referred to economies, internationalisation means that internal market is open to foreign companies, and that national companies operate overseas.

2 possible meanings:

i) stricter concept:

a company is “international”, when it is present in foreign markets with its own facilities (such as branches, local companies), for commercial or productive purposes (eg: KFC,Mc Donald).

ii) broader concept:

a company is “international”, when it sells abroad directly, even if it has not permanent facilities in foreign market (i.e. selling during local exhibitions).

3. International trade

is the exchange of goods carried out by different countries.

Goods are usually are valued at the frontier of the exporting country either in term of cost, insurance and freight (CIF) or free on board (FOB).

2. CLASSIFICATION OF INTERNATIONAL TRADE

Import Trade - The inflow of goods in a country is called import trade.

Export Trade - The outflow of goods from a country is called export trade.

Entrapot Trade - Many times goods are imported for the purpose of re-export after some processing operations.

3. FUNCTION WTO

Oversees the implementation, administration and operation of the covered agreements.

Provides a forum for negotiations and for settling disputes.

To review and propagate the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making

Administering WTO trade agreements

Forum for trade negotiations

Maintaining open trade to help trade flow as freely as possible – provided there are no undesirable side effect

Handling trade disputes

Monitoring national trade policies

Improving people’s lives by ensure trade should be conducted with a view to raising standards of living, ensuring full employment, increasing real income

Technical assistance and training for developing countries

Cooperation with other international organizations

4. REASON OF INTERNATIONAL TRADE

International trade allows countries to expand their markets and access goods and services that otherwise may not have been available domestically. As a result of international trade, the market is more competitive. This ultimately results in more competitive pricing and brings a cheaper product home to the consumer.

Trade contributes to global efficiency. When a country opens up to trade, capital and labor shift toward industries in which they are used more efficiently. That movement provides society a higher level of economic welfare.

5. PEFC - PROGRAMME FOR THE ENDORSEMENT OF FOREST CERTIFICATION

PEFC, the Programme for the Endorsement of Forest Certification, is a leading global alliance of national forest certification systems. As an international non-profit, non-governmental organization, we are dedicated to promoting sustainable forest management through independent third-party certification.

WHAT DO PEFC DO AND WHY

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Support national forest certification programs that are created by multi-stakeholder procedures and customized to the needs and goals of the local community.

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Give all sizes of forest owners a way to showcase their ethical business practices and encourage businesses and consumers to make sustainable purchases.

GLOBAL ALLIANCE - Membership organization based in Geneva, Switzerland

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Africa : Cameroon, Republic of Congo, South Africa, Gabon, Ghana

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Asia: China, India, Indonesia, Malaysia, Japan, Republic of Korea, Thailand, Vietnam, Myanmar

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Europe: Portugal,Belgium, Bosnia , Denmark, Austria, Germany, France, Finland, Poland, Italy, United Kingdom, etc.

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Oceania: New Zealand, Australia

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South America: Argentina, Brazil Uruguay, Chile, Guyana

6. RATIONALE OF INTERNATIONAL TRADE

The basic reasons why trade may take place between countries which are:

Differences in technology

Advantageous trade can occur between countries if the countries differ in their technological abilities to produce goods and services.

Differences in resource endowments

Advantageous trade can occur between countries if the countries differ in their endowments of resources

eg: Natural resources, skill workers, capital resources such as machinery, infrastructure, communications systems, Climate, shape of geographical area

Different demand

Individuals in different countries may have different preferences or demands for various products.

eg: Malaysians are likely to demand more rice than Americans, even if consumers face the same price economically by trading with each other

Existence of Economies of Scale in Production

Economies of scale refer to a production process in which production costs fall as the scale of production rises.

eg: produce wood products in America is higher cost than in Malaysia

Government Policies

Government tax and subsidy programs will change the prices of goods and services. These changes can be enough to generate advantages in production of certain products.

eg: import tariffs and quotas and export taxes and subsidies. Production and consumption taxes and subsidies can stimulate imports or exports to occur

7. TYPES OF INTERNATIONAL TRADE

Direct Business

The importer places order with manufacturer of the exporting country.

Consignment Business

The exporter sends

Indent Firms

The indent firms charge a commission for their services. The indent firms are also called commission agents.

Merchant Shippers

The businessmen who buy goods on their own account and sell them in a foreign country at a profit.

8. FUNCTION OF FREIGHT FORWARDER

A freight forwarder works with companies, importers and exporters to make sure goods are transported in the safest, most efficient and cost-effective way. A freight forwarder works out the logistics and makes sure all bases are covered in the process of transporting goods from A to B.

Freight forwarders play an important role in the transportation industry by helping companies streamline the process of shipping goods. Importing and exporting can quickly become costly and time-consuming for manufacturers with bulk shipping needs, and freight forwarders can help companies decrease costs and increase operation efficiency.

9. LETTER OF CREDIT, BALANCE OF PAYMENT,CENTRAL BANK,CURRENT ACCOUNT CAPITAL ACCOUNT,IMF,EXCHANGE RATE