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I nternational Trade Practices
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Part 1 Overview
Chapter 1 I ntroduction to I nternational Trade
Chapter 2 Basic Theory of I nternational Trade
Chapter 3 Barr iers to I nternational Trade
Chapter 4 E-Commerce
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Chapter 1 Introduction to
International Trade
What is International Trade? And Why
do countries trade?
Invisible Trade
Investment
Effectiveness Measurement ofInternational Trade
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I nternational Trade
------the exchange of goods, services,and technologies across
national boundar ies.
I t includes import and export operations.
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Why do countr ies trade?
Countries engage in international trade for the
following reasons:
1. Resources Reasons,
eg. Natural resources
Favorable climate conditions and terrain
Ski l led workers and Capital Resources
Favorable geographic location and transportation
costs.
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2. Economic Reasons
eg. Comparative advantageStrong domestic demand
Scale economy
I nnovation or style
3. Political Reasons
I n these cases, poli tical objectives outweighed economic
considerations. eg. Former Soviet Union and Cuba.
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I nvisible Trade
------the exchange of services
between nations
Such as
international cargo transportation,
I nternational cargo transportation insurance,
and tour ism.
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FDI
------a third important category in a
nations balance of trade, and a moreimportant than trade as a
vehicle for
international economic transactions
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Chapter 2 Basic Theory of International Trade
1. Classical Trade Theory
Adam Smith (1723-1790) and HisAbsolute Advantage
David Ricardo (1772-1823) and HisComparative Advantage
2. Neoclassical Trade Theory
3. Modern Trade theories
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Theory of Absolute Advantage
Wheat(one unit) Cloth(one unit)
Britain 200 days 100 days
France 100 days 200 days
Britain: (200+100)/100=3
France: (100+200)/100=3
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Theory of Comparative Advantage
Woolen(Labor/unit) Wine(Labor/unit)
Britain 100 120
Portuguese 90 80
Britain: (100+120)/100=2.2
Portuguese: (90+80)/80=2.125
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Chapter 3 Barriers to International Trade
1. Socio-cultural Barr iers
2. Economic Barr iers
3. Trade Barr iers
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1. Socio-cultural Barriers
LanguageReligionCustoms and Manners
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2. Economic Barriers
Exchange RateExtra Costs: ocean freight; packing cost;
marine insurance; cost of document, etc.
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3. Trade Barriers
TariffsSpecific Duties
Ad valorem Duties
Compound Duties Non-tariffs(NTBS)
Quota
Licensing System in Importing CountriesNew Barriers
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Reasons of Trade Barr iers
To correct a balance-of-payments deficit For reasons of national
security To protect their own industries against
the competition of foreign goods.
