-Early way using animals CAMELS & DONKEYS

ITA REVIEWER PRELIM -1st route bw Euphrates & Tigris

I. INTERNATIONAL TRADE – is the exchange  THE CARAVEL TRADE – 15th cent. By
of goods, services and capital across national
Portugese
borders.
-Small ship
-Highly Maneuverable sailing ship
THE HISTORY OF INTERNATIONAL TRADE:
Ancient Times
 PAX ROMANA – Rome greatest contrib. to
Middle Ages
international trade
Modern Era
-last of the Good Emperors
ANCIENT TIMES – Trade bw Romans and Indians
-Arabian nomads with camels (traded silk & spices in  EARLY FAIRS – Roman fairs were holidays,
Far East) intermission of labor & pleadings
-“Ships of Tranish” -Temporary markets
-Activities in Red Sea, Arabia from the “Land of -Important in long distance
Punt”
- THREE MAIN ROMAN PORTS(brought in from  PIEPOWDER COURT – Special Tribunal in
East Africa were set africa England organized by a borough on the occasion
+Myos Hormos of a fair or market.
+Arsinoe -Unlimited jurisdiction
+Berenice -Middle Ages unto Modern Times

MIDDLE AGES – Foreign trade licences,  AGORA – was a central public space in ancient
introduced by japan GREEK CITY STATES(Greece)
-DUTCH CONVOYS(1599)-600,000 LBS -“Gathering place/ Assembly
-The Dutch East Company is ESTABLISHED(1602) -center of the athletic, artistic, spiritual & political
(Bankcrupt on 1799, cuz of compete in free trade) life of the city
-French military Forts (18th cent.)-acted as
trading&communication port for fur  FORUM – The market during early times in
Rome
MODERN ERA – Napoleon III reign -The concourse of people engaged in buying &
-Free trade Agreement(1860) bw France & Britain selling was termed as “Mercatus”, derived from
-Japanese Meji Restoration open for “Mercari”-“to buy”
industrialization(Free Trade)(1868)
-23 nations implement GATT(1947)  NUNDINAE –anglicized to “nundines”
-NAFTA(January 1, 1994) -Market days of the ancient roman calendar
-WTO promote free trade(Jan. 1 1995) -weekend,rest from work for the ruling class
(Patricians)
SPECIALIZATION – method of production where -A market occurring every 9th day in Rome
a business, area or economy focuses on the -Greek word “Nundinus”
production of a limited scope of products or services -The Occasional markets held on national holiday
to gain greater degrees of productive efficiency w/n were called “Mercatus”
an overall system(Kung saan ka kilala)
 FORESTALLING –originated in England
COMPARATIVE ADVANTAGE – refers to the -derived from the Old Saxon word “FORE”/ stall
ability to produce goods and services at a lower sign of “To hinder”
opportunity cost, not necessarily at a greater -Buying Merchandise b4 it reaches the market
volume(Kung anong meron ka, ikaw lang meron) -Unlawful Practice during Roman Empire
-“paghaharang bago dumating sa market”
COMMERCE AMONG NATIONS:
 ROYAL AUDIENCIA – PHILIPPINES,1950
 THE CARAVAN TRADE – Persian word -est. official prices of meat and other commodities
“Traveling together for greater security against forbidden to the buyers who sell it on the higher
bandits” prices
 INTERNATIONAL TRADE – is then the
 AUCTION – latin term “AUCTIO”, “Increase” CONCEPT of this exchange between people or
-This is the process of trading carried on by entities in two diff. countries
succeeding offers of increasing sums from
potential bidders, often called ‘BIDS” INTERNATIONAL TRADE THEORIES:
Classical country-based theories
FACTORS THAT CONTRIBUTE TO Modern firm-based theories
ACCELERATION OF INTERNATIOANAL
TRADE CLASSICAL COUNTRY-BASED
THEORIES:
Industrial Revolution Mercantilism
Commercial Doc. Absolute Advantage
Commercial law Comperative Advantage
Banking Institution Heckscher-Ohlin
Ports of Entry
Laissez Faire MODERN FIRM-BASED THEORIES:
Country silimilarity
INDUSTRIAL REVOLUTION – The process Product life cycle
of change from an agrarian and handicraft Global Strategic Rivalry
economy to one dominated by industry and Porte’s National Competitive Advantage
machine manufacturing(Britain 18th cent.) Price Specie Theorie

