International Business and Trade

EVOLUTION OF
INTERNATIONAL
TRADE
Abad, Azur, Dalus, Josol, Mansing
CONTENT:
Evolution of International Trade
Theory: A Glimpse
Barter Origin of Money
History of the Philippine Currency
Mobile Payments and
Internet Payments
Virtual Currency
EVOLUTION OF
INTERNATIONAL
TRADE THEORY:
A GLIMPSE
 Mercantilism (16th Century)

one of the earliest efforts to develop an economic

theory; country’s wealth was determined by the
amount of its gold and silver holdings.
 WTO functions primarily as the forum for
trade negotiations between countries. The
primary purpose of the WTO is to open
trade for the benefit of all, WTO is the
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-such as the World Bank
(founded in 1944) and the International
Monetary Fund (founded in 1944).
operates a global system of trade rules

acts as a forum for negotiating trade

agreements

settles trade disputes between its

members

supports the needs of developing

countries
 WTO is head quartered in Geneva,
Switzerland. WTO has 164 members and
22 countries are in the process of acceding
to it, making it a veritably universal
multilateral institution. Officially, each
council, committee, or working party elects
its own chairperson.
 However, to ensure a good distribution of
appointments over all these bodies, informal
consultations are held to produce
consensus on slates of chairpersons in
three groups:

1. those directly involving the General

Council (including the bodies reporting to
the Trade Negotiations Committee);

2. those reporting to the Goods Council

3. those reporting to the Services Council

Ngozi Okonjo-Iweala- former finance minister of Nigeria and a
former World Bank senior executive of 25 years, leading to
her appointment as the Director General of the WTO effective
March 1, 2021. Ngozi Okonjo-Iweala is the seventh director-
general of the WTO becoming the first woman and the first
African to serve as director-general. Her term of office will
expire on August 31, 2025. 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-
Iweala (wto.org 2021)
 Comparative Advantage Absolute Advantage

focused on the ability of a country

occurs when a country cannot
to produce a good more efficiently
produce a product more efficiently
than another nation
than the other country; however, it
can produce that product better Smith reasoned that trade
and more efficiently than it does between countries shouldn’t be
other goods. regulated or restricted by
government policy or intervention
 Heckscher-Ohlin Theory
Factor Proportions Theory

stated that countries would produce and export goods

that required resources or factors that were in great
supply and, therefore, cheaper production factors

in contrast, countries would import goods that required

resources that were in short supply, but higher demand
 country-based theories couldn’t adequately address the
expansion of either MNCs or intraindustry trade, which refers to
trade between two countries of goods produced in the same
industry

for example, Japan exports Toyota vehicles to Germany and

imports Mercedes-Benz automobiles from Germany.

unlike the country-based theories, firm-based theories

incorporate other product and service factors, including brand
and customer loyalty, technology, and quality, into the
understanding of trade flows.
 Country Similarity Theory
proposed that consumers in countries that are in the same or
similar stage of development would have similar preferences

In this firm-based theory, Linder suggested that companies

first produce for domestic consumption. Linder’s country
similarity theory then states that most trade in manufactured
goods will be between countries with similar per capita
incomes, and intraindustry trade will be common
 Product Life Cycle Theory
originating in the field of marketing, stated that a product life
cycle has three distinct stages: (1) new product, (2) maturing
product, and (3) standardized product

assumed that production of the new product will occur

completely in the home country of its innovation
 Global Strategic Rivalry
Their theory focused on MNCs and their efforts to gain a
competitive advantage against other global firms in their
industry. Firms will encounter global competition in their
industries and in order to prosper, they must develop
competitive advantages. The critical ways that firms can obtain
a sustainable competitive advantage are called the barriers to
entry for that industry. The barriers to entry refer to the
obstacles a new firm may face when trying to enter into an
industry or new market.
 Global Strategic Rivalry
The barriers to entry that corporations
may seek to optimize include:

research and development,

the ownership of intellectual property rights,
economies of scale,
unique business processes or methods as well as extensive
experience in the industry, and
the control of resources or favorable access to raw materials.
 Porter's Theory
a nation’s competitiveness in an industry depends on the
capacity of the industry to innovate and upgrade. His theory
focused on explaining why some nations are more
competitive in certain industries.

