UNIT - I

International trade

Flow Of Commodity

Flow of Productive factors

INTERNATIONAL TRADE

FISCAL INCENTIVES TO PROMOTE EXPORT

Duty Drawback Tax Concession Market development assistance Export promotion of capital goods scheme Cash compensatory support Air Freight Subsidiary

Enhances the domestic competitiveness

Takes advantage of international trade technology Increase sales and profits Extend sales potential of the existing products Maintain cost competitiveness in your domestic market Enhance potential for expansion of your business

Gains a global market share Reduce dependence on existing markets Stabilize seasonal market fluctuations

Trade is mean mercantile transaction. When exchange of goods and services made among two individuals of the same country is internal trade. If it is between International Business If two nations constitute international trade. A number of theories have been developed for the basis of international trade namely the comparative cost theory maintains that trade free, in long run, it will enjoys a comparative advantage. The opportunity cost theory the opportunity cost of anything is the value of the alternatives. Heckscher ohlin thesis states in terms of factor endowments and the availability approach seeks domestic availability and nonavailability of goods. It has considerable merit in the basis of trade.

 The

law of comparative advantage indicates that a country should specialize in the production of that commodity in which it is more efficient and leave the production of the other commodity to the other country. The two nations will then have more of both goods by engaging in trade.

Type of Global Interaction Exports

Positive Effects

Negative Effects

Adds jobs, revenues to state businesses.

As firms widen export markets, may move production abroad. May move blue-collar and even technical jobs out of California May reduce revenue and employment for California firms.

Foreign Direct Investment by California Firms

Adds revenues to state businesses, may add high-wage jobs, support other California firms. In the long term, may lead to worldwide expansion of markets.

Import Competition

Imported Inputs

Lower costs for California firms.

An imported input for one firm may be competition for a domestic supplier.
May be another way for foreign

Foreign Investment in California

May add jobs and increase supplier