INTERNATIONAL

BUSINESS AND
TRADE
GERONIMO JR. L. PEREZ, LPT
Course Instructor
 LESSONS
• Evolution of International Trade Theory: A Glimpse
• Barter
• Origin of Money
• History of the Philippine Currency
• Mobile Payments and Internet Payments
• Virtual Currency

International Business and Trade: Chapter I 2

 INTRODUCTION
World Trade Organization (WTO)
 the only global international
organization dealing with the rules
of trade between nations
 to ensure that trade flows as
smoothly, predictably, and freely
as possible and to help producers
of goods and services, exporters,
and importers conduct their
business
International Business and Trade: Chapter I 3
 INTRODUCTION

World Trade Organization (WTO)

 there have been constant efforts
made to unite countries to create
more markets, to standardize
tariffs and trade laws, as well as to
remove trade barriers in trying to
create free markets

International Business and Trade: Chapter I 4

 INTRODUCTION

Below are some of the many roles of

WTO:
1. It operates a global system of trade
rules.
2. It acts as a forum for negotiating
trade agreements.

International Business and Trade: Chapter I 5

 INTRODUCTION

Below are some of the many roles of

WTO:
3. It settles trade disputes between
its members.
4. It supports the needs of
developing countries.

International Business and Trade: Chapter I 6

 WORLD TRADE ORGANIZATION
• functions primarily as the forum for trade negotiations between
countries
• to open trade for the benefit of all
• precursor of the General Agreement on Tariffs and Trade (GATT), which
was established by a multilateral treaty of 23 countries in 1947 after
World War II in the wake of other new multilateral institutions dedicated
to international economic cooperation
• head quartered in Geneva, Switzerland
• 164 members
• each council, committee, or working party elects its own chairperson

International Business and Trade: Chapter I 7

 NGOZI OKONJO-
IWEALA
• Director General of the WTO effective
March 1, 2021

• 7th director-general of the WTO

becoming the first woman and the
first African to serve as director-
general

International Business and Trade: Chapter I 8

 NGOZI OKONJO-
IWEALA
• Bridging the broken trust amongst
members of the WTO and updating
the rules to meet the twenty-first
century realities are the priorities of
Ngozi Okonjo-lweala

International Business and Trade: Chapter I 9

Lesson 1
EVOLUTION OF
INTERNATIONAL
TRADE AND
THEORY: A
GLIMPSE
 INTERNATIONAL TRADE THEORIES
The evolution of the international trade theories reflects the
ways nations were addressing basic economic problems
due to unequal distribution of natural resources or
difference in geographical locations. Economists have
developed theories to address these economic problems and
explain the mechanisms of international business and trade.

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Sample Footer Text 12
 INTERNATIONAL TRADE THEORIES
Other theories

• Liberalism

• Professionalism

• Free trade theory

• Leontiff Paradox

International Business and Trade: Chapter I 13

 Standard Theory of
International Trade
• Adam Smith’s Wealth
of Nations (1776) and
David Ricardo’s
Principles of
Economics (1951)
were published
• One of the earliest
efforts to develop an
economic theory

International Business and Trade: Chapter I 14

 Standard Theory of
International Trade
• A country’s wealth is
determined by its
holdings of gold and
silver

International Business and Trade: Chapter I 15

 THEORY OF FREE TRADE
• The works of Smith and Ricardo herald the formulation of a
theory of free trade

• Smith considered division of labor, as observed in the

nascent large-scale industries of his homeland England, as
the base for lowering labor costs, which ensured effective
competition across countries

International Business and Trade: Chapter I 16

 THEORY OF FREE TRADE
• It was left to Ricardo to sort out the basic premises of a theory
of free trade, which Smith had initiated

• Industrial capitalism was the second phase of capitalism in

which industries/factories became the dominant factor in the
production of goods. Imports of wage goods (corn) had a
special role by cheapening wage goods; hence, labor cost

International Business and Trade: Chapter I 17

 THEORY OF FREE TRADE
• Free trade, as opposed to the mercantilist policies of
protection, was championed by both Smith and Ricardo as a
route to achieve production efficiency at a global level

• Free trade system, individuals benefit from a greater choice of

affordable goods

• Mercantilism restricts imports and reduces the choices

available to consumers

International Business and Trade: Chapter I 18

 Absolute advantage

 country’s inherent ability to produce specific goods efficiently

and effectively at a relatively lower marginal cost, lesser
workforce, lesser time, and lesser cost without compromising
the quality

Comparative advantage

 country’s capability to produce the specific good at lower

marginal cost and opportunity cost compared to other
countries

International Business and Trade: Chapter I 19

Lesson 2

BARTER
 BARTERING

• Involves a direct trade/exchange of

goods and services.

• People exchanged their goods or

services for other goods or services
other people have in return

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 BARTERING
• Bartering is the process of trading
services or goods between two
parties without using money in the
transaction

• A service can be exchanged for an

item, an item exchanged for a
service, or an item can be
exchanged for some other item
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 ADVANTAGES
1. It does not involve money

2. Very simple such that issues confronted in international trade

like foreign exchange and unbalanced economic power are
virtually nonexistent

International Business and Trade: Chapter I 23

 DISADVANTAGES
1. It is difficult to find people who need what the other people
have

2. It is difficult to find the value of what one has versus the value
of what the other one has

3. There is no standard measure of value

International Business and Trade: Chapter I 24

 DISADVANTAGES
4. It is time-consuming

5. Parties in the bartering transaction will need to spend time

agreeing on the terms of the deal

6. If someone’s goods are perishable, it is hard to preserve it

International Business and Trade: Chapter I 25

International Business and Trade: Chapter I 26