To explain his theory, Porter identified four determinants that

he linked together. The four determinants are (1) local market
resources and capabilities, (2) local market demand
conditions, (3) local suppliers and complementary industries,
and (4) local firm characteristics.
Porter’s Theory
Industrial capitalism was the second phase of capitalism in
which industries/factories became the dominant factor in
the production of goods.

Marginal cost is the cost incurred in producing an additional

unit of a product.
Opportunity cost means the value you will get from an
alternative that you did not choose.
BARTER
Ancient Times
barter is a local phenomenon

direct trade or Middle Ages

exchange of goods European - fur and crafts = perfumes and silk
and services Colonial American - wheat, skin of male deer
experts in exchanging of services
process of trading
services or goods Oxford and Harvard - fees = food, firewood
between two parties
Today
without using money
Doctors (Albularyo) - fees = harvest, livestock
in the transaction
 HISTORYPLEX
EARLY FORMATION
HUMANS OF GROUPS

CULTIVATION & FARMING

EVOLUTION 6000 BC
OF THE
BARTER Mesopotamia
introduced the barter system
SYSTEM Phoenicians
bartered across the oceans

Babylonia
weapons, tea, spices, food items
human skull
Roman Soldiers’ salary = salt
ORIGIN OF
MONEY
 paper money
China (700 BC)
Marco Polo (AD 1271)

metal coins mint coin

China (1000 BC) Lydia 600 BC (Western Turkey)

King Alyattes
non-standardized coins from electrum

King Croesus (560-546 BC)

bimetallic system of pure gold and silver
miniature replicas of tools in Sardis, croeseid (kroiseioi stateres)
and weapons
China (770 BC)
 Artemisium at Ephesus silver and copper coins
King Gyges - lion and bull coin
white gold to pure gold & pure silver

Bank of Canada
europian colonial governments
issued the first paper currency
Tadaoussac - french people
bartered with Mantagnais spanish dollars (piastres)
stamped with fluer-de-lys; four livres
Quebec's first colonial settlement
Samuel de Champlain (1608) canadian coins
legal tender - beaver pelt stamped with fluer-de-lys; three livres
 copper money (1722)
notes issued by
private individuals
card money ordonnances
Jacques de Meulles (1685) promissory notes

acquits
treasury notes

card money
strictly limited - legal tender
monneye de france
LEGAL TENDER
currency, such as coin and paper
money, that are declared by law to be
valid and sufficient for the payment of
debts, and meet a financial
obligation, including tax payments,
contracts and legal fines or damages
 october 15, 1759 advent of paper money
suspension of payment of bills of
exchange for payments of expenses

british conquest 1760

paper money became worthless
gold and silver came back
increase in
international trade
treaty of paris
signed in February 1763 electronic money
settlement of paper obligations
ended the war of Great Britain digital / virtual currencies
and France or cryptocurrencies
HISTORY OF THE
PHILIPPINE
CURRENCY
PRE-HISPANIC ERA
Early Filipinos barters with the neighboring countries like China,
Java, Borneo, and Thailand.

COWRIES (OVULIDAE
TRIVIIDAE)
a kind of marine gastropod, having
glossy and colorful pattered shell.
it is portable, durable, and almost
impossible to counterfeit.
 PILONCITOS
means “gold piece”
have an embossed
inscription of the letters
“MA” or “M”.
Theory: (1) “Ma-I” – ancient
name for the Philippines
BARTER RINGS
and (2) “Madjapahit” – from
made of gold that were
a Javanese script
used for personal
adornment and jewelry
SPANISH ERA
(1521 - 1897)
COBS OR MACUQUINAS
(SILVER COINS)
usually bore a cross on one
side a the Spanish royal coat-
of-arms on the other
brought by the galleons, large
sailing ships, from Mexico and
other Spanish colonies
BARRILLA
(COPPER COIN)
is worth of one centavo
the first coin minted in the
Philippines; ordered by the
Royalty of Spain due to
shortage of fractional coins
GOLD COINS
portrait of Queen Isabela
minted in Manila

