International Business and Trade

1. Explain the importance of economic analysis to international business and trade.

Economic Analysis function is to evaluate and indicate country’s performance and

potential in International Business and Trade. Businesses, companies, and other country’s
government valued the result came from analyzing the economy of one country. Having clear
vision about the development, potentiality, risk, how a specific country’s run its economy, and
how they adapt in changes helps for multinational companies to identify their right action
against the information they gathered. Investors want to know the risk and the return they will
got in investing in another country. These investors can be either a foreign company or another
country who wants to become their trade partner. Also, economic analysis gave a knowledge to
its beneficiary on how is changes in the value of currency, how this country deal with changes,
and what is this country’s potential to support the needs of the business, inside and
international. Lastly, economic analysis will show the good and bad in the situation inside the
country. International business mostly wants to get in partner with a country that value the best
its citizen. Citizen, as its nature, is the one who drives the market, which is the international
business and trade goal, participate in global market by widening their scope.

2. Discuss interdependence and economic freedom. How do they affect international businesses?

Interdependence happened in global market. Usually, raw materials and products

available in one country is not available in one or another country. Therefore, countries lack in
certain items deal with each other to create an alliance to help one another. Interdependence
happened inside these groups providing each country’s demand, they are lacked off.
Meanwhile, economic freedom is the economic liberty of its citizen and his/her right to
own something without constraints. Citizens will have a choice in dealings in their needs, wants,
what pursue, and what to do. Choice to purchase something is easy, when they are capable to.
They have preference of what to own and what do about it. Economic freedom can be seen to
those who can afford it.
Interdependence and economic freedom affect international business in different ways.
First, interdependence limit the flow of goods and services inside the alliance made by those
countries. International business needs to enter that group, through its country, for it to be able
to participate in the market created. Second, interdependence can give a positive effect to
international business, participating either as a producer of goods, or transforming the goods in
better function. Also, materials in business can get in good access with the partnered countries.
Third, in economic freedom, international business can introduce wide choices of goods services
in a country, with a citizen having a great economic freedom. Having a high degree of economic
freedom is having a great freedom of choice, and it includes a great purchasing power. In this
way, international business will be benefited as well as the country where its is expanded.
However, as for the last one, low level economic freedom of a citizen would rather be a cost to
the international business, as an expense in product introduction yet the target consumer has
limit in choices due to lack of purchasing power.
3. Profile the leading indices of economic performance.
 There are three leading indices of economic performance namely, Gross National
Income, Gross National Product, and Gross Domestic Product. First, we have the Gross National
Income or GNI. GNI measures the all the value of production made by the country, including the
income they receive outside and less the payments they made similarly outside. In total, it is the
broadest measure of country’s economy. Next, the Gross National Product or the GNP. GNP as
likely as the GNI, measures the value of all final goods and services made inside the country, in a
given year. The calculation includes the value of service of those citizens abroad and deduct the
one earned by foreign entities. Last of the three is the Gross Domestic Product or GDP. GDP
differently measures the nation’s economic performance. It measures the total market value of
all output produces inside the country, disregarding the producer of it whether domestic or
foreign entities. It measures the performance through the income generated by the country and
not from what it is owned or the wealth it holds. These three leading indices measures the
economic performance of a nation, allowing them to have a self-evaluation, and use this to
create plans of action, regarding this matter.

