INTERNATIONAL BUSINESS AND TRADE

_________General Agreements on Tariffs and Trade

Lowers trade barriers. It is created by the new United nations after the world war 2.

World Trade organization It hammers the rules and regulation of international trade. Has
__164_____member countries.

North American Free Trade Agreement. Designed to facilitate more trade between United States,
Mexico And Canada

Mercantilism oldest trade theory first seen in Europe during 1500s.

- Wealth=gold+silver
- Maximize exports, minimize imports
- Exports=increase in wealth
- Imports=decrease in wealth
- When money supply increase- cause inflation- ___increase______ in production cost of
goods.
- When the money supply decrease-deflation-_______low____ production cost (cheaper
goods).
- The amounts of money in the world is _____static______
- Spanned on the ___16th___Century- ___18th ___ Century.

5Characteristics of Mercantilism

Wealth is static

Needs to increase the production of gold and silver

Need for large population

Need for colonies

Needs for protectionism

- Fiscal policies__________________ discouraging colonies froma buying foreign products.

Ie. Sugar Act of 1764, Navigation Act 1651
- Britain’s East India Company and Dutch East India Company- powerful mercantilist
corporations.
- Precursor to Capitalism.

Neomercantilism- form of economic nationalism

_____Adam Smith_____ He created the Theory of Absolute Advantage. An Inquiry into the nature
and causes of Wealth Nations. He highlighted the importance of trading. He is the father of Modern
Economics.

Neomercantilism- Trade Surplus=Power

________Absolute Advantage__________- an ability of a country to produce something at lower cost

than another country.

Comparative Advantage- proposed by _David Ricardo_____________ ability of an entity to produce

product at a lower opportunity cost.

_______Trade Bloc___________ group of countries that agrees to reduce/ eliminate trade barriers
among members. It is governed with

_______Internal Rules_______- rules of member country

 ________External Rules__________- Rules followed by non-member countries.

TYPES OF TRADE INTERVENTION

• _________Tariffs__________- taxes imposed on imports

• ___________________ payment to producers
• ___________________limits a certain quantity of product to be imported in a certain period
of time.
• ___________________ banned trading with country or group of countries due to some
political reasons.
• ___________________ are the effects of the limited quantity of a good that can be exported
in a country in a specific span of time, where an export quota is self-imposed by the
exporting company.
• ___________________- limit convertibility of one currency.
• ___________________- certain percentage of a product or an item be manufactured locally.
• ___________________ Dumping occurs when a company sells a product below market price.
• ___________________ Government provides financing to domestic companies.
• ___________________. Bureaucratic policies and procedures to deter imports by making
operations more difficult and time consuming.

3 world’s largest labor forces

_________________ Variety of ways in which countries can protect their domestic economies from
competitions abroad.

Type of trade blocs:

1. ________________-Lower the barriers among themselves.

2. ________________- Totally eliminate barriers within members; continue to maintain individual
policies in dealing with non-members. Ex. NAFTA
3. _________________ Eliminate trade barriers for member countries; agree on common
external barriers. i.e. Russia, turkey, eu, Belarus
4. _________________Eliminate internal Barriers; adopt common external barriers, allow free
movement of resources among members. Ex. Mercosur, Comesa, Ecowas
5. __________________Eliminates internal barriers, adopt common external barriers, free
movement of resources; uniform set of policies. Ex. European Union.
6. __________________ ex. United states.

TYPES OF TRADE BLOCS

1. ______________________ Born on August 8, 1967 as a result of rivalry of US and Soviet

Union. Created during the heights of Vietnam war.

First members- ___________________________________________- To promote stability

and contain the influence of communism during the cold war.

_______________________________________________joined after cold war.

Cold War, the open yet restricted rivalry that developed after World War II between the United States
and the Soviet Union and their respective allies.

2021 2020
 Unemployment ______ _______
Rate
___________ASEANS’ biggest investor
Unemployed
China- Biggest trading partner.
Underemployment
2. _________________ Rate
- 60% of world’s GDP.
- Brunei, Darussalam, Canada, Chile, China,
Hongkong, Indonesia, Japan, Malaysia, Poverty Rate
Mexico, New Zealand, Papua New Guinea,
Peru, Philippines, Russia, Singapore, Taipei,
Thailand, USA, Vietnam.
- Biggest trading countries- ________ and ___________

3. BRICS- ________,__________,___________,_______________,__________

4. ______________________________-
- Formed in 1951.
- Euro as single currency for regional trading.
- Austria, Belgium, Bulgaria, Denmark, Finland, Germany, France, Greece, Ireland, Italy,
Luxembourg, Netherlands, Portugal, Romania, Spain, Sweden, UK, Cyprus, Croatia, Czech
Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia.

5. _________________________________________
- Jan 1, 1994
- Canada, United States and Mexico
- USA and
- ____________ provide highly industrialized environment
for manufacturing & services growth while ______________
provides cheaper resources.

Trade controls that directly affect price

- Tariffs, subsidies, arbitrary customs, valuation methods, and special fees.