SILVER PESO
profile of Alfonso XIII, former
king of Spain
last coins minted in Spain
EL BANCO ESPAÑOL
FILIPINO DE ISABEL II
first paper money used in the
Philippines
REVOLUTIONARY PERIOD
(1898–1899)
The Philippine Republic of 1898 under General Emilio
Aguinaldo issued its own coins and paper currency.
Malolos Arsenal - minted two types of two-
centavo copper coins.
Republika Filipina Papel Modena de Un Peso
and Cinco Pesos - a one-peso and five-peso
paper bill. Hand-signed by Pedro Paterno,
Mariano Limjap, and Telesforo Chuidian
 AMERICAN PERIOD
(1900 - 1941)
Modern banking, currency, and credit systems were introduced.

Monetary System Based on Gold

It is when a country’s currency has a value directly linked to gold
fixed the peso-dollar ratio of 2:1
was approved by the US Congress on the Coinage Act of 1903
was designed by Melecio Figueroa, a Filipino engraver and artist.
 AMERICAN PERIOD
(1900 - 1941)
Bank of the Philippine Islands (1912)
El Banco Español Filipino
use of English from Spanish in all coins issues up to 1933
May 1918, treasury certificates and one-peso note
 JAPANESE
OCCUPATION
MICKEY GUERRILLA
MOUSE MONEY NOTES
Japanese forced war notes in These were issued by different
high denominations (i.e. 1942 provinces and municipalities
series and 1993–1945 series) through their local currency
These notes have no back up boards
reserves
 THE PHILIPPINE REPUBLIC
Old treasury certificate as currency overprinted with the word
“Victory”.

Central Bank of the Philippines

Established in 1949
First currencies issued were the English series notes printed
by the Thomas de la Rue & Co., Ltd., a London based
stationer and printer.
US Bureau of Mint, a government agency, minted the first
coins.
 THE PHILIPPINE REPUBLIC
Ang Bagong Lipunan (ABL) Series (1978)
printed at the Security Printing Plant

Flora & Fauna Coin Series

issued in 1983

New Design Series

issued in 1985; it was replaced by the currencies bearing the
name of ‘Bangko Sentral ng Pilipinas’
 THE PHILIPPINE REPUBLIC

New Generation Currency Coin & Banknotes Series

- banknotes was first issued in December 2010
- coins was launched in 2018

Polymer Note
April 18, 2022
 MOBILE PAYMENTS
AND INTERNET
PAYMENTS
MOBILE POINT OF
PAYMENTS SALE
are money rendered for a is a place, such as a
product or service through a checkout counter of a
portable electronic device, such store, where a customer
as a cell phone, smartphone, or a makes the payment for
tablet device. goods or services.
MOBILE
PAYMENTS
INFORMATIONS
near field communication (NFC)

technology that allows two devices–your phone and a

payments terminal–to process contactless payments

sound wave-based (SWB) or sound signal-based

(SSB) mobile payments or pay-by-sound
transactions are processed without the need for internet
through unique sound waves containing encrypted data
about the payment.
Magnetic secure transmission (MST)

is when a phone emits a magnetic signal imitating the

magnetic strip on the payer's credit card, which the card
terminal picks up and processes as if a physical card was
swiped through the machine. MST is secure as it uses a
secure tokenization system.

mobile/digital wallet

stores payment information on a mobile device, usually in

an app that utilizes different technologies in the payment
process.

four important advantages:

quick response (QR) codes 1. It stores a large volume of data.
2. It can be scanned from a screen, not just paper.
-are the trademark of a type of matrix barcode (type 2D
3. It can be read even if part of the code is damaged.
barcode) readable by smartphones
4. It is safer because information can be encrypted.
short message (or messaging) service (SMS)

paying for products or services via text message with the

relevant information to the right payee phone number and
the payment amount is added to your mobile phone bill.

direct carrier billing (DCB)

is similar to SMS payments, you pay through your mobile

carrier instead of using bank or card details, the payment wireless application protocol (WAP) payments
will be then added to your phone bill or prepaid sim card as
with SMS payments.
internet payments “auto pay”

payment links

neobanks
 VIRTUAL
CURRENCY
Cryptocurrency / Digital Currency

any type of digital unit that is used as a

medium of exchange or a form of digitally
stored value generated by agreement within
the community of virtual currency users