International Trade Practices

Part 1 Overview

Chapter 1 Chapter 2 Chapter 3 Chapter 4

Introduction to International Trade Basic Theory of International Trade Barriers to International Trade E-Commerce

Chapter 1 Introduction to International Trade

What is International Trade? And Why do countries trade? Invisible Trade Investment Effectiveness Measurement of International Trade

International Trade
------the exchange of goods, services, and technologies across national boundaries. It includes import and export operations.

Why do countries trade?

Countries engage in international trade for the following reasons: 1. Resources Reasons,
eg. Natural resources Favorable climate conditions and terrain Skilled workers and Capital Resources Favorable geographic location and transportation costs.

2. Economic Reasons eg. Comparative advantage

Strong domestic demand Scale economy Innovation or style

3. Political Reasons
In these cases, political objectives outweighed economic considerations. eg. Former Soviet Union and Cuba.

Invisible Trade ------the exchange of services between nations

Such as international cargo transportation, International cargo transportation insurance, and tourism.

FDI
------a third important category in a nations balance of trade, and a more important than trade as a vehicle for international economic transactions

Measurement of Global Trade

Two key indicators: Balance of Trade & Balance of Payments

Chapter 2 Basic Theory of International Trade

1. Classical Trade Theory Adam Smith (1723-1790) and His Absolute Advantage David Ricardo (1772-1823) and His Comparative Advantage 2. Neoclassical Trade Theory 3. Modern Trade theories

Theory of Absolute Advantage

Wheat(one unit) Britain France 200 days 100 days

Cloth(one unit) 100 days 200 days

Britain: (200+100)/100=3 France: (100+200)/100=3

Theory of Comparative Advantage

Woolen(Labor/unit) Wine(Labor/unit) Britain Portuguese 100 90 120 80

Britain: (100+120)/100=2.2
Portuguese: (90+80)/80=2.125

Chapter 3 Barriers to International Trade 1. Socio-cultural Barriers 2. Economic Barriers 3. Trade Barriers

1. Socio-cultural Barriers Language Religion Customs and Manners

2. Economic Barriers Exchange Rate Extra Costs: ocean freight; packing cost; marine insurance; cost of document, etc.

3. Trade Barriers Tariffs Specific Duties Ad valorem Duties Compound Duties Non-tariffs(NTBS) Quota Licensing System in Importing Countries New Barriers

Reasons of Trade Barriers

To correct a balance-of-payments deficit For reasons of national security To protect their own industries against the competition of foreign goods.