WEEK 2

Assessing International Trade Policies and

Understanding the International Economy
 TOPICS COVERED:
IMF
WORLD BANK
REGIONAL INSTITUTIONS
A STRATEGIC OUTLOOK FOR TRADE
AND INVESTMENT POLICIES
 TOPICS COVERED:

INTERNATIONAL ECONOMY
INTERNATIONAL TRADE
TAXATION SYSTEM
GATT
WTO
 PURPOSE OF IMF

Promote international monetary co-

operation, facilitate international trade, foster
sustainable economic growth, make
resources available to members experiencing
balance of payments difficulties.
 Politician, Economist

Managing Director
Kristalina Georgieva
 WORLD BANK

• Provides financial and technical assistance to developing countries

• Founded in 1944 in Washington, D.C.
• Main mission to fight poverty
• Provides low interest loans, no interest loans, and guarantees local
government bonds.
• Contributes to global sustainability and care for the environment
 PRESIDENT
WORLDBANK
 D. DIFFERENT TYPES OF REGIONAL
ECONOMIC INTEGRATION AND TARIFF RELAXATION
AGREEMENTS

• Free Trade Area

• Customs Union
• Common Market
• Complete Economic Integration
 FREE TRADE AREA
• Two or more countries agree to eliminate trade
barriers and tariffs between their countries
• Countries continue to have individual agreements
with other countries
• The North American Free Trade Agreement is
between Mexico, Canada, and the U.S.
 CUSTOMS UNION
• A trade agreement between 2 or more
countries
• Partial Elimination of the internal barriers
and tariffs
• Establishment of common external
barriers and tariffs to other countries
 The Southern African Customs
Union is a customs union among
five countries of Southern Africa:
Botswana, Eswatini, Lesotho,
Namibia and South Africa. Its
headquarters are in the Namibian
capital, Windhoek. It was
established in 1910.
 COMMON MARKET

• COMPLETE Elimination of the internal barriers and

tariffs between 2 or more countries
• Establishment of common external barriers to trade
• The European Union is a common market
 COMPLETE ECONOMIC INTEGRATION
(COMPLETE COMMON MARKET)

• EUROPEAN UNION
• MERCOSUR
• ASEAN
 The EU countries are:

Austria, Belgium, Bulgaria, Croatia, Republic of

Cyprus, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Ireland, Italy,
Latvia, Lithuania, Luxembourg, Malta, Netherlands,
Poland, Portugal, Romania, Slovakia, Slovenia, Spain
and Sweden.
 MERCOSUR – South American Trade Bloc

Its full members are Argentina, Brazil, Paraguay

and Uruguay. Venezuela is a full member but has
been suspended since 1 December 2016.
Associate countries are Bolivia, Chile, Colombia,
Ecuador, Guyana, Peru and Suriname.
 SINGLE
CURRENCY
INTEGRATION
SINGULAR CURRENCY INTEGRATION
Singular Currency Integration
SPECIAL TARIFF ZONES
THREATS OF GLOBAL COMPETITION

•DUPLICATION
•NON-ACCEPTANCE
•SATURATION
Korean Dessert
 INFRASTRUCTURE

•Actual
•Media
STRATEGIC GLOBAL ALTERNATIVES

• MATERIALS
• MANPOWER
• DISTRIBUTION
A. BASIC THEORIES OF WORLD TRADE

Absolute advantage
• Trade is based on each country selling what it is best at
producing
Comparative advantage
• Trade can occur between two countries even if one of
the countries has no absolute advantage in any product
PRE OIL MIDDLE EASTERN INDUSTRY 19TH CENTURY
THE PERSIAN GULF
 Functions of Coral Reefs: Coral reefs are important for many different
reasons aside from supposedly containing the most diverse ecosystems
on the planet. They: protect coastlines from the damaging effects of wave
action and tropical storms. provide habitats and shelter for many marine
organisms.
CAUSES OF GULF WAR
United Arab Emirates (UAE)
UNITED ARAB EMIRATES (UAE)
United Arab Emirates (UAE)
United Arab Emirates (UAE)

Process of removing
salt from the
seawater
United Arab Emirates (UAE)
Oil production in the United Arab Emirates from 1998 to 2020*
(in 1,000 barrels per day)
United Arab Emirates (UAE)
 United Arab Emirates (UAE)

Population: 9,890,402 Million

GDP : 414.2 billion USD (2018)

 BAHRAIN

• The First Market Economy of the Middle East.

