INTERNATIONAL BUSINESS – business across countries o the richer or developed countries

grow their business to the global

 refers to buying and selling of goods or services beyond level they get maximum benefit
geographical limits of a country o the developing countries gets tech,
 relates to any situation where the production or distribution foreign capital, employment
of goods or services crosses country borders opportunities, rapid industrial dev
 encompasses a full range of cross-border exchanges of good large scale operations contains a large number of operations at
or services, or resources bet two or more nations a time because it is conducted on a large
 trade of goods and services, capital, knowledge, and tech scale globally, includes
across borders on a global scale  production of goods at a large
 other terms: internalization, globalization, scale
 marketing of the product at a
 NOTE: Economies of scale – cost advantages reaped by
large scale
companies when production becomes efficient
integration of o combines the economies of many
economies countries
DIFFERENCE BET GLOBAL AND INTL BUSINESS o companies use the finance, labor,
resources, and infra of other
GLOBAL BUSINESS INTL BUSINESS countries in wc they are working
a company that operates sells products worldwide dominated by o intl business is dominated by
facilities, such as manufacturing but has facilities only its developed countries developed countries and the MNC’s
ang distribution centers, in home country (more on o have large financial and other
many countries around the distribution) resources like best tech and
world research and dev centers
 difference in currencies market segmentation o based on the market segmentation
 mobility of factors of production on the basis of the geographic
o the ability to move factors of production—labor, segmentation of the consumers
capital, or land—out of one production process o market is divided into diff groups acc
to the demand of the consumers in
into another.
diff countries
o Factor mobility may involve the movement of
o produces goods acc to the demand
factors between firms within an industry, as
of the customers
when one steel plant closes but sells its sensitive nature o highly affected by economic policies,
production equipment to another steel firm political environment, tech
 diff in natural and geographical condi o can play a positive role improve the
 diff political system and legal environment business and can also be negative
o formal and informal system for the business
o o totally depends on the policies
made by the gov, in helping the
NEEDS FOR INTL BUSINESS expansion of the business and
maximizing the profits
 variety of new choices
 simplifies the mobility of labors, capital, and tech
 shift activities to a global level BENEFITS OF INTL BUSINESS
 provides employment opportunities
more job o industry helps to generate jobs as
opportunities companies expand their available
NATURE OF INTL BUSINESS markets
o as the available market grows and
intl restrictions undertaken in an effort to protect market share increases, naturally
companies and workers in the home manufacturing and service
economy from competition by foreign capabilities expand as well
firms o end result is more job opportunities
 tariff barriers are available for the working class
 foreign exchange restriction
(imposed on the sale of expanding target o beyond job creation, a larger target
currency) markets and market allows companies to run
 anti-dumping proceedings increasing revenues production without the fear of
(imported goods sold at lower overproduction as any excess
rice in other country) products produced can be sold intlly
 quotas (direct restrictions in o in each country, a business adds to
the qty of goods or services) their list opens up new potential for
 voluntary export restrictions business growth and increased
benefits to o gives benefits to the countries wc revenue
participating countries are participating in the intl business
 improved risk o when a company focuses only on
management the domestic market, there is
increased risk from economic
downturns, environmental events,
political influence, and more risk
factors
o by becoming less dependent on a
singular market, companies reduce
the potential risks associated with
their core market
greater variety of o trading intlly provides consumers
goods available and countries with the opportunity
to purchase foods and services that
are either not available or more
expensive to produce in their own
countries
better relations bet o economic interdependence of
countries counties that results from intl trade
can lead to strong rs of coop in
other areas
o when counties engage in a
substantial amt of trade, they are
more likely to avoid other areas of
conflict bet the nations
enhanced company o trading globally can provide a boost
reputation to a company’s reputation within
the intl market
o when a company has success doing
business in one country, it can
significantly influence the success of
that company in neighboring and
neighboring countries as well
opportunities to o by participating in intl markets,
specialized companies may be presented with
opportunities to specialize in a
particular area to serve a particular
market
o when countries cannot efficiently
produce a good or service, they can
seek to acquire it through trade with
