INTERNATIONAL BUSINESS

AND TRADE
Teacher: Ralfh Julius T. Delator
CHANGING PROFILE OF GLOBAL BUSINESS
ENVIRONMENT
• From North Pacific to Asia Pacific
countries, powerful countries
emerged and dominated the world
trade Britain was the current
hegemon and had powerful allies
not only within Europe but
widening to US continent and Asia.
Having allies forced Britain to
participate when one of her allies
was confronted, which was what
led the alliance to the World War I.
Hegemon- something (such as a
political state) having dominant
influence or authority over others :
• Trying to rise up from the aftermath of World War I,
European countries struggled to get themselves out
of the adversity. In this situation, supplies from Britain
were hampered and was taken over by the United
States. Development in US was really fast that they
didn't struggle much after the war. US soon became
the supplier replacing the throne who was before
seated by the Great Britain. US dominated the
international politic and control the trade.
The outbreak of World War II totally changed the world
entity. This was because International Economy was
integrated with each other but also because of the
spread of liberalism. Then IMF was established to help
maintain the world economy In the 1948. GATT or
General Agreements of Tariffs and Trade was
stablished to control and manage the goods cycle in
international trade system.
 GATT

• The General Agreement on Tariffs and Trade (GATT), signed

on October 30, 1947, by 23 countries, was a legal
agreement minimizing barriers to international trade by
eliminating or reducing quotas, tariffs, and subsidies while
preserving significant regulations.1 The GATT was intended
to boost economic recovery after World War II through
reconstructing and liberalizing global trade.
 WHAT IS A QUOTA?

• A quota is a government-imposed trade restriction that limits the

number or monetary value of goods that a country can import or
export during a particular period. Countries use quotas in
international trade to help regulate the volume of trade between them
and other countries. Countries sometimes impose quotas on specific
products to reduce imports and increase domestic production. In
theory, quotas boost domestic production by restricting foreign
competition.
 WHAT IS A TARIFF?
A tariff is a tax imposed by one country on the goods and services
imported from another country.
• Governments impose tariffs to raise revenue, protect domestic
industries, or exert political leverage over another country.
• Tariffs often result in unwanted side effects, such as higher consumer
prices.
• Tariffs have a long and contentious history and the debate over
whether they represent a good or bad policy rages on to this day.
 WHAT IS A SUBSIDY?

A subsidy is a benefit given to an individual, business, or

institution, usually by the government. It can be direct (such as
cash payments) or indirect (such as tax breaks). The subsidy is
typically given to remove some type of burden, and it is often
considered to be in the overall interest of the public, given to
promote a social good or an economic policy.
The ideas to initiate a multilateral trade
organization then improved to forming ITO
(International Trade Organization),
following by IMF and International Bank for
Reconstruction and Development or known
as World Bank These organizations were
built to help the restoration of countries
post-world war II.
The multilateral trading system is an attempt
by governments to make the business
environment stable and predictable. In the
WTO, when countries agree to open their
markets for goods or services, they “bind” their
commitments. For goods, these bindings amount
to ceilings on customs tariff rates.
According to Michael C.Webb and Stephen D. Krasner,
hegemonic stability theory argues that international
economic openness and stability is most likely when
there is a single dominant state, and this thinking
became the most prominent approach among American
political scientists for explaining patterns of economic
relations among the advanced capitalist countries since
1945.
Multinational firms from the United States
played a key role in this growth; a global
perspective became mandatory, even if one's
business is domestic in focus. In particular,
corporations must need to be capable to adapt
quickly and creatively to a unique set of forces
and these driving forces cross national, cultural
and geographical boundaries
 FREE TRADE AGREEMENT

What Is a Free Trade Agreement (FTA)?