4. Discuss the indicators of economic analysis.

Other ways to analyze a nation’s economy is through looking these indicators. They are
the inflation, unemployment, debt, income distribution, poverty, and balance of payments. First,
inflation measures the increase in the cost of living inside the boundaries. Thus, it is
characterized by the continuous rise in the prices measured again the standard level of
purchasing power. It happens when the demand is higher than the supply, creating changes in
market prices, lowering the value of money and thus lowering the purchase power. However, in
contrast is deflation, the sudden lowering of prices due to less demand but high in supplies.
Resulting to negative number for inflation rate. Second, unemployment represents the number
of individuals who are capable to do a job but unemployed and still looking for employment. In
this factor, we can see how effective a country in handling their human resources. Increasing
number of unemployment affect the performance of economy of the country. Unemployment
shows the possible income-earner a country has, yet still in process to become. Third, debt can b
be categorized in two categories, the internal debt and external debt. Internal debt is what
nation owes due to excessive spending than it collects. Meanwhile, external debt results from
borrowings made by the government to outside entities, banks, governments, or international
financial institutions, like World Bank. Having struggle in budgeting and can result to higher
taxes, inflation, reducing growth, and creating austerity in the near future. Taxes is getting
higher as result of increasing debt that need to be paid the nation’s people. Fourth, income
distribution is the discussed the estimation of proportion in population versus the earning of
various level of income. It assumes that on average, people earn in the same level,
proportionately in the income earned in a year. Fifth, poverty is an issue pertaining on a wide
condition of lack in essential or basic need to live, including food, water, and shelter. This
happened in a country where having an education, healthcare, and information is hard to
achieve. It is a major problem in the world. Lastly, balance of payments is the recording of all
economic transaction of a country with the rest of the world. It records the current account,
which pertains to the outside payments of goods and services, and the capital account, record
to track loans for outside the borders payment for assets.
5. Describe the relationship between foreign trade and international factor mobility.
Foreign trade is the flow of goods between countries to distribute excess production
and goods and transform it for more efficient use. A country with more abundant goods and
services transfer more than what its country’s needs. While the country with less production of
goods and services needed, will be the target receiver of excess. Meanwhile, international factor
mobility is a trade in factors and another form of international integration. International factor
mobility involves the movement of labor and capital across the national border of a country.
Transportation of labor and capital, or the factor movements will never be easy in a strict
country. Regarding the relationship of the two, when combined or worked together, foreign
trade and factor movements will result efficient allocation of resources, in excess of what a
country needs, to a country or countries having experience of a scarcity.

6. Explain how free trade improves global efficiency.

According to Adam Smith, unrestricted trade or free trade would lead a country to
specialize in the products that gave a country its competitive advantage. Repetition of
movement make them more skilled in certain production process, to result of competitive
advantage. This is one of the results of free trade. Free trade includes the exchange of resources
produced of each country. These resources either natural resources, labor, technology, or
process products from a country according to their specialization. These free flows of goods
increase production and thus fulfilling the needs of each country without having an option of
what to produce. Rather focus to produce something then trade to other who have a limited
supply into it. These advantages is what a global efficiency is all about.

7. Why production factors move internationally?

Production factor are the capital, labor, land and technology required to produced
finished goods and services, needed to supply the needs of their own country. Helps to purse its
economic objectives. Production factors that move internationally are capital and labor. Capital
move internationally through investment and borrowings. Either a company will invest in a
foreign company, in belief of great return, or a government will borrow or loan to other country
to help them fill the gap in deficiency in capital and to improve their production inside the
economy. In addition, aside from the two, donations are made by organization to lessen the
effect of economic and social conditions in a country. Meanwhile, labor is all about people as a
worker and not as a tourist or students. Labor move internationally through migration. For
example, Philippines have Overseas Filipino Workers, a great number of Filipinos transferring
and working abroad to gain more income, way better than what will they get locally. Yet, some
move overseas, not just to get income, but to the reason of they are refugees. Refugees are
people came from places where in a war is currently happen. Participating in the labor of that
country.

8. What are the factors that affects the national trade patterns?
Factors that affects the national trade includes the size of the country and the size of the
economy. In the size of the country, we all assume that places of production are much bigger
than those countries with small size of country. It usually concludes that large countries are less
dependent in trade than the small country. Importation is not as important of exportation. Also,
 the cost of transportation of goods is material to the country delivers it. In size of economy,
exportation is greater in number. Dissemination of abundance resources to those countries in
need. These two concludes on how much a country will trade. In addition, factors also include
the product they want to trade and who will be its trading partners. Types of products a country
may trade are either be the people and land; manufacturing locations; capital, labor rates,
specialization; process technology; and product technology. These products are essential to
those countries in need, helping them to develop and design their economy in success. For the
last one, a nation may build relationships in other countries through this basis. Based on the
specialization and acquired advantage, the product differentiation to use as exchange,
similarities of their culture, the relationship in political aspects and economic agreements made
by their government, and the distance of country they want to be partnered with. These factors
affect the national trade patterns of a country in different aspects.