another country
o these opportunities to specialize
often lead to greater efficiency in
production, higher levels of
innovation, and increased qual of
dev
o this may provide companies with a
long-term competitive advantage
and growth in terms of their global
market share
SCOPE OF INTL BUSINESS
1. Export business
 export firms which produce entirely in the home
country and export a part of their output directly
or through an intl country
2. International firms
 such a firm decides to exploit business
opportunities outside the home country, it
locates its branch in foreign market and uses the
domestic marketing mix abroad
3. Multinational firms
 an intellectual firm turns into a multinational
firm when it responds to specific needs of
foreign markets in terms of product, promotion,
and distribution
 different strategies for different markets
4. Global firm
 has business operations in several countries but
there is coordination bet different subsidiaries
operate under a common strategy
 the subsidiaries are bound by global strategy
decided by the parent company
5. Transnational firm
 produces, markets, invest and operates across
the globe
 it is an integrated global entrepreneur which
thinks globally but acts locally
PROBLEMS OF INTL BUSINESS
language barriers o it is important to consider
languages spoken in the countries
to which a business wants to
expand
o consider hiring an interpreter and
consulting a native speaker and
resident of each country a
business wants to engage in
o it’s also critical to consider the
languages spoken by your
company’s team mem based in
intl offices
cultural differences o each country has its own specific
or blend of cultures
o culture consists of the holidays,
arts, traditions, foods, and social
norms followed by specific group
of ppl
o it is important to learn abt the
cultures of countries where
businesses engaged with
o it demonstrates that you’ve taken
the time to understand their
cultures can project the respect
and emotional intelligence
necessary to conduct business
successfully
managing global teams o challenge of intl business is
managing employees who live all
over the world
o trying to function as a team is
difficult to account for language
barriers, cultural differences, time
zones, and varying level of tech
access and reliance
o to build and maintain a strong
working relationship with your
global team, facilitate regular
check-ins, preferably using a video
conferencing platform so you can
 interact in real time
o according to research (Gallup), it
shows that employees who have
regular check-ins with their
managers are three times more
likely to be engaged at work than
employees who don’t
o communication is key to ensuring
everyone feels valued and
engaged
currency exchange and o the value of a dollar in your
inflation rates country won’t always equal the
same amt in other countries’
country, nor will the value of
currency consistently be worth
the same amt of goods and
services
o it is necessary to familiarize
yourself with currency exchange
rates bet your country and those
where you plan to do business
o it is important to monitor the
inflation rates
o understanding and closely
following these two rates can
provide important info abt the
value of your company’s product
in various locations over time
nuances of foreign o business doesn’t exist in a
politics, policy, and vacuum – it’s influenced by
relations politics, policies, laws, and
relationships bet countries.
o because those relationships can
be extremely nuanced, it’s
important that you closely follow
news related to countries where
you do business
o the decisions made by political
leaders can impact taxes, labor
laws, raw material costs,
transportation infra, educ
systems, and more
IMPORTANCE OF INTL BUSINESS
access to new markets o intl business provides access to
new markets which can help
companies expand their customer
base and increase their revenue
o by doing business intlly, companies
can take advantage of
opportunities in diff countries and
regions
diversification of risk o can help companies diversify their
risk by operating in diff countries
and regions
o this can help to reduce the impact
of economic or political instability
in any one market
increased of o can help companies become more
competitiveness competitive by allowing them to
take advantage of economies of
scale and access to new tech, as
well as helping them to develop
new products and services
access to resources o can provide access to resources
that may not be available
domestically, such as raw mats,
talent, and tech
cultural understanding o can help to develop cultural
understanding and appreciation,
which can be important in building
relationships and trust with
customers, suppliers, and other
stakeholders from diff parts of the
world
OPTIONS OF DOING INTL BUSINESS
1. exporting goods and services
2. giving license to produce goods in the host country
3. starting a joint venture with the company in the host
country
4. opening a branch for producing and distributing goods in
the host country
5. providing managerial services to companies in the host
country
CULTURE AND INTERNATIONAL BUSINESS
CULTURE
 all the ways of life, including arts, beliefs, and institutions
of a population that are passed down from generation to
generation
 has been called the way of life for an entire society.
includes codes of manners, dress language, religion,