COMMERCIAL DOCUMENTS – written  THEORY OF MERCANTILISM 16-1700

records of commercial transactions describing -Simultaneously encourage exports &
various aspects of those transactions discourage imports
-Oldest trade theory
COMMERCIAL LAW – Business law, also -The government seeks to regulate the
called commercial law or mercantile law, the economy and trade in order to promote
body of rules, whether by convention, domestic industry – often at the expense of
agreement, or national or int. legislation, gov. the other countries
dealings bw persons in commercial matters
TRADE MERCANTILISM:
BANKING INSTITUTIONS – Also known as TRADE SURPLUS
financial institution is a company engaged in the -value of exports exceeds value of import
business of dealing with financial and monetary TRADE DEFICIT
transactions such as deposits, loans, investments, -value of imports exceeds value of export
& currency exchange PROTECTIONISM
-the practice of imposing restrictions on
PORTS OF ENTRY – It is a place where one imports & protecting domestic industry
may lawfully enter a country
-Land border, airports, seaport  THEORY OF ABSOLUTE
ADVANTAGE – dev. By Adam Smith
LAISSEZ FAIRE – The driving principle -the ability of a country to produce goods
behind laissez-faire, a French term that translates more than efficiently than other nations
as “leave alone”, is that the less the government
is involved in the economy, the better off the *IF COUNTRY A CAN PRODUCE
business will be – and by extension, society as a GOODS CHEAPER AND FASTER THAN
whole. COUNTRY B, THEN, COUNTRY A HAS
-Free market capitalism THE ABSOLUTE ADVANTAGE

II. INTERNATIONA TRADE THEORY –  THEORY OF COMPARATIVE

are simply diff. theories to explain ADVANTAGE – David Ricardo (1976),
international trade English Neoclassical economist
-Produces greater output of a good or
TRADE – is the concept of exchanging goods services than other countries using the same
and services between two people or entities amount of resources
 *COUNTRY A PRODUCES A WINE BARRIERS TO ENTRY – an obstacle a
AND GAINS 5M REVENUE FROM IT. new firm may face when trying to enter to
HE ALSO DISCOVERED THAT HE CAN an industry/ market >BELOW<
PRODUCE JUICE BUT IT ONLY
GENERATES 3M AS A REVENUE FROM +RESEARCH & DEVELOPMENT-self
IT. AS TO CHOOSE BETWEEN 2 explanatory
PRODUCTS, COUNTRY A WINS THE
COMPARATIVE ADVANTAGE +OWNERSHIP OF IPR-Protection of
intellectual property, the reputation, to
 HECKSCHER-OHLIN THEORY – Eli protect from the fake brand
Heckscher & Bertil Ohlin
-“Factors Proportion Theory” +ECONOMIC OF SCALE-“status of the
-countries would gain comparative company”, kaya mo bang
advantage if they produce and export goods makipagkomepetensya?
that requires resources/ factors that they had
in great supply +UNIQUE BUSINESS PROCESS/
-This makes the production cost cheaper METHOS AND EXPERIENCE IN
INDUSTRY-self explanatory
 CONTRY SIMILIRATY THEORY –
Swedish Economist Steffan Linder(1961) +CONTROL OF RESOURCES/
-Explains intra-industry trade by stating that FAVORABLE ACCESS TO RAW
countries with the most similarities in MATERIALS-theory of procurement,
factors kasunduan about sa mga raw materials,
paano maavail ang raw materials
*COMPANIES PRODUCE GOODS,
WHEN DOMESTICALLY IT IS  PRICE SPEIE THEORY –David
FAVORED, IT WILL ATTEMPT TO Hume(1711-1776)
EXPORT, IN THE COURSE OF EXPORT, -Countries with increasing money supply
COMPANY WILL LOOK FOR A would see inflation as price of goods &
COUNTRY WHO HAS SAME services rise while countries with decreasing
APPROVAL RATING DOMESTICALLY money supply would experience deflation as
prices of goods and services fell
 PRODUCT LIFE CYCLE THEORY –
Raymond Vernon(1960)(Harvard business +UNDER GOLD STANDARD,
professor) COUNTRIES WITH POSITIVE TRADE
-Describes the period of time over which an BALANCES ARE EFFECTIVELY
item is developed, brought to market and IMPORTING GOLD IN EXCHANGE FOR
eventually removed from the market THEIR EXPORTS WHILE THOSE WITH
-developed in response of the failure of NEGATIVE TRADE BALANCES ARE
Heckscher-ohlin Theory EXPORTING GOLD IN EXCHANGE FOR
IMPORT
STAGES OF PRODUCT LIFE CYCLE: -Japan 1000 yen, many currency

