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NOTES ON INTERNATIONAL BUSINESS TRANSACTIONS

By Atty. Josh Carol T. Ventura While globalization has created a world in which virtually no country (even N. Korea)
is truly isolated from the trade of foreign goods, there are still some types of goods
Introduction to International Business Transactions that we try not to trade or create an expanded market for (drugs, weapons, etc.)

A) Definition of International Business Transactions and Globalization D) Two core aspects of economic globalization
When one looks at economic globalization one can distinguish two core
International business consists of transactions that are devised and carried out aspects : market globalization and regulatory globalization Market globalization
across national borders to satisfy the objectives of individuals and organizations. focuses on the increased volume of transactions in which goods, services, labor and
capital cross national boundaries, facilitated both by technological change and
One of the most common definitions of globalization is the elimination of time and decreasing tariff and non-tariff barriers, such that these transactions taken as a
space as a factor in human social relations. We may then say that globalization whole begin to resemble those of a single market spanning the globe. This
involves the elimination of time and space as factors in international economic characterization of globalization begins with the fact that there has always been
relations, specifically in international business transactions. transboundary economic activity, and argues that such activity is increasing both in
scope and scale such as to warrant a new name : globalization . Thus market
B) What makes international business international?Features of International globalization asserts in essence that globalization is a quantitative rather than a
Business Transactions qualitative change.
Cross border participation
Foreign currency This common approach to defining economic globalization, however,
Different laws applied across borders represents only one aspect of economic globalization. Another definition, which shall
Transfer of goods/services across borders be termed regulatory globalization, includes the quantitiative changes highlighted
Basically, any flow of value across borders. in market globalization, but emphasizes a qualitative change in the nature of our
regulation of markets. In particular, regulatory globalization focuses on the complex
***Foreign Exchange social processes which have led to the regulation of markets for goods, labor, capital
and services at new levels, levels which require formalized interstate cooperation
Chief concern here is foreign currency--money and finance through new and powerful institutions like the WTO, and which may in certain cases,
90% of all currency transactions are against the U.S. dollar transcend nation-state control to a significant degree, as in the case of the European
U.S. dollar is the most common reserve currency. Union.
Two important features of U.S. dollar as reserve currency are:
(1) convertability and (2) stability (inflation controlled) E.)The Primary Types of International Business Activities Are:
a) Sale of Goods (Exporting and Importing)
Foreign exchange market is unique in its efficiency. b) Sale of Services (consultancy)
Currency risks in international business transactions include varying rates, c) Licensing and Technology Transfer
inflation, instability, etc. d) Foreign Direct Investment

C. Commodification of Goods and Services Hybrid Types of International Business Activities :


1) Franchising the same legal tradition i.e. the English common law system; other
2) joint ventura countries are civil law systems or a mix of civil law and common law.
3) Countertrade Know what is countertrade In a common law system, the legal principles are developed
through the doctrine of precedent from judgments handed down
F) Sources of International Business Law by the courts.
Art. 38 of the Statute of International Court of lists the sources of international law . Civil law system originated from ancient Roman law and its
In the order of superiority, they are distinguishing feature is the emphasis on codified law.
a. international conventions and treaties Emerging economies like China, Vietnam and Cambodia have to
b. international custom or general practice build up their own legal framework and may choose any of the
c. general principles of law recognized by civilized nations system or may come up with a hybrid of the two
d. judicial decisions and scholarly writings
6. Who has jurisdiction? Some courts may have extra-territorial jurisdiction
G. Main Features of International Contracts (E.g. exercise of a courts power to regulate activities occurring outside its
jurisdiction U.S Sherman Act (Anti-trust Law)
Three main features of any contract are : 7. In settling dispute, what arbitration center are we going to choose? There
1. explanation of the deal itself are International arbitration centers in : Hong Kong, Tokyo, Sydney,
2. payment mechanisms for the deals Singapore, Kuala Lumpur among others
3. legal enforcement provisions
I) The Value of Global Linkages
Deciding and ensuring legal enforcement of the contracts is the key role of Today, global linkages tie trade, financial markets, technology, and living
the lawyer. In ensuring enforceability, lawyer must understand (1) standards together in an unprecedented way!
international commercial law and (2) what happens when a dispute ends up Trade:
in a national court system. A freeze in Brazil and its effects on coffee production are felt around the world as
coffee becomes scarce and its price rises.
H) Legal Issues Posed in an International Business Transaction
Financial Markets:
1. What are the rights and obligations of parties? A decline in the value of the Mexican Peso affected financial markets in all
2. What remedies are available to the parties in case of a breach? emerging economies and impacted Poland, Hungary, and the Czech Republic.
3. Where to sue, in the place of buyer or seller or elsewhere?
4. As far as the respective legal rights, obligations and remedies are Technology Creates Intense Individual Linkages:
concerned, should the parties be bound by the law of the buyer(e.g. Computer technology, satellite communications, and telecommunications give
Australian law) or the law of the seller (e.g Singapore sales law) or some real-time access to people and information on a global scale.
international sales law may be applicable?
5. What if the other contracting originates from a country with a different People (Living Standard)..
legal system? E.g. Singapore and other Commonwealth countries share Listen to world music
Watch international programs broadcast by CNN
Wear blue jeans and dance the same dances
Eat hamburgers, tacos, and pizza
The Result is that International Investment is at an Unprecedented High

J) Global investment forces companies to reconsider and play by new rules in:
Business practices
Legal requirements
Ethics

K) Macroeconomic Impacts of International Business


Firms can attain economies of scale not attainable only in domestic markets
Global markets increase the number of potential customers
Firms can ride the learning curve more quickly and produce lower cost goods
faster
Firms can hone their competitive skills
Workers in exporting firms earn higher wages!

L) International Business Creates International Adjustments:


Prices of high technology products drop due to global competition
VCRs are no longer manufactured in the U.S.
Only a small percentage of motorcycles are built in the U.S.
The U.S. shoe industry is in its death throes

M) International Business IS the Future of Business!!-


Advantages Available to the International Firm:
Access to Advanced Technology
Ability to Capitalize on Product Development
Superior Financial Strength
Depth and Breadth of Management Talent
Reduced Political Risk

N)Globalization
The watchword that describes the need for companies and their employees, if they
are to prosper, to treat the world as their stage.