rituals, art
CULTURE IN BUSINESS
 shared values, attitudes, behaviors, and standards that
make up a work environment
 it is what creates the day-to-day experience at the
company
 system of shared assumptions, values, beliefs, which
govern how ppl behave in org
Culture is like an iceberg—visible behaviors stem from invisible
sources (language, religion, education, norms, habits, values,
customs)
CULTURE
 just a manifestation of the broader and deeper
components of the deeply held preferences, complex
ideas, and priorities which are known as values and
attitudes
 what we can see is just what is on the surface. we
associate culture like dance, languages, rituals, pray, songs,
and so on
  we don’t realize that all of them are just parts of the
manifestation of the greater idea behind it.
DETERMINANTS OF CULTURE
1. language (verbal and non-verbal)
o one of the defining characteristics of culture
2. social structure
o refers to the basic social org o
o patterns of social rs in the society
o religion, regulation, gender action among the
members of the society – hierarchy
3. education
o a medium through indiv learn many of the
languages, conceptual, mathematical skills
4. religious beliefs and ethical system
o a system of shared beliefs and rituals that are
concerned with the reach of the sacred
o set of moral principles or values that used to
guide or shaped the behavior
o most of the world’s ethical system are the
product of religions
5. economic philosophy
o efficient creation of material wealth
o question how to efficiently create wealth
6. political philosophy
o questions abt state, govt, politics, liberty,
justice, and the enforcement of legal codes by
authority
SIGNIFICANCE OF CULTURE IN INTL BUSINESS
ENTRY INTO A NEW MARKET
 companies display sensitivity towards diff cultures when
dealing with foreign client or planning a marketing
campaign for their foreign subsidiaries
 executives should start by studying the local market’s
beliefs, values, and customs
BUSINESS NEGOTIATIONS
 while some consider negotiations a signed contract
between two parties, others view it as the beginning of a
strong business relationship
 a company should understand how their counterpart views
a negotiation’s purpose, whether they want to build a
long-term rewarding relationship or are looking at is as a
one-time deal
PERSONAL STYLE
 culture in intl business strongly influences personal style,
from an individual’s dressing sense to interacting with
others
 each culture has its customs and formalities for business
negotiations and meetings
INCLUSION AND DIVERSITY
 an organization that welcomes cross-cultural ppl, ideas,
and customs create a benchmark as an inclusive and
diverse workspace
 sensitivity and acceptance of diverse cultures help create a
dynamic and talented workforce
INTL BUSINESS AND CROSS-CULTURAL CHALLENGES
UNDERSTANDING LOCAL BUSINESS PRACTICES
 one of the core cultural issues in intl business is the failure
of org to understand local business customs
 ignorance of how to conduct business in a foreign country
without considering cultural, political, and economic
influence is a significant roadblock in intl trade
IDENTIFYING REGIONAL DIFFERENCES
 org focusing on the bigger picture overlook regional
differences in emerging markets
 subcultures go beyond regional and ethnic variations to
include other elements, such as differences in female and
male consumer behavior and thinking
ADAPTING HUMAN RESOURCE POLICIES
 attracting, retaining, and leveraging global talent can be
challenging for a culturally ignorant foreign company that
employs local staff
 organizational commitment, job satisfaction, motivation,
and conflict resolution vary across cultures
 the key to understanding those differences is rethinking
the human resource policies to accommodate local cultural
profiles
 HR teams should be aware of the cultural differences while
recruiting and communicating with foreign employees
CREATING A DIVERSE AND INCLUSIVE WORKPLACE
 a diverse and inclusive workplace attracts and retain top
global talent, responds to the diverse needs of customers,
increases access to new clients, fosters creativity, and
drives innovation
 diversity and inclusion issues vary across nations, and one
shall take note that bias, discrimination, and cultural
conflicts are barriers to intl trade
 INTERNATIONAL FINANCIAL MARKET AND INTERNATIONAL
MONETARY SYSTEM o income stocks
 equities that provide regular income
INTERNATIONAL FINANCIAL MARKET by distributing company profits or
 the place where financial wealth is traded bet. Indiv (and excess cash through dividends that
bet countries) are higher than market rate
 when funds flow across national boundaries and the
transfer is bet parties residing in diff countries o blue chip stocks
 worldwide marketplace in wc buyers and sellers trade  well established companies that have
financial assets, such as stocks, bonds, currencies, large market capitalization
commodities, and derivatives, across national borders
 it plays a vital role in facilitating the smooth operations of o cyclical stocks
capitalist economies by allocating resources and creating  directly affected by economic
liquidity for businesses and entrepreneurs performance, typically follows
economic cycle of expansion, peak,
BRIC – Brazil, Russia, India, China  to challenge dollars recession, and recovery