TRADE CONTROL THAT INDIRECTLY AFFECT PRICES

- quotas, VERs, Buy local legislation, Arbitrary standards, licensing arrangements, foreign-
exchange controls, administrative delays, reciprocal requirements.

DOING BUSINESS IN PHILIPPINES

Philippine economy grew by ______% in 2021.

Philippines’ Gross National Income per Capita- $_____ In 2021

Top drivers of inflation for the year- ________,________,_____

To tame Inflation: decrease in the Most Favored Nation(FMN) of the following goods:

-Corn- 5% in quota

- 15% out quota

- Coal- 7%

Philippines was rank _______in competitiveness ranking in 2022.

Challenges to Doing Business in Philippines:

- Government Red Tape

- Regulatory uncertainties
 - Slow judicial system
- Inconsistent application of laws by LGU
- Corruption.

Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) in March 2021 as part
of the Comprehensive Tax Reform Program (CTRP) is expected to lure $4 billion in new
investments in the next three years but is also estimated to erode government revenues by up
to $10 billion in the next five years.

CREATE- cuts the corporate income tax to _______ from _______

In 2021, the Philippines ranked as the __________ largest export destination for U.S. products and
the 30th largest source of U.S. merchandise imports.

Philippine’s Largest Supplier

- United States- 6.6%

- China- 22.7%
- Japan- 9.4%
- Korea
- Thailand

Philippine’s Export Market

- United States- 15.9%

- China- 15.5%
- Japan
- Singapore

6 Market Barriers in the Philippines

BEST PROSPECTS FOR US COMPANY IN PH:

-
-
-
-
-

BEST STRATEGY TO ENTER PHIL MARKET

Philippine Implemented the 2017 version of ASEAN Harmonized Tariff Nomenclature (AHTN).

Philippines’ simple average Most Favored Nation (MFN) applied tariff rate was ____ in 2020. (RA
10683) MODERNIZING THE CUSTOMS AND TARIFF ADMINISTRATION

Philippines’ simple average MFN rate:

Agricultural products- ___

Non-Agricultural Products- _______

The Philippines eliminated tariffs on approximately 99% of all goods from ASEAN trading partners
under the ASEAN Free Trade Area (AFTA).

IMPORTS AND EXPORTS ROCEDURE IN THE PHILIPPINES

3 PROCESSES For importers:

- Import Clearance Certificate from BIR, this is valid for 3 years

- Registration in BOC- updated annually.
- Set up account with Client Profile Registration System; cost ______ (_____usd)- takes
____ working days.

6 Required Documents:

For Importers Bringing Animals, Plants, Foodstuffs, Meds or Chemical

- Must have ________________________-

For Exporters:

- Registration with the Client Profile Registration System (CPRS) through Philippine
exporters Confederation.

Coffee exporters- Registration in _____________

Exporters Operating Out of Special Economic Zones- Registration in ___________________

Required Documents:

Additional Documents:

Endangered species of flora and fauna (Bureau of Biodiversity Management);

Animals and animal products (____________________);

Fish and fish products (____________________________________________);

Plants (______________________________________);

Rice (______________________________);

Radioactive materials (___________________________________) and;

Sugar and molasses (__________________________________________).

TARIFFS AND TAXES

Followed from the United Nation’s Standard International Trade Classification

- Import tariffs ___________

- Non-agri goods- ____________

VAT FOR IMPORTED GOODS-__________________

NO TAX FOR IMPORTS LESS THAN ___________________________

For exports:

- Logs______________

FREE TRADE AGREEMENTS IN PH

Philippine is a member of ____FREE TRADE AGREEMENTS AND ___ BILATERAL FTA WITH
JAPAN.

the five FTAs that ASEAN has signed with the following countries or group of countries:

DOING BUSINESS IN PH

Foreigners are allowed to own 100% of domestic business in Ph if:

- you need to have at least ____________

- If you will employ _______or more Filipinos, it can be reduced to _________

If not 100% owned of operating overseas, ________ is needed.

Law states- the business must have ____ ownership by Filipinos.

Popular business types:

- ____________-

Challenges in having business in Ph as a foreigner:

THEORETICAL ASPECTS OF INTERNATIONAL TRADE

1. Interventionist theories

2. Free-Trade Theories

Globalization benefits

5 COST OF GLOBALIZATION

Modes of Operation in International Business

1.
 2

UNUSUAL BUSINESS ETIQUETTES

1. ________- Left hand is considered as unclean; its an insult.

2. ________Beef dish is considered as disrespect.
3. ________3 air kisses greet
4. ________tapping of nose means confidential
5. ________Accept business cards.

EPG MODEL- international business model including three

dimensions_________________,_______________,____________________.
- Introduced by ____________________ in the journal article “The tortuous Evolution of Multinational
Enterprise” in 1969.
_______________________- Operates in several countries but is managed from one home country or when
it derives more than one quarter of its revenue outside home country.
_______________- a theory in business that anything learned about foreign market is not always applied to
any other foreign market.
___________- hiring local people as workforce and adapts the HR practices of host nation.
____________________- the possibility of viewing the world or the market environment in the perspective of
one’s own culture.
- Has the idea that a culture is superior to the other.
__________________ use the same HR practices of the parent company in host nations.
__________________ assuming that there is likeliness and differences in the world that is better understood
in combining different cultures.
___________________ staffing is adopted when companies implement a transnational orientation.
Recruitment are based on skills and experiences not on their nationality.

