Understanding Global Trade?

https://youtu.be/Tzjn-v99fZw
CRITICAL MACRO TERMS ONE SHOULD KNOW???
• 1.Export
• 2.Import
• 3.GDP/GNP
• 4.BOT/BOP
• 5.Trade Agreements
• 6.Currency Devaluation
• 7.PPC/trade theories
• 8.Inflation
• 9.Deflation
• 10.Monetary Policy
• 11.Fiscal Policy
• 12. Business Cycles
 Definition
Export:-
This term export is derived from the
conceptual meaning as to ship the goods and
services out of the port of a country.
The seller of such goods and services is
referred to as an "exporter"
 Definition
Import:-
The term import is derived from the conceptual meaning
as to bring in the goods and services into the port of a
country.
The buyer of such goods and services is
referred to an "importer"
 Ways for Export/Import
 Direct Exporting/Importing: In Direct Exporting/Importing, a firm directly deals with the
customer/supplier of the foreign country and performs all the formalities, including shipment and financing
of goods and services.
 Indirect Exporting/Importing: In Indirect Exporting/Importing, a firm deals with the customer/supplier
with the help of middlemen. They do not directly deal with the customers/suppliers. With the help of
middlemen, most of the formalities and work are done, such as export houses or purchasing businesses
or offices of overseas customers, or wholesale importers in the case of import operations
Advantages of Trading:

• 1. Easiest and Simplest: Exporting and Importing is the easiest way to enter into the international
market as compared to any other modes of entry. Here, there is no need to set up and manage
any business unit abroad, which makes the process easier.
• 2. Less Investment: Less investment is required in the case of exporting/importing as it is not
mandatory for the enterprise to set up a business unit in the country they are dealing with.
• 3. Less Risky: If there is no investment or very less investment required in exporting/importing in
the foreign country, the firm is free from many risks involved in foreign investment.
• 4. Availability of Resources: As the resources are unevenly scattered around the globe, it is very
important for every country to export/import goods around the globe, as no nation can be 100%
self-sufficient.
• 5. Better Control: Exporting/Importing can provide better control over the trade, as there is very
less involvement in the foreign country. Everything is controlled by the home country and there is
no need to set up a unit in the foreign country.
Disadvantages of Trading:
• 1. Extra Cost: Since goods are to be sent to different nations, there is some extra cost, incurred in
packaging and transportation of goods, which is a major limitation.
• 2. Regulations: Different countries have different policies for foreign trade, and sometimes it
becomes difficult for a company to comply with the rules and regulations of each country they are
dealing with.
• 3. Domestic Competition: The companies involved in exporting/importing have to face severe
competition in the domestic country due to the presence of domestic sellers.
• 4. Country’s Reputation on Stake: Goods that are exported to different countries are subject to
quality standards. If any goods that are of low quality are exported to any other country, the
reputation of the home country becomes questionable.
• 5. Documentation: Exporting/Importing requires obtaining licenses and documentation for foreign
trade from every country, which can become frustrating at times.
• 6. Multitasking: Managing business across different countries involves a lot of multitasking, which
can be hectic for a company.
•
 Advantages of Import
Reduce dependence on existing markets
Exploit international trade technology
Extend sales potential of existing
products
Maintain cost competitiveness in your
domestic market
 Disadvantages Of Import

Importation of items from

other countries can increase the
risk of getting them which is no
more common in the warm
weather.
 it leads to excessive
competition
It also increases risks of other
diseases from which the country is
Advantages Of Export
 Disadvantages Of Export
 Extra Costs

 Financial Risk

 Export Licenses and Documentation

 Market Information
What is Gross Domestic Product (GDP)?
• Gross Domestic Product (GDP) is the gross market value of the total goods and services produced
within the domestic boundaries of a country during a given period of time. It is also known as
National Income (Y). Total imports and total exports are essential components for the estimation of a
country’s GDP. They are taken into account as “Net Exports”.
• GDP = C + I + G + X – M
• Where:
• C = Consumer expenditure
• I = Investment expenditure
• G = Government expenditure
• X = Total exports
• M = Total imports
• Net Exports
• (X-M) in the above equation represents net exports. Net exports are the estimation of the total value
of a country’s exports minus the total value of its imports. A positive net exports figure indicates a
trade surplus.
• On the other hand, a negative net exports figure indicates a trade deficit. A trade surplus or trade
deficit reflects a country’s balance of trade (which is, essentially, whether a country is a net exporter
or importer, and to what extent).
 Balance Of Trade
 Balance of trade represents a difference in value
for import and export for a country.
A trade deficit occurs when imports are large relative to
exports.
Imports are impacted principally by a country's income and
its productive resources.
How to Decrease Imports/Increase Exports

1.Taxes and quotas

Governments decrease excessive import activity by imposing tariffs and quotas on imports. The tariffs make
importing goods and services more expensive than purchasing them domestically.
2. Subsidies
Governments provide subsidies to domestic businesses in order to reduce their business costs. This helps
bring down the price of domestic goods and services
3. Trade agreements
Sometimes, countries ensure a regular flow of international trade, i.e., a high volume of both imports and
exports, by entering into a trade agreement with another country. Such agreements are aimed at stimulating
trade and supporting economic growth for both countries involved.
4. Currency devaluation
Governments devalue their currency with the aim of bringing down the prices of domestic goods and
services, the ultimate goal being to increase net exports. The currency devaluation also makes purchasing
from other countries more expensive, thus discouraging imports.
CASE OF UBER
• https://youtu.be/l7q7Hz91CVQ