o non-cyclical stocks
TYPES OF FINANCIAL MARKET  operates on recession-proof
industries that tends to perform
Stock Market Over-the-counter Market Bond Market reasonably well irrespective of the
Money Market Derivative Market Forex Market
economy
Commodities Market Cryptocurrency Market

o defensive stocks
 provides consistent return in most
1. STOCK MARKET
economic condi in a stock market
 venues where companies list their shares, wc are
environment
bought and sold by traders and investors
 most company typically sells essential
 used by companies to raise capital and by
products and services such as
investors to search returns
consumers staples, health care,
utilities
o common stocks
 can be value, income, non-cyclical
 ordinary shares, represent partial
stocks
ownership in a company
 can elect board of companies for both
o IPO (Initial public offering)
company policies
o Environmental, Social and Corporate
 investors – company founders and
Governance Stocks (ESCG)
employees

o preferred stocks
2. OVER-THE-COUNTER MARKET
 preference shares
 decentralized market in wc market participants
 entitles the holder to regular dividend
trade stocks, commodities, currencies, or other
payment before dividends issue to
instruments directly bet two parties and w/o a
common shares holders
central exchange broker
 no voting rights, passive income
 do not have physical locations; instead, trading is
 capital investors – provide
conducted electronically
capitalization to the company
 include stocks, debt securities, and derivatives
 stocks that are traded over the counter usually
o growth stocks
belong to small companies that lack the
 expected to grow sales and earnings
resources to be listed on formal exchanges
at a faster rate than the market
average
3. BOND MARKETS (DEBT, CREDIT, OR FIXED INCOME
 foreign exchange, real estate
MARKET)
 bond is a security in wc an investor loans money
o value stocks
for a defined period at a pre-established interest
 trade at a discount to what a rate
company performance might
 marketplace for debt securities
otherwise indicate
 covers both govt. issued and corporate-issued
debt securities
  allow capital to be transferred from savers or
investors to issuers who funds for projects or
other operations
o government bonds
 capitalist will loan money from the
government in return for an agreed
rate of interest
o corporate bonds
 debt security issued by the company
in order for it to receive capital
 investor who buys corporate bonds
expectedly lending money to the
company in return of series interest
payments
o municipal bonds
 debt securities issued by state cities
and countries and other govt
entities to fund day-to-day
obligations and to finance capital
projects such as building schools,
highways, or sewer system
o collateralized bonds
 a type of structured debt security
that has investment-grade bonds as
the underlying assets backed by the
receivables on high-yield or junk
bonds
5.
o zero-coupon bonds
 do not pay interest during the life of
a bond instead investors price it at a
deep discount from their face value
which is the amt of the investor will
receive when the bonds mature or
comes due
4. MONEY MARKETS
 one of the pillars of global financial system
 involves overnight swaps of vast amts of money
bet banks and the govt specifically the US govt
 majority of transac are wholesale transac that
take place between financial institutions and
companies
o bank account transactions
 terms of cert deposits
 length of time that you agreed
your fund deposited until it
reaches its maturity
 interbank loans
 loan bet banks
 loan from one bank to another
 money market mutual funds
 invest in highly liquid near-
term instruments, cash and
cash equivalents low risk
investment
 commercial paper
 unsecured short term debt
instruments issued by corps
(promissory notes)
 treasury bills
 short-term secured
instruments issued by govt
through BTr
 security lending
 practice of loaning shares of
stock, commodities, derivative
contracts, or other securities
to other investors or firms
 repurchase agreement
 borrower temporarily lends a
security to the lender for cash
with an agreement to buy it
back in the future at a pre-
determined price
 ownership of the security does
not change hands in a repo
transaction
DERIVATIVE MARKETS
 a contract bet two or more parties whose value
is based on an agreed-upon underlying financial
asset (security) or set of assets (index)
o security – financial instruments whose value
depends upon the value of another asset
