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    International Business Trade Lesson 1

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    Kristen Ijaco
    International business involves cross-border trade between countries and global transactions. It has grown due to globalization and falling trade barriers. Several international institutions were established post-World War 2 to facilitate global trade and economic development, such as the WTO, IMF, and World Bank. Countries trade for reasons such as comparative advantage and access to cheaper or higher quality goods. Methods to protect domestic industries include tariffs and non-tariff barriers. Common forms of international business include exports, foreign direct investment, licensing, franchising, and strategic partnerships.

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    International Business Trade Lesson 1

    Uploaded by

    Kristen Ijaco
    30 views25 pages
    International business involves cross-border trade between countries and global transactions. It has grown due to globalization and falling trade barriers. Several international institutions were established post-World War 2 to facilitate global trade and economic development, such as the WTO, IMF, and World Bank. Countries trade for reasons such as comparative advantage and access to cheaper or higher quality goods. Methods to protect domestic industries include tariffs and non-tariff barriers. Common forms of international business include exports, foreign direct investment, licensing, franchising, and strategic partnerships.

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    International business involves cross-border trade between countries and global transactions. It has grown due to globalization and falling trade barriers. Several international institutions were established post-World War 2 to facilitate global trade and economic development, such as the WTO, IMF, and World Bank. Countries trade for reasons such as comparative advantage and access to cheaper or higher quality goods. Methods to protect domestic industries include tariffs and non-tariff barriers. Common forms of international business include exports, foreign direct investment, licensing, franchising, and strategic partnerships.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    30 views25 pages

    International Business Trade Lesson 1

    Uploaded by

    Kristen Ijaco
    International business involves cross-border trade between countries and global transactions. It has grown due to globalization and falling trade barriers. Several international institutions were established post-World War 2 to facilitate global trade and economic development, such as the WTO, IMF, and World Bank. Countries trade for reasons such as comparative advantage and access to cheaper or higher quality goods. Methods to protect domestic industries include tariffs and non-tariff barriers. Common forms of international business include exports, foreign direct investment, licensing, franchising, and strategic partnerships.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 25

    International Business and Trade

    International business  to the trade of 


    goods, services, capital and/or knowledge
    across national borders and at a global or
    transnational scale.
    It involves cross-border transactions of goods
    and services between two or more countries.
    Globalization

    Globalization refers to the shift towards a more


    integrated and interdependent world economy.

    Globalization of Market-refers to the merging of


    historically distinct and separate national market into
    one huge global market place. Falling barriers to cross-
    border trade and investment have made it easier to
    sell internationally.
    Globalization of Production- refers to sourcing of goods
    and services from locations around the globe to take
    advantage of national differences in the cost and
    quality of factors in production (such as labor, energy,
    land and capital)
    The Emergence of Global Institutions

    The General Agreement on Tariffs and Trade (GATT),


    signed in 1947 by 23 countries, is a treaty minimizing
    barriers to international trade by eliminating or reducing
    quotas, tariffs, and subsidies. It was intended to boost
    economic recovery after World War II.
    GATT was expanded and refined over the years, leading
    to the creation in 1995 of the World Trade Organization
    (WTO), which absorbed the organization created to
    implement GATT. By then, 125 nations were signatories
    to its agreements, which covered about 90% of global
    trade.
    International Monetary Fund and the World Bank were
    both created in 1944 by 44 nations. IMF was
    established to maintain order in the international
    monetary system . The world bank was set up to
    promote economic development.

    WTO- focus on making low interest loans to


    governments in poor nation.

    IMF- lender of last resort to nation whose economies is


    uncertain and currencies are losing.
    United Nation was established on October 24, 1945 by
    51 countries committed to preserve peace through
    international cooperation and collective security. Today
    nearly every nation in the world belongs to the United
    Nation, membership now totals 193 countries. When
    states become members of the United Nation, they
    agree to accept the obligations of the UN Charter, an
    international treaty that establishes basic principles of
    international relations
    Treaties are agreements between nations. They can be
    bilateral, between two nations, or multilateral, among
    several nations. Key aspects of treaties are that they
    are binding (meaning, there are legal consequences to
    breaking them) and become part of international law.
    The Rationale for Foreign Trade and its Organization
    Why countries trade ?
    There are two basic types of trade between countries:

    • the first in which the receiving country itself cannot


    produce the goods or provide the services or where they
    do not have enough.