9. Explain why governments try to enhance and restrict trade.

Government enhancement and restrictions in trade is under the concept of
protectionism. Government, through its trade restrictions helps the country to avoid dangerous
transaction, affecting national security, and securing the interest of the importing countries
while giving protection to the interest of the country and its security. Supporting trade,
however, is the way of the government to support the balance of demand and supplies of its
citizen. Also, it helps the country to develop the country`s economy. Scarcity will never give
benefits from the country they serve. In that way, while securing the nation, the government
can also secure their source of goods and services they lack of
.
10. Compare the potential and actual effects of government intervention on the free flow of trade.
Economic effects of government intervention include the fight against unemployment,
protection to infant industries, developing industrial base, and economic relationship in other
countries Meanwhile, non- economic effects of government intervention includes the
maintaining essential industries, promoting acceptable practices abroad, maintaining spheres of
influence, and preserving national culture. Fighting unemployment can put pressure against the
importation. Workers can physically against in importation and thus urging the government to
put restrictions for the benefits of unemployed. Next, restrictions in importation produce
protection to a newly born industries, beginning to rise. And through restrictions by
government, they can support new business as reduction to competition. Third, developing
industrial base is forming a part to protect the interest of the country. Making specialization and
thus helps to participate in the international markets. Lastly in economic, economic relationship
to other country by observation in the its own nation and making comparison to others.
Determined the improvements that need to do. In none economic, trade restrictions put
protection to our essential industries, and to avoid being dependent to other countries. Next,
promoting acceptable practices abroad, by limiting importations to foreign countries, to
promote changes in foreign country's policies and capabilities. Putting pressure to make the
country persuade in certain conditions. Third, maintaining spheres of influence, usually
happened in an alliance. Giving credit and help to those members in need and encouraging
those countries to make an import to the government's own nation. And lastly, preserving
 national culture by prohibition in importing goods that will influence the citizens, resulting in
merging of culture or worse, forgetting it.

11. Discuss the business uncertainties and opportunities created by governmental trade policies.
The uncertainties and opportunities created by the governmental trade policies.
Businesses need to run together with the changes made by the government. When new trade
policies have been made, businesses will also follow the changing of policies in cooperation with
the trade policies made by the government. There is an uncertainty produce when a business
plan needs to changes according to the trade policies of government. Also, it Is made when
there is loss or great changes happen in the operation of the business, wondering what to d o
and what to pursue. In addition, the fact that business decisions or offered decision to be made
to the government might not be suitable to one or all, and thus need a careful planning and
study of effects to each other. However, there are also certain business opportunities created
through the creation of governmental trade policies. Trade policies can be made as support
against planning of tactics against the import competition. Government trade policies can help
business to gain advantages over imports competitors. And for the last one, it can help the
business to deal with the changes to be come upon operations of trade policies. Or it might
bring uncertainties against on what action to pursue.

12. Discuss the three major approaches to economic integration.

Three major approach includes the Global integration, wherein all countries in the world
decide to cooperate through the World Trade Organization. Next, the bilateral Integration
where in two countries involved, dividing to cooperate to each other, more closely, either
through reductions of tariffs. And lastly, Regional integration, build by countries living in the
same region or geographic location, decide to cooperate to help each other.

13. Discuss the pros and cons of global, bilateral, and regional integration.

The pros under Global Integration is the fair treatment across the member in terms of
trade and its dispute settlements by giving charges for those who practices unfair trading. Cons
under this category includes the preferential treatment given to the developing country’s
manufactured products over those industrial industry. Also, concessions are granted for those
belong to a regional trading alliances and countries can raise barriers against those country who
they feel traded unfairly. These cons are disadvantages for those countries lack in special
character mentioned above.

The pros of Bilateral Integration show that it is much easy or simple to make a deal than
those in WTO. However, it cons, conclude the difficulty of it to measure its impact in the short
run, especially in struggling times of the country.

The pros of Regional economic integration show that it is composed of two or more
countries, much greater in number than bilateral. Yet, its cons are the limit in number of
countries that needs to participate. The location of the country, who wants to join, is important.
Also, the preference of its citizen must be almost the same with the other countries.
14. Compare and contrast different regional trading groups.
First, European Union is the largest and the most successful regional trade group. It
abolishes internal tariffs among its members, allowing free trade of goods, services, capital, and
people. However, produce an external tariff against its non-members. It has its own
organizational structure, who provides political leadership, drafts, and run the daily program of
the EU.
We have the North American free trade agreement of NAFTA. It includes the Canada,
the United States, and Mexico. It is also involving free trade of goods and services to it members
just like the European Union, yet with investments as a reciprocal to capital. It is a large trading
bloc but it includes different countries, in different state of size and wealth.
Both countries decided for the elimination of tariff barriers, giving harmonization and
unity on its of trade rules, the liberalization of restrictions on services and foreign investment,
the enforcement of intellectual property rights, and a dispute settlement process. Having an
objective for the betterment of each other.
15. Identify the major characteristics and challenges of the World Trade Organization.
World trade organization is an organization which has free trade without discrimination
among its members. It is an organization for trade and a forum for governments to have a trade
agreement. It settles disputes among countries and make a rule for systemize trading.
Challenges of WTO, are the differences among its members. These differences create disputes
that need to be fixed. Some other challenges is the action to be taken, what decisions to be
made which will be in favor for all the member of the WTO. Lastly, the challenges to lower or
removing tariff for free flow of goods.