FOREIGN TRADE

CHAP T E R 10
 C T ION
T R ODU
IN
FOREIGN TRADE
-is the exchange of goods and services
between countries

BARTER
-early people exchange goods for a different
variety of products.
 l o g i c a l
Techno n
In n o va t i o
-led to globalization and made the world seem
borderless in terms of all forms of trading.

As believed, one country cannot be self-

sufficient, does not have everything in the
world, and must exchange for another product,
even North Korea.
 H IST ORY
FORE OF
IGN TRADE

This is where you section ends. Duplicate this set of slides as many times you need to go over all your sections.
 R CAN T I L I SM
ME
Valued balance of trade, exports given to a foreign
country must, at any time, exceed the imports, if not
equal.
Adam S mi t h
- Scottish economist, philosopher,
and author who is considered the
father of modern economics

-In 18th century he wrote a book “The

Wealth of Nations”
 David Ricardo
1772-1823
A classical economist best known for his theory on
wages and profit, the labor theory of value, the theory
of comparative advanatge, and the theory of rents.
CONCEPTS OF FORE IGN T RADE

● An extension of domestic trade

● The import and export activities carried out by any nation with

another nation or by any company in one country with a

company in another country.

● The exchange of services or goods between different countries.

 F RO M
GAINS .
TRA DE S

It is undeniable that there are a lot of benefits to international trade. We can use electronic devices, wear
imported clothes, eat fruits and vegetables that are not locally grown, and so forth.
 M E OF THE PE RK S O F FO R EIG N TR A D E
THIS ARE SO

Production Cost Competition Product Variation

 Raw materials in certain  The liberalization of trade  This somehow makes life for
countries are cheaper than and investment stimulates them easier and increase
making the production costs healthy competition their standard of living
lower

Surplus Market Market Efficiency

 This benefit particularly for  Seasonal fluctuations of
those producer countries of products affect some
agricultural products. companies that may lose
opportunity to do business.
 RISK OF FOREIGN TRADE

FOREIGN
POLITICAL RISKS CREDIT RISKS
EXCHANGE RISKS
 Is the chance that a  Is the risk an  Simply defined as the
company will lose investment's returns potential that a bank
borrower or counterparty
money on international could suffer as a result
will fail to meet its
trade because of of political changes or
obligations in accordance
currency fluctuations. instability in a country. with agreed terms.
 RISK OF FOREIGN TRADE

THIRD-PARTY
BUYER RISKS SELLER RISKS
RISKS
 Trust will always be an  Reputation may be  Failure to honor buyer-
issue as the possibility compromised as two seller agreements is one
to be scammed is great. factors must always be of the risk in foreign
met, the volume and the trade.
distance of delivery.
 Effects of
Foreign Trade
Generally, world price is the price of a product set to
other countries except for the price in own country.
EFFECT S OF FOREIGN TRADE
 TRADING I N THE AS EAN

Philippine exports by major partner country

The Association of Southeast OTHERS U.S.A
19% 18%
Asian Nations (ASEAN) seems to
be doing good in the net exports
of goods and services as it is in an MALAYSIA
3%
increasing trend before the TAIWAN
3%
pandemic.
KOREA JAPAN
4% 18%
GERMANY
4%
SINGAPORE
3%
THAILAND HONGKONG
3% CHINA 13%
13%
The ASEAN is composed of Brunei, Cambodia,
Indonesia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand and Vietnam