o index – a group of basket securities,
derivatives, and other financial instruments
that represents a measure of the
performance of a specific market
 these financial instruments help you make
profits by betting on the future value of the
underlying asset
 rather than trading stocks directly, it trades in
future and options contract and other advanced
financial products that derive their value from
underlying instruments like bonds, commodities,
currencies, interest rates, market indexes, stocks
o future contracts
 a contract bet two parties or both
parties agreed to buy and sell a
particular asset, specific quantity
and at a predetermined price, at a
specified date in future
o options contracts
 gives buyer the right but not the obli
to buy or sell the underlying asset by
a certain date
 o credit default swaps
 allows investor to swap or offset
their credit risk with that of another
investor
 similar to an insurance contract
providing the buyer with protection
against specific risks
6. FOREX MARKET (FOREIGN EXCHANGE)
 where participants can buy, sell, hedge, and
speculate on the exchange rates bet currency
pairs
 most liquid market in the world. being cash as its
most liquid assets
 decentralized and consists of a global network of
computers and brokers worldwide
 transac are executed 24 hours, five days a week
 one of most accessible financial markets
 market participants range from tourist and
amateur traders to large financial institution
Factors that affect foreign exchange rates:
o Economic Conditions
 govt economic policies
 trade balances
 inflation
 economic growth outlook
o Political Conditions
 political instability
 political conflicts
o Psychological Conditions
 the psychology of forex market / the
participants influence
Participants in Forex Market
o importers
 persons who source goods or service
into nations from overseas to sell it
o exporters
o portfolio managers
 responsible for investing fund’s
assets, implementing its investment
strategy, and managing the day-to-
day portfolio trading
o commercial banks
 banks that make loans, take
deposits, and provide checking and
savings accounts services
o brokers
 help buyer and seller together for a
small commission
o arbitragers
 seeks to earn business profit from
price difference in different foreign
exchange market
o speculators
 buy and sell in the hope that a price
change will result in a profit
o governments
 central bank, treasury dept, and
other govt agencies sometimes
participate in the market in order to
influence the exchange rate of the
countries
7. COMMODITIES MARKETS
 venues where producers and consumers meet to
exchange physical commodities such as:
o agricultural products (corn, livestock,
soybeans)
o energy products (oil, gas, carbon credits)
o precious metals (gold, silver, platinum)
o soft commodities (cotton, coffee, sugar)
o aka as Spot commodity markets where
physical goods are exchanged for money
8. CRYPTOCURRENCY MARKETS
 thousands of cryptocurrency tokens are available
and traded globally across a patchwork of
independent online crypto exchanges
 these exchanges host digital wallets for traders
to swap one cryptocurrency for another or for
fiat monies such as dollars or euros
o bitcoin
o binance coin
o stablecoins
o ethereum
o cardano
o XRP
o tether
o dogecoin
o Litecoin
MOTIVES FOR THE INTERNATIONALIZATION OF FINANCIAL
TRANSAC
Difference in interest o higher interest rates tend to attract
rates foreign investment increasing the
demand for and value of the home
country’s currency
o lower interest rates tend to be
unattractive for foreign investment
and decrease the currency’s relative
value
International o the attempt to reduce risk by
diversification investing in more than one nation
o investing across countries with non-
perfectly correlated economic cycles
 allows investors to generally lower
return variability
Economic growth o an improvement in an economy’s ECONOMIC INTEGRATION
prospects ability to generate goods and services
over time  a process whereby countries cooperate with one another
Exchange rate o happen when the value of foreign to reduce or eliminate barriers to the intl flow of products,
fluctuations currencies keeps changing ppl, or capital
o each currency’s value changes due to  aims to reduce costs or both consumers and producer and
a variety of economic factors, any
to increase trade between the countries involved in the
currency can be bought or sold for a
agreement
diff amt of another currency at any
given time
TWO APPROACHES TO ECONOMIC INTEGRATION

