RIZAL TECHNOLOGICAL UNIVERSITY

Cities of Mandaluyong and Pasig

MODULE No. 1
Chapter 1 - Evolution of International Trade

1. Explain how the Standard Theory of International Trade developed;

2. Discuss the meaning of trade surplus and elaborate on industrial capitalism

3. Differentiate free trade from mercantilism, absolute advantage from comparative advantage, and marginal cost
from opportunity cost;

4. Explain the meaning of barter, give examples and discuss its advantage and disadvantage;

5. Trace the origin of money, give example of items used as money, explain the meaning of mint and minting, and
discuss the role of China, Canada and France in the development of money;

6. Elaborate on the development of the Philippine currency and trace its history;

7. Explain the meaning of mobile payments, discuss what point of sale, elaborate on the different methods of
mobile/internet payments, elucidate on the meaning of mobile wallets, and discuss “ auto pay” and “direct carrier
billing”; and

8. Elucidate on the meaning of digital / virtual currency and discuss the different type of cryptocurrencies.

INTRODUCTION

The World Trade Organization (WTO) is the only global international organization dealing with the rules of
trade between nations. At its heart are the WTO agreements negotiated and and signed by the bulk of the world’s
trading nations and ratified in their parliaments. The goal is to ensure that trade flows as smoothly predictably, and
freely as possible and to help producers of goods and services, exporters and importers conduct their business. With
the creation of WTO, there have been constant efforts made to unite countries to create more markets, standardize
tariffs and trade laws, as well as to remove trade barriers in trying to create free markets.

TOPIC PRESENTATI0N
Introduction:

1.1 EVOLUTION OF INTERNATIONAL TRADE

The evolution of the international trade theories reflects the ways nations were addressing basic economic
problems due to unequal distribution of natural resources or difference in geographical locations.

International Business - country to country business trade, that describes as the purchasing and selling of
goods, commodities and services outside of its own borders.
 Is business done outside the origin country’s national borders.
International Trade - International trade theories are simply different theories to explain international trade.
Trade is the concept of exchanging goods and services between two people or entities. International trade is
then the concept of this exchange between people or entities in two different countries.
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 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
People or entities trade because they believe that they benefit from the exchange. They may need or want
the goods or services. While at the surface, this many sound very simple, there is a great deal of theory, policy, and
business strategy that constitutes international trade.
Period
19 th Century - Silk Road & Spice Route – barter
routes of trade- most trading happens in seas
and ports; silk, spices and precious stones.
First systematic body of thought – is a trade in
which the domestic goods exported are more
valuable than the goods that are imported
1976, Adam Smith, Father of Economics-
published his book entitled “An Inquiry into the
Nature and Causes of the Wealth of Nations”,
fundamentally challenge mercantilism .
David Ricardo as well as James Mill and Robert
Torrens – published in his book “Principles of
Political Economy”
Theory of Comparative Advantage
- Suggest that a country export goods in
which its relative cost advantage ,
1913 – anti mercantilism began to plan their
international pacts and policies were made,
including tariff –free importation
First World War
1920 – Economic recession
May 1927 – World Economic Conference
1930
International depression
1947, League of Nations Conference
Chicago School of Economic Thought
( Milton Friedman) championed neoliberal
globalization
At Present
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Activity
Silk Road and the Spice Route
Broader concept of the integration of economies and societies
evolved.
Mercantilism -
This concept of international trade allows for a
larger market and an increased productivity
world wide
- He contended that these restrictions only
encourage monopoly and discourage
competition.
Theory of Comparative Advantage
- Suggest that a country export goods in
which its relative cost advantage , and not
their absolute cost advantage.
Free Trade -
All currencies can be converted to gold,
with the gold becoming an international
monetary currency accepted anywhere,
anyone can work for a living anywhere.
Global trade and businesses were alive and
blooming.
This changed the entire course of the world
trade and countries began to build walls around
themselves with wartime controls.
This conference opened the door to discussions
on how to ease the international trade issues
and economic pressures, leading to the
establishment of the Multilateral Trade
Agreement
-
Establishing the General Agreement on Tariffs
and Trade.
This ideology, which started in the early 1970s
gradually, became a major force to reckon with
in the 1980s and became the norm in the
1990s. The result of all this was the hyperactive
expansion of global companies across the
world.
The concept of international trade and business
 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
is in a much better place in terms of freedom
and management .
Global competition affects nearly every
company – regardless of size
International business grew in scope and size to
the point where at the moment; the global
economy is dominated by multinationals from all
countries in the world.