• A Colony of The Great Britain up until 1971
• 19th Freest economy
• Tax and Banking Freedom for Foreign Investments
• All industries except oil are tax free
BAHRAIN

Population: 1,701,575 Million

 B. IN-DIRECT INTERNATIONAL
TRANSACTIONS
Buy and Sell Transaction is
not the only form of
Exchange In International Marketing

• Outsourcing and Toll Packing

Arrangements
 OUTSOURCING
• Contracting an “EXTERNAL” organization abroad to perform operations
specific tasks and projects for the firm.

• Liability (Limited for Contracting) (High for Contractee)

TOLL-PACKING

• An arrangement in which a company of one country processes raw

materials or semi - finished goods for another company from
another country.
• Also called toll processing.
• Liabilities (Non for Contracting) (Very High for Contractee)

Century Pacific Group

COMBINATION ARRANGEMENT
 ACCREDITATION
Orthodox Union (OU) = Jewish Law Kosher Approved/Based in New York

Canadian Food Inspection Agency (CFIA)

Earth Island Institute Dolphin Safe – Monitors Tuna catchers & processing companies

Hazard Analysis Critical Control Point (HACCP) – Food safety

British Retail Consortium (BRC)

International Food Standard (IFS)

European Union (EU)

Islamic Dawah Council (IDC)

United States Food and Drug Administration (USFDA)

 GLOBAL OUTSOURCING AND TOLL PACKING

Outsourcing and Toll Packing aims to

Redistribute resources from a superior
Country to an inferior one
International Outsourcing and
Toll Packing
Outsourcing Controversy
TOLL PACKING VS FOREIGN DIRECT
INVESTMENT
C. INTERNATIONAL TAXATION
SYSTEMS
WORD PLAY
Local farmers suffered
tremendous losses
 C. INTERNATIONAL TRADE TAXATION SYSTEMS

• Tariffs – Taxes imposed in incoming products

to control volume and protect local businesses
• Quotas – Maximum Number of Products that
can be accepted by a country
***Non-tariff barriers – Political or Health
restrictions that may arise from time to time
QUOTAS
• TRQ = Specific Quota allocation with a specified tariff rates
CHICKEN MEAT DOMESTIC QUOTA
CONSUMER (WET MARKETS/GROCERY)

INDUSTRIAL (FOOD MANUFACTURERS

AND RESTAURANTS)
C. NON - TARIFF BARRIERS / BAN
- OBJECTIVES

• RISK MITIGATION
• To avoid health and safety
risk from entering territories

• POLITICAL LEVERAGE
• To coerce and force
countries to bend to
your will
 GENERAL AGREEMENT ON TARIFFS
AND TRADE (GATT)
• Formed in 1947 by 23 nations
• Offers Reciprocity and reduction or elimination of duties
between members.
• Non discrimination
• Most favored nation (MFN) status
• Helped simplify trade documentation
• Replaced in 1996 by the World Trade Organization
Geneva, Switzerland
 WORLD TRADE ORGANIZATION
• Created as final act of GATT
• Based in Geneva with 159 member countries
• Members agree to a set of rules to improve
world trade
• WTO is forum to resolve trade disputes
• Unlike GATT, WTO decisions can only be
overturned by consensus and not by veto (by
president or governor) Latin word, “ I forbid”.
The website is: http://www.wto.org
 IMPORTANT CONCEPTS

• What is MFN?
• Most Favoured Nation : This is a special economic affinity
bestowed upon the united states of America to countries who
based on their discretion are ideal political/economic partner.
• MFN Rates : On Average the taxes and duties levied upon
importation and exportation Transactions between the United
States and MFN Countries are 5-10% lower.
• Supervised By the World Bank