    • the second, in which they have the capability of


    producing the goods or supplying the services, but still
    import them.
    However, the reasons for importing product generally fall into
    three classifications:

    • the imported goods may be cheaper than those produced


    domestically;

    • a greater variety of goods may be made available through


    imports;

    • the imported goods may offer advantages other than lower


    prices over domestic production – better quality or design, higher
    status (eg prestige labelling), technical features, etc
    Methods of protection

    Categorized as either tariff or non-tariff barriers.


    Tariffs
    A tariff is a ‘tax’ or import duty levied on goods or services
    entering a country. Tariffs can be fixed or percentage levies
    and serve the twin purposes of generating revenue for
    governments and making it more difficult for companies
    from other countries to do business in the protected
    market.
    Non-tariff barriers

    Although progress was made in dismantling tariff barriers


    under the GATT in the period up to 1995 when the WTO
    was established. The Global Economy tariff protection
    increased during the 1980s, mostly as a substitute for the
    tariffs which were outlawed.
    The following is a list of non-tariff measures which have
    been deployed by both developed and developing
    countries:

    • Quotas
    A numerical limit in terms of value or volume
    imposed on the amount of a product which can
    be imported.
    • Voluntary export restraints
    Agreed arrangements whereby an exporter agrees
    not to export more than a specific amount of a good to
    the importing country (usually to preempt the
    imposition of more stringent measures). Such
    agreements are common for automobiles and
    electronics, but are also applied to steel and
    chemicals.
    • Domestic subsidies
    The provision of financial aid or preferential tax
    status to domestic manufacturers which gives them
    an advantage over external suppliers. The most
    obvious examples are agriculture where both the
    EU and US have consistently employed subsidies
    to help domestic p roducers.
    • Import deposits

    The device of requiring the importer to make a


    deposit (usually a proportion of the value of the
    goods) with the Government for a fixed period. The
    effect on cash flow is intended to discourage
    imports.
    • Safety and health standards / technical specifications

    This more subtle form requires importers to meet


    stringent standards or to complete complicated and
    lengthy formalities. The French bans on lamb and then
    beef imported from the UK during the 1990s will be
    long remembered by the British farming industry.
    Technical regulations and standards
    Technical regulations and standards are important, but they vary from
    country to country. Having too many different standards makes life difficult
    for producers and exporters. If the standards are set arbitrarily, they could
    be used as an excuse for protectionism. Standards can become obstacles to
    trade. But they are also necessary for a range of reasons, from
    environmental protection, safety, national security to consumer information.
    And they can help trade. Therefore the same basic question arises again:
    how to ensure that standards are genuinely useful, and not arbitrary or an
    excuse for protectionism.

    The Technical Barriers to Trade Agreement (TBT) tries to ensure that


    regulations, standards, testing and certification procedures do not create
    unnecessary obstacles.
    Types of International Business

    • Export –Impot Trade


    • Foreign direct Investment
    • Licensing
    • Franchising
    • Management Contract
     Export-Import Trade

    Is the most fundamental and the largest international


    business activity, and it is often the first choice when the
    businesses decide to expand abroad as it is the easiest
    way to enter the market with the small outlay of capital.
     Foreign Direct Investment

    The host country will get benefits by the introduction of new


    products, services, technologies and managerial skills. Also ,
    FDI helps facilitate progressive internal policy reforms of the
    host country and enhance the economic situation
     Licensing

    It is one of the other ways to expand the business internationally.


    Licensing is the arrangement between the firm, called which allows
    another one to use its intellectual property such as brand name,
    copy right, patent, technology, trademark and so on for a specific
    period of time.
    The licensor gets benefit in term of royalty.
     Franchising

    Is closely related to licensing. Franchising is a parent


    company (franchiser) gives right to another company
    (franchisee) to do business using the franchiser’s name and
    products in the prescribe manner. Franchising is different
    from the licensing in terms of the franchisees have to follow
    much stricter guidelines.
     Management Contract/Strategic Partnership and Joint Venture.

    A strategic partnership alliance is a positive aspect of the


    cooperation of two or more companies in different countries are
    joined together for mutual gain. A joint venture is a special type
    of strategic alliance, where the partners across the globe
    collectively found a company to produce goods and services.

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