1.2 BARTER

Barter / Bartering involves a direct trade/ exchange of goods and services. It is the process of trading services
or goods between two parties without using money in the transaction.
Development of Barter Activity

Ancient time ( Early Humans) Barter system - a trade between and among different
Nomadic Life places, They used leaves and animal skin as clothes and
ate vegetables, fruit, fish and animal meat

Formation of Groups Early humans had to travel distances to find food and
started forming groups.
- Intergroup interaction started exchanging their goods
for what they needed, which the other group had- Barter
System

Cultivation & Farming People started settling down in areas, where they began
growing plants and raising farm animals
- pottery, carpentry, weaving- started trading surplus
goods and system of trade flourished

600BC Barter system was introduced by the tribes of

Mesopotamia, then adopted by Phoenicians, and further
developed in Babylonia.( weapons, tea, spices and food
items).
Salt was so valuable that time that the salary of roman
soldiers was pain salt

1.3 ORIGIN OF MONEY

 1000BC The first metal coins appeared, during , China

consisting of miniature hoes & billhooks.
 770 BC miniature replicas of tools and weapons cast
in Bronze
 Moved from coins to paper money
 AD 1271 (Marco Polo) - visited China

The first region of the world to use an industrial facility Europe, called Lydia ( now Western Turkey)
to manufacture coins ( a mint) King Alyantes minted the first official currency, non
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 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
standardized coin from electrum, that did not have a
standardized value.

Production of “white gold” Artemisium ( temple of Artemis

Issuance of the first paper currency Canada

Instead of going back to barter, colonial government
issued IOU’s (promissory notes) that traded as a
currency,

1608 - first colonial settlement Quebec by Samuel de Champlain

Beaver Belt - was the one universally accepted medium
of exchange

1670 - silver and copper coins were minted France

1685 - temporary issuance of paper money printed in

paper cards
Card Money served as money Canada

1722 - copper coins were introduce France & Canada

1729 - card money was legal tender for all payments

Legal tender ( currency)

1759 - French government suspended the payment of

bills

1760 - gold &silver were restored

1763 - Paper obligation issued by the colonial authorities

was included in the Treaty Of Paris

Advent of paper money led to increase in international Today, physical currency is not required, as electronic
trade. money is widely used for monetary transactions.

Minting -is the process of making coin by stamping metal in 600BC

BUT WHY DO COUNTRIES ENTER INTO INTERNATIONAL TRADE?

1. Differences in Technology
2. Differences in Resources
3. Differences in Demand
4. Existence of Economic of Scale in Production
5. Existence of Government Policies ( ex. Tariff)

Technology - changed the way business organizations manage activities ranging from manufacturing, procurement,
finance and sales.
Gold - the currency accepted world wide during the peak of free trade
Economies of Scale - is the term referring to relationship between production costs and scale of production; thus
when costs decrease, scales of production increase.

COURSE TITLE : MGT 104

 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
1.4 HISTORY OF THE PHILIPPINE CURRENCY
Period
Pre-Hispanic Era
Spanish Era (1521 – 1897)
Revolutionary Period (1898 –
1899)
American Period( 1900 – 1941)
Japanese Occupation (1942-
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Activity
Barter
Cowries – a specific medium of exchange due to the inconvenience of the barter
system
- Ovulidae Triviidae (allied cowries) is the most popular of all marine
gastropods, having glossy often colorfully patterned shells.
Barter Rings made in gold were used in ancient times for personal adornment,
jewelry and the first local form of coinage called piloncitos, believe that this
inscription was the name by which the Philippines was known to Chinese traders
during the Pre Spanish time.
Manila became the center of commerce in the East.
Cobs or Macuquinas ( silver coins) of colonial mint were the earliest coins
brought in by the galleons from Mexico and other Spanish colonies.
Barilla – a crude bronze or copper coin worth about one centavo, was the first
coin struck in the country.
Filipino term “barya” referring to a small change, has its origin in barilla.
Gold Coins – with the portrait of Queen Isabela were minted in Manila.
Silver pesos with the profile of young Alfonso XIII were the last coin minted in
Spain.
Pisos Fuertes, issued by the country’s first bank, the EL BANCO ESPANOL
FILIPINO DE ISABEL II, were the first paper money circulated in the country.
Republika Filipina Papel Moneda de Un Peso and Cinco Pesos – two type of two-
centavo copper who freely circulated during this period. With the surrender of
Aguinaldo to the Americans, this currencies were withdrawn from circulation
and declare illegal currencies.
Coinage Act 1903, Gold standard is the monetary system where a country’s
currency or paper money has a value directly linked to gold. With this standards,
countries agrees to convert paper money into a fixed amount of gold per unit of
currency.
El Banco Espanol Filipino( Bank of the Philippine Island (1912) paved the way for
the use of English from Spanish in all notes and coins issued up to 1933.
May 18, 1918 treasury certificates replaced the silver certificates series, and a
one peso note was added.
“Mickey Mouse” money- notes circulated during WWII that had no back up
 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
1945) reserves.
This is the worst inflation in the Philippine history – where prices are very high.
Resistance Currencies which are low in denominations, were issued in different
provinces to show resistance against the Japanese occupation.

The Philippine Republic
Central Bank of the Philippines (1949) , were establish issuing the first
currencies.
English series notes – first currencies issued by the Central Bank printed by
Thomas de la Rue & Co. Ltd. In England and the coins minted at the US Bureau
of Mint.
Filipinization of the republic coins and notes began in the late 1960’s .
Ang Bagong Lipunan (ABL) series notes were circulated , which were printed at
the Security Printing Plant starting 1978.
Flora & Fauna coin series- initially issued in 1983.
New Design series of bank notes issued in 1985 replacing the ABL.
After no years new set of coins and notes were issued carrying the logo of the
new Bangko Sentral ng Pilipinas.