1. INTRODUCTION  FIRM-BASED TRADE THEORY –also

2. GROWTH considered as “Modern-Based Trade theory”
3. MATURITY -Cntrast of Classical theory
4. DECLINE -Trade between countries of goods produced
in the same industry
-incorporates products,service….into
 PRODUCT SPECIFIC RIVALRY understanding of trade flows
THEORY – Paul Krugman & Kelvin -IPHONE
Lancaster (1980)
-Firms will encounter global competition, in  LEONTIEF PARADOX THEORY –
order to prosper, they must develop Wassily N Leontief, Russian Economist
competitive advantages -A complete opposite of Factors Proportions
Theory
 -The country with a higher capital per c. MULTILATERAL – Agreements involve 3 or
worker has alower capital/ labor ratio in more parties w/o discrimination bw those
exports than in imports involved
-to test the Factor Proportions Theory
TYPES OF TRADE AGREEMENTS:
III. TRADE AGREEMENTS- is any contractual A. UNILATERAL TRADE AGREEMENT
trade agreement bw states concerning their -Trade incentives an importing country offers in
relationships order to encourage the exporting country o engage in
-type of economic integration where two or more international economic activities that will improve
countries enter into trade terms & agreements to gain the exporting countrry’s economy
greater benefits from each other
-may be bilatersal/ multilateral – that is, between two B. BILATERAL TRADE AGREEMENT
states/ more than 2 states -Usually includes a broad range of provisions
regulating the conditions of trade bw the contracting
IMPORTANCE OF TRADE AGREEMENTS: parties

i. REDUCE TRADE BARRIERS EX. ASEAN- CHINA FREE TRADE AREA,IN

-Two or more nations can go for economic EFFECT AS JANUARY2010
integration by partial/ full abolition of these EU – JAPAN ECONOMIC PARTNERSHIP
barriers AGREEMENT(2018)

TARRIEF BARRIERS C. MULTILATERAL TRADE AGREEMENT

-These partner invokijng a conditional MFN clause -involve 3 or more countries w/o discrimination bw
must make concessions equivalent those extended those involved
by the third country -the agreements reduce tariffs & make it easier for
businesses to import & export.
NON-TARIFF BARRIERS
-is a way to restrict trade using trade barriers in a FEATURES OF TRADE AGREEMENT
form other than tariff Reciprocity
-frequently use NTB to restrict the amount of trade Most-Favored-Nation Treatment
they conduct with other countries Non-Tariff Restrictions

ii. INCREASE THE COMBINED ECONONOMIC  RECIPROCITY- If agreement takes place, it may
PRODUCTIVITY be assumed that each party to the agreement
-It increase the combined economic productivity of expects to gain at least as much as it loses
the countries by economic cooperation
 THE MFN CLAUSE – Binds a country to apply
iii. TRADE AGREEMENTS BRING MANY to its partner country any lower rate of import
BENEFITS FOR ECONOMIES AROUND duties that it may later grant to imports from some
THE WORLD other country
-New Markets -against discriminatory treatment
-Jobs -the current agreement from further lowering barriers
-Competitiveness to another country
-Foreign Investment
TYPES OF MFN ADVANTAGE:
TYPES OF AGREEMENT:
a. UNILATERAL – The promisor makes an open CONDITIONAL – The partner invoking a
promise to provide something in exchange for conditional MFN clause must make concessions
performance equivalent to those extended by the third country

b. BILATERAL – Both the promisor and the UNCONDITIONAL – The clause operates
promise knowingly enter into na agreement automatically whenever appropriate circumtances
where both parties make a promise, and each is arise
obligated to fulfill the promise
 NON-TARIFF RESTRICTIONS – includes
discriminatory regulations, selective excise or sales
taxes, special “health” requirements, quotas, IV. TRADE BARRIERS – A barrier to trade is a
“voluntary restraints on importing government-imposed restraint on the flow of
international goods/ service