• A free trade agreement is a pact between two or more
nations to reduce barriers to imports and exports among
them. Under a free trade policy, goods and services can be
bought and sold across international borders with little or no
government tariffs, quotas, subsidies, or prohibitions to
inhibit their exchange.
 HOW A FREE TRADE AGREEMENT WORKS

In the modern world, free trade policy is often implemented by

means of a formal and mutual agreement of the nations involved.
However, a free-trade policy may simply be the absence of any
trade restrictions.
NOTE: The most well-known U.S. regional trade agreement is the
United States-Mexico-Canada Agreement (USMCA) which
replaced the North America Free Trade Agreement (NAFTA)
effective July 1, 2020
 7 REASONS FOR INTERNATIONAL TRADE

No matter how attractive and ‘must have’ your product or

service seems to be, a strictly limiting yourself to your
domestic market will have a finite capacity. And once you have
reached saturation point, what then? Because of these
limitations wise business owners are looking to go global and
exploit the many international trade opportunities – after all,
in the global economy; practically every country is a potential
customer.
 1. REDUCED DEPENDENCE ON YOUR LOCAL
MARKET

• Your home market may be struggling due to economic

pressures, but if you go global, you will have immediate
access to a practically unlimited range of customers in areas
where there is more money available to spend, and because
different cultures have different wants and needs, you can
diversify your product range to take advantage of these
differences.
 2. INCREASED CHANCES OF SUCCESS

Unless you’ve got your pricing wrong, the higher the volume
of products you sell, the more profit you make, and overseas
trade is an obvious way to increase sales. In support of this,
UK Trade and Investment (UKTI) claim that companies who go
global are 12% more likely to survive and excel than those
who choose not to export.
 3. INCREASED EFFICIENCY

Benefit from the economies of scale that the

export of your goods can bring – go global and
profitably use up any excess capacity in your
business, smoothing the load and avoiding the
seasonal peaks and troughs that are the bane of
the production manager’s life.
 4. INCREASED PRODUCTIVITY

• Statistics from UK Trade and Investment (UKTI)

state that companies involved in overseas trade
can improve their productivity by 34% –
imagine that, over a third more with no
increase in plant.
 5. ECONOMIC ADVANTAGE

Take advantage of currency fluctuations – export when the

value of the pound sterling is low against other currencies,
and reap the very real benefits. Words of warning though;
watch out for import tariffs in the country you are exporting to,
and keep an eye on the value of sterling. You don’t want to be
caught out by any sudden upsurge in the value of the pound,
or you could lose all the profit you have worked so hard to
gain.
 6. INNOVATION

• Because you are exporting to a wider range of customers,

you will also gain a wider range of feedback about your
products, and this can lead to real benefits. In fact, UKTI
statistics show that businesses believe that exporting leads
to innovation – increases in break-through product
development to solve problems and meet the needs of the
wider customer base. 53% of businesses they spoke to said
that a new product or service has evolved because of their
overseas trade.
 7. GROWTH

• The holy grail for any business, and something

that has been lacking for a long time in our
manufacturing industries – more overseas
trade = increased growth opportunities, to
benefit both your business and our economy as
a whole.
 WHAT IS INTERNATIONAL TRADE LAW

• Generally, international trade law includes the rules and

customs governing trade between countries.
International trade lawyers may focus on applying
domestic laws to international trade, and applying
treaty-based international law governing trade.
• NOTE: Under international law, a treaty is any legally
binding agreement between states (countries)
 WHAT IS TRADE POLICY?
• Trade policy is the set of agreements, regulations, and
practices by a government that affect trade with foreign
countries. Each nation determines its own standards for
trading, including its tariffs, subsidies, and regulations.
• Trade policies have a significant effect on the international
economy and on financial markets. They affect exchange
rates, the availability of goods, and the prices that people
pay for them, among many other economic factors.
* Trade policies aim to strengthen the domestic economy.
 REFERENCES

• https://www.investopedia.com/terms/s/subsidy.asp
• https://www.investopedia.com/terms/f/free-trade.asp
• https://ttcwetranslate.com/7-reasons-for-international-trade/
• https://www.law.georgetown.edu/your-life-career/career-exploration-professional-
development/for-jd-students/explore-legal-careers/practice-areas/international-
trade-law/
• https://thefactfactor.com/facts/management/international-business/drivers-of-
international-business/1586/#google_vignette