SOURCES OF INTERNATIONAL FUNDS
Multilateral development o an intl financial institution chartered
banks or agencies by two or more countries to
encourage economic dev
Government / govt o secured by the govt from financial
agencies institutions and other services
International banks o offer financial services to clients
worldwide, including taking
deposits, making loans, easing
payments, and providing investment
products
Securities market o marketplace where various
securities such as bonds, stocks, and
derivatives
o organized as exchanges, over the
counter markets or electronic
platforms
LEVELS OF ECONOMIC INTEGRATION
1. INTERNATIONAL APPROACH
o involved intl conference under World Trade
Organization (WTO)
o the purpose of the intl conference is to reduce
barriers intl trade and investment
 WTO – the only global intl org dealing
with the rules of trade between
nations
 whose purpose is to establish free
trade among themselves
2. ECONOMIC APPROACH
o involved agreements among a small no. of nations
whose purpose is to establish free trade among
themselves while maintaining barriers to trade
with the rest of the world
o Example: European Union

free trade o reduction of tariff bet. members: USMSCA,

Mercosur, ASEAN
o gen goal of free trade agreements is to develop
economies of scale and comparative advantages,
promoting economic efficiency
o a large and complex economy having a free trade
agreement with smaller economies is better
positioned to negotiate advantageous clauses
and dispute resolution
customs unions o an agreement bet two or more countries to
remove trade barriers and lower or eliminate
o sets common external tariffs are applied to third
countries, a common trade regime is achieved
o useful to level the competitive playing field and
address the problem of re-exports where
importers can be using preferential tariffs in one
country to enter (re-export) another country
with which it had preferential tariffs
common o free movement of capital and services, diff natl
market regulations
o services and capital are free to move within
member countries, expanding scale economies
and comparative advantages
o each natl market has its own regulations, such as
product standards, wages, and benefits
economic union o no barriers for intl trade – uniform market
o free movement of labor – enabling workers in a
member country to move and work in another
member country
o harmonized tax rates – monetary and fiscal
policies bet member countries are harmonizes,
which implies a level of political integration
 o monetary union common currency: EU
political union o represents the potentially most advanced form
of integration with a common govt and where
the sovereignty of a member country is
significantly reduced
o only found within nation-states, such as
federations where a central govt and regions
(provinces, states, etc.) have a level of autonomy
over well-defined matters such as education
o aka as legislative union and state union
ADVANTAGES OF ECONOMIC INTEGRATION
o in December 2005, Goldman Sachs named
Bangladesh one of the “Next Eleven – group of
developed and developing countries that have
very optimistic outlook for investors”
o one factor is labor cost
 emerging markets are in process to make their economy
o strong
o more open to intl investors
o more competitive in global markets

 helps developing nations take advantage of economies of  large or small, most nations have sumth of value for intl
scale by integrating with developed nations trade in terms of natural resources, labor, tech, location, or
 expands production capacity and creates new culture
opportunities
 supports intl specialization CHARACTERISTICS OF EMERGING MARKETS
 leads to the dev of new products with quality output
1. MARKET VOLATILITY
 free flow of labor, capital, and goods
o stems from political instability, external price
 increases bargaining power, efficiency, and productivity
movements, and/or supply demand shocks due to
levels of small countries
natural calamities
o it exposes investors to the risk of fluctuations in
DISADVANTAGES OF ECONOMIC INTEGRATION
exchange rates, as well as market performance
 trade diversions may deflect small countries’ economies
2. GROWTH AND INVESTMENT POTENTIAL
land and contribute to member countries’ economies
o emerging markets are often attractive to foreign
 developing countries become dependent on more
investors due to the high return of investment they
developed nations, thus becoming depressed regions
can provide
 member nations must follow trade regulations and
o in the transition from being an agriculture-based
monetary and fiscal policies set by non-member nations
economy to a developed economy, countries often
 increased competition may harm high-cost producers
require a large influx of capital from foreign sources
 can lead to a political disturbance and rivalry bet two
due to a shortage of domestic capital
nations

3. HIGH RATES OF ECONOMIC GROWTH

o gov of emerging markets tend to implement
EMERGING MARKETS
policies that favor industrialization and rapid
growth
 markets of countries that are in the process of
o such policies lead to lower unemployment, higher
transformation
o from agri to industrial, agri to service capital disposable income per capita, higher investments,
and better infrastructure
 markets of countries that are in transitional phase bet
developing and developed status
4. INCOME PER CAPITA (PER PERSON)
 an economy that experiences considerable economic
o emerging markets usually a low-middle income per
growth and possesses some, but not all characteristics of a
capita relative to other countries, due to their
developed economy
dependence on agricultural activities
 it is the point at which an economy changes from one that
o as the economy pursues industrialization and
is low-income, less developed, and frequently pre-
manufacturing activities, income per capita
industrial to one that is modern, industrial, and has a
increases with GDP
higher standard of living
 It attempts to address how to strengthen an economy,
ASIA AMERICAS EUROPE AFRICA
increase its accessibility to foreign capital, and boost its China Mexico Russia Egypt
competitiveness in international trade India Brazil Poland Libya
Pakistan Argentina Ukraine Morocco
Malaysia Venezuela Czech Republic Algeria
Emerging Markets are NOT only small or poor Indonesia Ecuador Slovakia Tunisia
Thailand Peru Hungary South Africa
Vietnam Chile Romania Nigeria
 CHINA – considered an emerging market Philippines Colombia Bulgaria Zimbabwe
o it has vast resources and a population abt 1.3 B Bangladesh
Sri Lanka
 BANGLADESH – despite poor governance and weak public Lebanon
institutions, the country has achieved an ave annual Iran
growth rate of 5% since 1990 Iraq
 GOVERNMENT TRADE POLICIES INTERNATIONAL TRADE POLICY

