NEGATIVE ASPECTs OF INTERNATIONAL TRADE AND HOW TO OFFSET ITS EFFECTS

SGA
Key info:
-Thailand and Vietnam
Top rice exporters of the philippines (2023) -Philstar
- Philippines Balance of Trade
The trade deficit in the Philippines decreased from USD 4.52 billion to USD 4.01 billion in
December 2023 in the same month a year earlier, as imports fell much faster than exports
(Good).
Purchases shrank 5.1% yoy to an eight-month low of USD 9.79 billion, reversing from an
upwardly revised 1.3% growth in the prior month while pointing to the 10th time of fall for
the year as domestic demand remained weak due to elevated cost pressure (Good for now).
shipments dropped by 0.5%, marking the fourth straight month of a decline to an eight-
month low of USD 5.78 billion amid lower sales to the US, China, and the ASEAN countries
(Not so good/concerning)
Still, a decrease in exports moderated sharply from a downwardly revised 13.0% tumble in
November, which was also the softest contraction since a rise in August, as signs of an
improvement in foreign demand grew ahead of a New Year holiday. Considering the whole
year, the trade shortfall dropped to USD 52.42 billion from USD 57.65 billion in 2022.
(Good).source: Philippine Statistics Authority

-PECP
Is one of Environment Management Bureau’s major programs that seeks to boost the competitive
stance of our domestic manufacturers and exporters through seminars, information sessions and
activities that give them insights on productivity, innovation, and updates in export trade

Negative Aspects:
1. Trade Deficit or Negative balance of Trade
When a country's imports exceed its exports during a given time period (investopedia).
Effect: Depleted Foreign exchange reserves
FER are backup funds deposited in central banks held in U.S dollars. When we import, the
bank uses these funds to pay off the expenses. More import: less funds, More export; more funds.
To reduce:
 Increase exports: support domestic industries through providing subsidies (government
assistance), and export promotion programs (e.g. Philippines Export Competitiveness
program or PECP)
 Import substitution: produce local products instead of relying on foreign goods.
 Achieve competitive advantage: produce goods and products at cheaper costs compared to
rivaling countries. This will prompt foreign countries to import from us

2. Foreign Goods Dependency

When a country relies on foreign goods rather than domestic
Effects: (1) Trade Deficit
(2) The fall of Domestic industries
-Domestic industries can no longer compete with cheaply sold imported products.
Often leads to job loss
(3) Vulnerability to Resource crisis
-in times of a global economic shock, access to foreign goods may be restricted or
prioritized by other
 countries. Where would we get the goods if we don’t have any of our own, and our
only source decides to restrict their exports?

To Reduce:
 Promote and Support domestic production: PECP
 Trade Policies/ Restricting imports through quotas: put a limit and control the supply
and demand of imported goods, which enables domestic industries to stabilize
prices on domestic products. These are policies that favor domestic industries.

Current Trade policies/barriers in the Philippines

-Executive Order (EO) No. 39, series of 2023 (signed by pres. On Aug. 31. 2023):
Mandated price ceilings on rice: PHP 41/kg for regular-milled rice and PHP45 on
well-milled rice.

(But WHY is the current price around PHP50-56?)

https://youtu.be/4LoyWgB516o?si=ZOM_LBXaz1V8wOu7 =

“International rice prices are still going up, and we still have the restrictions on the exports
of rice, especially from india, and, to some extent, from our big sources of rice imports,
especially in Vietnam. Prices of rice from a year to year basis have climbed up to 44%. And
with which other countries, such as Indonesia, doing their best to import more rice to
counter reduced harvest, I foresee that there will still be pressure on the prices of rice
sourced from abroad. I think that we are likely to see an increase, rather than stabilization or
decrease in the prices of rice globally”

Articles:
Philstar
^Philippines now the World's Top rice importer^(Sept 14, 2023)
by Danessa Rivera

https://www.philstar.com/headlines/2023/09/14/2296141/philippines-now-worlds-top-rice-
importer-usda#:~:text=Thailand%20and%20Vietnam%20are%20the,in%20the%20Philippines%20in
%202023.

-Top importer used to be china, but, now, we are

-In its latest “Grain: World Markets and Trade” report, the USDA projected that Philippine rice
importation will reach 3.8 million metric tons in marketing year 2023-2024 while China’s imports will
drop to 3.5 million MT...freeFederation of Free Farmers (FFF) agreed with the USDA’s forecast

CMC
Tackling the Challenges of International Trade: Strategies for Success

Challenges Of International Trade

1. Trade Barriers: Obstacles to Market Entry
Tariffs, quotas, and import/export restrictions all present substantial hurdles to international trade.
Consequently, if businesses grasp target market policies and adhere to international trade rules,
they can then design effective strategies.
Cultural Differences: Bridging the Gap
The ODM Group recognizes the importance of cultural acumen in international trade. From
cross-cultural training to adaptive marketing, businesses learn to build robust relationships with local
partners, bridging gaps and fostering successful ventures in diverse markets.

2. Logistics and Supply Chain Management

International trade is a complex process requiring efficient logistics and supply chain management.
By partnering with experienced providers, utilizing technology-driven solutions, and conducting
thorough risk assessments, businesses can streamline operations and navigate the complexities of
international trade.
Currency Exchange and Financial Risks
Currency exchange rate fluctuations pose a significant challenge for international businesses,
impacting pricing, profit margins, and financial stability.However, by implementing hedging
strategies, monitoring market trends, and collaborating with experts, businesses can effectively
mitigate these risks.
Legal and Regulatory Compliance
Operating in various jurisdictions necessitates adhering to numerous legal and regulatory
frameworks, including international trade laws, intellectual property regulations, and product safety
standards.
So that, seeking legal advice, conducting due diligence, and maintaining transparency are crucial.