1.5 MOBILE PAYMENTS AND INTERNET PAYMENTS

Mobile Payments - are money rendered for a product or service through a portable electronic device, such
as cell phone, smart phone, or a tablet device.

Point-of- Sale (POS) - is a place, such as checkout counter of a store, where a customer makes the payment
for goods or services.

The following mobile payments information came from mobile transaction,org 2021;

1. NEAR FIELD Communication (NFC) payment is the technology that allows two devices- your phone and a
payment’s terminal - to process contactless payment using

2. Sound Waves - Based (SWB) or sound signal based (SSB) mobile payments or pay by sound uses an advanced,
ultra low-power, wireless transmission technology to transmit data via sound waves that originate from POS
terminal that retailers are already using.

3. Magnetic Secure Transmission (MST) is when a phone emits a magnetic signal imitating the magnetic strip on the
payer’s credit, which the card terminal picks up and processes as if a physical card was swiped through machines.
This is secure as it uses a secure tokenization system.

4. Mobile/digital wallet stores payment information on a mobile device, usually in an app that utilizes different
technologies in the payment process.

Tokenization - a method using-time limited token numbers generated to process the specific transaction
using your already -encrypted card” stored in your mobile wallet.

5. Quick Response (QR) codes are the trademark of a type of matrix barcode (type 2D barcode) readable by
smartphones created in 1984 for the Japanese automotive industry. This is more secure because your phone, that
your card details are connected to, confirms your are the owner of the card.

COURSE TITLE : MGT 104

 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
Advantages:

a. It stores a large volume of data

b. It can be scanned from a screen, not just paper.
c. It can be read if ,part of the code is damaged.
d. It is safer because information can be encrypted.

6. Short Message ( or messaging service) SMS - called premium SMS payments, and direct carrier billing.
- means paying for products or services via text messages

7. Direct Carrier Billing - DCB - is similar to SMS payments because you pay through your mobile carrier instead of
using bank or card details.

8. Internets Payments - can be done on desktops, laptops or even phones ( as in mobile phones)
Wireless Application Protocol WAP - used to be the most common facility on smartphones connecting to the
internet.
Auto-pay is done when payments to credit cards or other bills, like some utilities are scheduled to be automatic
paid on a certain date from funds or the payee with certain bank, just like debit card.

9. Payment Link or pay by link - referring to a button/link sent in an email, text message, messaging app, or on social
media. When the receiver clicks the link, a checkout page opens where the recipient can enter their details to
process the transactions for a specific merchant.

10. Neobank - literally means new bank from the Greek word neos meaning new-
It is an umbrella term for the new generation of cutting edge, fully digital banking services aiming to be more
accessible than traditional banks, that includes savings account, current account, mobile apps payments, money
transfer, loans and even financial services like analytic spending behaviors.

1.6. VIRTUAL CURRENCY

Virtual Currency (VC) is a type of digital “currency” created by a community of online users, is stored in
electronic wallets ( e-wallets), and generally transacted online.
* It is not issued or guaranteed by central bank or government authorities.
* VC’s may e transferred within the community of users, It may be used to buy virtual items (e.g. games,
apps) or real goods from online shops/merchants willing to receive the VC payment. In this case VC’s are used as a
medium of exchange.
* VC’s may also be exchanged to/from actual cash (fiat money) through people/companies that are part of
the community of users.

Cryptocurrency is a type of VC that uses cryptography - a method of storing and transmitting data in
unreadable form so that only the intended receivers can read and process it. This allows cryptocurrency transactions
to be carried out in a decentralized manner by a group of users.
Bitcoin - the first and most popular cryptocurrency to date, introduced in 2009.
Blockchain - also known as “digital ledger technology” - is a special kind of database and it differs from traditional
databases. It is a “distributed ledger” built in a data structure known as blocks.
Fiat Currency or Real Currency - the coins and paper money minted and printed by the central bank of a
country ; designated and circulated as legal tender in the country; and used and accepted as a medium of exchange
in the country, fully backed by the government and acceptable as payment for public and private debts.

COURSE TITLE : MGT 104

 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
E-money - is a digital representation of fiat currency. E-money is convertible to fiat currency in licensed e-
money issues or e-money agents.It is used to electronically transfer monetary value that is equivalent to, or
similarly denominated as fiat currency; Is a legal tender.
What are the potential benefits of VC’s?
Consumers:
1. Remittances & wire transfers
2. Electronic payments
3. Financial inclusion
Risks Involved:
1. Prices change quickly
2. Potential for unlawful use
3. Prone to theft or loss
4. VC transactions are immediate and irreversible
5. VC holdings are not insured

Top 6 Six - 5 star rated digital currencies:

1. Ether - 2015
2. Bitcoin - 2009
3. 0’> Ripple (XRP ) 2012
4. Stellar (XLM) 2014
5. Cardano 2017
6. Dogecoin 2013

COURSE TITLE : MGT 104

 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig

COURSE TITLE : MGT 104

 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig

COURSE TITLE : MGT 104

 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig

COURSE TITLE : MGT 104