POLITICAL CONSIDERATIONS

1. ___________________ endorses the primacy of personal freedoms in the political, economic,

and cultural realms.
- Interest of ____________ over __________________.

2. ____________________ holds that the needs of society take precedence over the needs of
the individual.
- Political officials have extensive role
- State intervention to improve the welfare of the group.

3. ___________________ protects personal right, civil liberties, fair and free elections, and
independent courts of Law.
- Protects freedom.
- _______ over ________.

4. ____________________ many. The government exercises control over many to all aspects of
life, the individual is subordinated to the state, and opposing political and cultural expression is
suppressed.
- _________ over _______.

DIFFERENT POLITICAL SYSTEMS

 ________________ Which contends that individuals should control political activities and public
government is both unnecessary and unwanted.

________________ which contends that every aspect of an individual’s life should be controlled
and dictated by a strong central government.

________________ which asserts that both public and private groups are important in a well-
functioning political system.

_______________________ centralize all control in the hands of one strong leader or a small
group of leaders, who have full authority.

- Leaders are not elected, not accountable to the people.

_________________ a more extreme form of authoritarianism, occurs when an authoritarian

leadership is motivated by a distinct ideology, such as communism.

NUMBER OF FULL DEMOCRACIES________

FLAWED DEMOCRACIES- ___________
AUTHORITARIAN-___________
HYBRID REGIMES- ____________
__________________________-ONLY TWO NATIONS IN ASIA WITH FULL DEMOCRACY

5 Countries with established democracies

China has successfully combined state intervention with private investment to develop a
robust, market-driven economy—all within a communist form of government.

_________________ Chinese search engine, earn 73%

LEGAL SYSTEM

__________ is based on a detailed set of laws that constitute a code and focus on how the law is
applied to the facts. It’s the most widespread legal system in the world.

___________is based on traditions and precedence.

____________ is also known as theocratic law and is based on religious guidelines.

3 Example:

SHARIA’S GUIDELINES

TRADE INTERVENTION

_________________-Governments seeking to control key industries.

Ex. Oil
Government is concerned about _____________________,_______________,_____________

What remained state-run?__________________

_______________________ is an economic system in which the means of production are owned and
controlled privately.

-focuses on law multiple legal policies to protect international trade.

-enable and facilitates between two trading countries.
Ex.
Convention on Contracts for the international sale of goods.
Convention on security interests in mobile equipment.

FINANCIAL FRAMEWORK
____________- deals with the acquisition of financial resources and their allocation among the
company’s present and potential activities and projects.
______________ any currency banked outside its country of origin.
______________one sold outside the country of the borrower but denominated in the currency of the
country of issue.
_____________bond issue sold in a currency other than that of the country of issue.
_____________- money denominated in the currency of another nation or group of nations.
_______________- the price of a currency.
________________________involve the exchange of currency ______or more days after the date
on which the dealers agree to the transaction.
______________ in foreign exchange is traded every day.
__________ most widely traded currency in the world.
_____________ main foreign exchange market in the world.
Spot transactions involve the exchange of currency on the __________day after the date on which
the two dealers agree to the transaction.
In foreign exchange:
Numerator is called the ____________
Denominator the _______________

Philippines Method of Payments

• open account
• Letter of credit
• Cash in advance
• Documentary collections
• Factoring

Export transactions:
It will depend on the existing relationship between exporter and importer and mutual agreement
on terms of sale.
 ____________________
- Used by buyers with existing foreign accounts.
- Cash payment is remitted before goods are shipped.
- For first time transaction between the exporter and importer:

___________________ the buyer establishes credit with his/her local bank of choice and
describes in full details the terms of sale.

IF BUYER AND SELLER HAVE ALREADY ESTABLISHED A RELATIVELY FAVORABLE

BUSINESS RELATIONSHIP:

__________________________________________
- By signing the D/A, the importer agrees to pay in the future-on a predetermined date.
- The importer can collect the documents as soon they sign the bill of exchange (D/A).
_________________________________________
- The documents transferring the title to the goods are not released to the buyer by the
collecting bank unless the bank receives payment from the buyer.
________________________________________
- Documents transferring title to the goods are sent to the buyer without guarantee of
payment.
_________________________________________
- requires the buyer to pay immediately upon receipt of
- the document transferring the title to the goods.

Credit Rating Agency

________________________________________ pioneer credit rating agency in the Philippines.

___________________
Typical collection time frame from 30 to 90
Party President Chair Ideology
days. Partido
Federal ng
Pilipinas
(PFP)
Lakas
Christian-
Muslim
Democrats
(LAKAS-
CMD)
Partido
Demokratiko
Pilipino-
Lakas ng
Bayan (PDP-
LABAN)
Nacionalista
Party
Liberal Party