3. Intellectual Property Protection

The global economy is changing intellectual property protection, with counterfeit items, copyright
infringement, and patent disputes posing substantial obstacles.To safeguard their intellectual
property, businesses may register trademarks, patents, and copyrights, establish robust monitoring
systems, and take legal action against infringers.
Cultural and Political Unrest
Unexpected occurrences such as political instability, societal upheavals, and natural calamities can
interrupt supply chains, corporate operations, and pose threats to international trade.As a result,
detailed risk assessments, supplier diversity, and contingency plans are critical for addressing these
difficulties.

Effect on Merchandising Strategies

challenges of international trade
Impact on Product Selection: Harmonizing with Trade Norms
Trade barriers and tariff flux influence The ODM Group’s approach to product selection. With
strategic alignment to trade norms, businesses under The ODM Group’s guidance adapt offerings,
preserving market relevance and ensuring compliance with international regulations.
Pricing Strategies in Flux
Businesses are adopting dynamic pricing strategies to adapt to currency fluctuations and taxation
policies across diverse markets. This adaptive approach helps maintain profitability and
competitiveness in the ever-evolving international trade landscape.
Additionally, companies can adjust their pricing models in response to these changes.
Evolving Supply Chain Management: The ODM Group’s Resilient Solutions
Logistical hurdles and supply chain disruptions prompt The ODM Group to champion resilient supply
chain strategies. Through diversification and technology-driven solutions, businesses ensure
consistent product availability, mitigating the impact of unpredictable international trade
environments.
Thriving Amid Complexity
Strategic adjustments in merchandising become pivotal under The ODM Group’s guidance. Beyond
survival, businesses thrive in the intricate and dynamic landscape of international trade, positioning
themselves for sustained success.

Strategies to Overcome International Trade Challenges

Navigating the challenges of international trade requires careful planning and strategic approaches.
Here are some effective strategies that businesses can employ to overcome these challenges:

1. Conduct Market Research

Before entering a foreign market, it is crucial to conduct thorough market research. Understand the
local culture, preferences, and regulations. Identify potential competitors, market trends, and
consumer behaviour.
This knowledge will help you tailor your products or services to meet local demand and navigate
cultural differences.
2. Build Strong Relationships
Developing strong relationships with local partners, suppliers, and distributors is essential when
operating in a foreign market. Partnering with local companies with knowledge and experience can
help navigate legal and regulatory barriers, establish distribution networks, and mitigate cultural
challenges.
Likewise, cultivating trust and fostering long-term relationships will ensure smooth operations and
sustainability.
3. Adapt to Legal and Regulatory Frameworks
International trade involves dealing with different legal and regulatory frameworks. Stay updated
with the laws and regulations of the countries you operate in.
Seek legal advice and ensure compliance with import/export regulations, customs duties, taxes, and
intellectual property rights. Adhering to the legal requirements will minimize the risk of legal
challenges and trade barriers.
4. Efficient Supply Chain Management
Managing a global supply chain can be complex, but ensuring timely delivery of products or services
is crucial. Optimize your supply chain by identifying reliable suppliers, leveraging technology for real-
time tracking, and streamlining logistics processes.
This will help minimize delays, reduce transportation costs, and improve customer satisfaction.

5. Mitigate Currency and Financial Risks

Fluctuating exchange rates and foreign exchange risks can significantly impact international trade.
Implement risk management strategies such as hedging, forward contracts, or currency options to
reduce uncertainty.
Establish relationships with financial institutions that specialize in international trade to navigate
complex financial transactions and ensure economic stability.
6. Invest in International Talent
Building a team with international expertise can help overcome cultural and language barriers.
Hiring staff with cross-cultural competence and language proficiency can facilitate effective
communication, understanding, and negotiation with global partners.
Additionally, consider localizing your marketing materials and adapting your business practices to
align with local customs and preferences.
7. Continuously Monitor and Adapt
The international trade landscape is constantly evolving. Stay informed about global economic
trends, political developments, and regulatory changes that may impact your business.
Regularly assess your strategies, products, and services to ensure they remain relevant and
competitive in different markets. Embrace innovation and be open to adapting your business model
to stay ahead of the curve.
Adapting Merchandising Strategies
Embracing Flexibility
A key facet of adapting merchandising strategies involves embracing flexibility. Businesses need to
cultivate a mindset that allows for quick adjustments to changing market conditions. Moreover, this
adaptability is crucial for staying responsive to evolving trade dynamics and ensuring that
merchandising strategies remain effective in diverse global markets.
Informed by Market Research
Understanding market nuances is crucial for successful merchandising strategies. Through robust
market research, businesses can tailor offerings to local preferences, regulations, and cultural
nuances. Informed decision-making based on comprehensive market insights is essential for thriving
in the complex international trade landscape.
Innovative Approaches
International commercial issues necessitate fresh thinking in marketing methods. Accordingly, this
entails devising unique ideas, leveraging technology, and implementing novel approaches to manage
consumer behavior, demand fluctuations, and changing trade restrictions. As a result, businesses
that embrace innovation are nimble enough to navigate global market difficulties.