 trade agreements that are negotiated to create trade and
investment regulations and to open markets
 a measure that influences how much a nation imports and
exports in terms of goods and services
 a system of laws and regulations that governs how one
nation behaves toward another in the context of intl trade
and business, whether through protectionism or free trade
SPECTRUM OF TRADE POLICIES (IN AN ECONOMY)
 refers to agreement made in the multilateral trade system
under the sponsorship of the General Agreement on
Tariffs and Trade (GATT) and World Trade Organization
(WTO)
 buying and selling goods between various countries
 vital to any country’s prosperity, and more specifically the
economic development
 can be defined as the govt’s rules and regulations guiding
and controlling how trade is done with foreign countries

FREE TRADE PROTECTIONISM INTERNATIONAL ORGANIZATION

 no government or very  govt set trade restrictions
little restrictions in a to help domestic 1. ITO
country’s trading practices industries 2. GATT
 limit reliance on other 3. WTO
countries
THE GOVERNMENT ROLE IN INTERNATIONAL TRADE
WHY GOVT TRADE POLICIES IMPORTANT
 include regulation, allocation, distribution, and
POLITICAL REASONS ECONOMIC REASONS stabilization
 protecting jobs and  protecting new industries  involved to a certain extent with the major decisions not
industries, national from competition and just being made by one body or group
security, retaliation building strategic trade
against foreign policies, policies
RATIONALE AND GOALS OF TRADE AND INVESTMENT POLICIES
and protecting their
consumers
 govt policies are designed to regulate, direct, and protect
INTERNATIONAL TRADE natl activities. the exercise of these policies is the result of
national sovereignty, which provides a govt with the right
 an exchange involving a good or service conducted to shape the environment of the country and its citizens
between at least two different countries  the domestic policy actions of most govts aim to increase
 the exchange can be imports or exports the standard of living of citizens and to improve the quality
of life, and to achieve full employment
WHY DOES INTERNATIONAL TRADE OCCUR  these policies affect intl trade and investment directly
 in more direct ways, a country may also pursue technology
 occur because one country enjoys a comparative transfer from abroad or the exclusions of foreign industries
advantage in the production of a certain good or service to the benefit of domestic infant firms
specifically if the opportunity cost of producing that good  govt officials can also develop regulations on imports to
or service is lower for that country than any other country protect citizens
 nations institute foreign policy measures designed with
SOURCES OF COMPARATIVE ADVANTAGE domestic concerns in mind but explicitly aimed to exercise
influence abroad
international o plays a significant role in intl trade  a major foreign policy goal is national security
difference in climate
difference in factor o imply that some countries are more RESTRICTIONS OF IMPORTS
endowments resource-rich than others in land,
capital, and human capital  many countries including the US have passed antidumping
o a country enjoys a comparative laws (goods are priced below fair market value) which help
advantage in production of the domestic industries by restricting foreign products being
resources are abundantly available sold below the cost od production, or at prices lower than
within the country those in the home market
difference in o most commonly observed in superior  imports are also restricted by nontariff barriers, such as
technology production processes seen in buy-domestic campaigns. it is difficult to remove these
different countries
barriers
  imports can also be reduced by tightening market access
and entry of foreign products through involved procedures
and inspections

EFFECTS OF IMPORT RESTRICTIONS

 import control may mean that the most efficient sources of

supply are not available, resulting in second-best products
or higher costs for restricted supplies
 import control may result in the downstream change in the
composition of imports
 due to inefficiency, import controls may cause a lag in
technological advancements

RESTRICTIONS OF EXPORTS

 nations control their exports for reasons of short supply,

national security and foreign policy purposes, or the desire
to retain capital
 national security controls are placed on weapons and high-
technology exports
 although restrictions of exports is a valuable international
relations tool, it may give a country’s firms the reputation
of being unreliable suppliers and may divert orders to firms
of other nations

EXPORT PROMOTION

 designed to help firms enter and maintain their position in

international markets and to match or counteract similar
efforts by other nations
 various approaches toward export promotion include:
o knowledge transfer
o direct or indirect subsidization of export
activities
o reducing governmental red tape for exporters
o export financing and mixed aid credits to
exporters
o altered tax legislation for nationals living abroad