Those RESTRAINTS – are obvious, but most often

subtle and non-obvious

BARRIERS TO TRADE – often called “protection”

because their stated purpose is to shield/ advance
particular industries/ segments of an economy

TRADE – is a tax imposed by one country on the

goods and services imported from another country
- Are used to restrict imports by
increasing the price of goods & services
purchased from another country,
making them less attractive to domestic
consumers

TYPES OF TARIFFS
 AD VALOREM – expressed as a fixed
percentage of the value of the traded
commodity
 SPECIFIC TARIFF – expressed as a fixed
sum per physical unit of traded commodity
 COMPOUND TARIFF – a combination of
two

NON-TARIFF BARRIERS OF TRADE

-An indirect methods of protection which comprise
MERITS OF TRADE AGREEMENTS largely of administrative controls over trade such as
1. Removal of disputes customs regulations
2. Expanded Markets for exports
3. Specialization of labor and Capital -is a way to restrict trade using trade barriers in a
4. Foreign employment and economic growth form other than a tariff
5. Increased production efficiently & effectively
6. Consumer satisfaction -include quotas, embargoes, sanctions, and levies

NON TARIFF BARRIERS OF TRADE

 Marking of Origin Requirements
 Plant Regulations
 Safety Standards
 Health Standards
 Pharmaceutical Products
 Product Content Requirement
 Labelling and Container regulation
 System Licensing
 Consular Formalities and Documentations

EXCHANGE CONTROL – are government-

imposed limitations on the purchase and sale of
currencies

-these controls allow countries to

better stabilize their economies by limiting inflows
and out-flows of currency, which can create DUMPING – unfair practice, having to do with the
exchange rate volatility price discrimination bw the foreign market and the
domestic market
OBJECTIVES OF EXCHANGE CONTROL -derived from NORSE word “Dumpa”
 To maintain the exchange rate and avoid -danish word “Dumpe”
flight of capital -English word “Dump” “ to throw into a heap”
 To assure imports of items considered
essential to country’s well being KINDS OF DUMPING
 To stimulate the production of certain goods 1. Short Run or Intermittent Dumping
deemed vital to the economy 2. Long Run or Continuous Dumping
 To discourage the production of certain 3. Occasional Dumping
goods
MEASURES AGAINST DUMPING
QUANTITATIVE RESTRICTIONS 1. Application of ordinary protective duties

 TRADE POLICY-a developing countries 2. Imposition of special customs duties, known

as a result of balance of payment difficulties as Anti-Dumping Duties
in a form of Quotas
3. Banning of prohibition of the importation of
 QUOTAS-are restrictions imposed by one dumped goods
country on the volume and kind of goods
that may be allowed to enter or leave that 4. Re-exportation of the dumped goods
country
WHAT CONSTITUTES DUNPING
1. When importation destroys or injures an
 FRANCE-was the first to introduce a
industry efficiently and economically
COMPREHENSIVE SYSTEM OF
operated in the Philippines
QUANTITATIVE RESTRICTIONS in 1934
2. When they prevent the development of an
SPECIAL CUSTOMS DUTIES
industry that is being established
 DUMPING DUTY – a protectionist duty
that a domestic government imposes on
foreign imports that it believes are priced 3. When they restrain or monopolize trade or
below fair market value commerce in the Philippines

 CONTERVAILING DUTY – trade

imports duties imposed under WTO rules to 4. When an importer, owner, consignee, or
neutralize the negative effects of subsidies. agent, is indulging in unfair methods of
MARKETING DUTY competition which may result in the
destruction of industries or in restraint of
 GENERAL SAFEGUARD MEASURE – trade as aforesaid
shall apply where there is an increase in the
quantity of a product being imported,
whether absolute or relative to the domestic 5. When “Purchase Price’ or “exporters sale
production, which is determined to be a price” is less than its foreign market value
substantial cause of serious injury or threat or, in absence of such value, the cost of
thereof to the domestic industry production in the country of origin

 SPECIAL SAFEGUARD MEASURES –

shall apply on agricultural product where: Its
cumulative imports volume, in a given year,
exceeds is trigger volume: or but not
concurrently: Its actual C.I.F imports price
has gone below its trigger price