Presented by;D.

PREM PREETHI BBM-4th sem 107516

CONTENTS
1. Introduction-international trade system.
2. Regulation of international trade. 3. A hypothetical example of international trade.

4. World trade organization.

5. Advantages of international trade. 6. Risk in international trade. 8. Top traded commodities.

7. Largest countries by international trade.

1.Introduction-international trade system

International Trade is the exchange of capital, goods, and

services across international borders or territories. It increases the GDP of the country. The country can export/import the goods or services easily through international trade system. Instead of importing a factor of production, a country can import goods that make intensive use of that factor of production and thus embody it. An example the import of labor-intensive goods by the United States from China. Instead of importing Chinese labor, the United States imports goods that were produced with Chinese labor.

2.Regulation of international trade.

Traditionally trade was regulated through bilateral

treaties. After Second World War controversial multilateral treaties have arisen. They are:1) General Agreement on Tariffs and Trade (GATT) 2) World Trade Organization(WTO) The WTO has prominent role in facilitating international trade.

A hypothetical example of international trade.

Example: (1) Equal Difference in Substitute Ratio: Pakistan and India having one unit of resource. Pakistan: 1 quintal of cotton + 1/2 quintal of wheat. India: 1 quintal of Cotton + 1/2 quintal of wheat. Total product = 2 quintal of cotton + 1 quintal of wheat without specialization If Pakistan specializes in the production of cotton and India in wheat the total production will be: Pakistan: 2 quintals of cotton. India: 1 quintal of wheat When the opportunity cost ratio between two countries is the same, no benefit can occur through specialization to the countries concerned. Thus, we find, that when comparative cost ratio between two countries is the same, no gain can arise from international trade.

A hypothetical example of international trade.

(2) Difference in Comparative Cost Ratio: Pakistan: 1unit of resource=1qt of cotton or 10qt of wheat. India:1unit of resource=1qt of cotton or 25qt of wheat. If Pakistan and India invest their resources in their own countries separately for the production of cotton and wheat, the total production will be: Pakistan: 1 quintal of cotton + 10 quintal of wheat. India: 1 quintal of cotton + 25 quintal of wheat. Total = 2 quintals of cotton + 35 quintals of wheat. If Pakistan specializes in the production of cotton and India in wheat, the total product with the same productive resources will be: Pakistan: 2 quintals of cotton. India: 50 quintal of wheat. We find thus that when opportunity cost ratio is different between two countries, the same productive resources can be made to yield a surplus of 15 quintals of wheat.

3.World trade organization

The WTO began life on 1 January 1995, the General

Agreement on Tariffs and Trade (GATT) had provided the rules for the system. The WTO deals with the rules of trade between nations at a global or near-global level. Above all, its a negotiating forum Its a set of rules And it helps to settle disputes

3.World trade organization Current members of (WTO).

4.Advantages of international trade.

It would be very difficult to have all of the different

materials that we use in everyday life, if there was no international trade. Eg- Poor countries such as Africa would not be able to have any money at all if they did not have international trade, and great countries such as China would not be able to provide us with the majority of materials and products that we use if there was no trading system in place. You can be sure that without international trade you would not have most of the foods that you love and most of the technological devices that are within your home. Eg- McD BURGER,APPLE IPODS etc.

4.Advantages of international trade.(cont..)

Enhances the domestic competitiveness. Takes advantage of international trade technology. Increase sales and profits. Extend sales potential of the existing products. Maintain cost competitiveness in your domestic

market. Enhance potential for expansion of your business Gains a global market share. Reduce dependence on existing markets. Stabilize seasonal market fluctuations .

6.Risk in International Trade.

The risks that exist in international trade can be divided

into two major groups:

1)Economic risks

Risk of insolvency of the buyer. Risk of protracted default - the failure of the buyer to pay the amount due within six months after the due date. 3. Risk of non acceptance. 4. Surrendering economic sovereignty .
1. 2.

6.Risk in International Trade.

2)Political risks 1. Risk of cancellation or non renewal of export or import licenses. 2. War risks. 3. Risk of expropriation or confiscation of the importer's company. 4. Risk of the imposition of an import ban after the shipment of the goods. 5. Transfer risk - imposition of exchange controls by the importer's country or foreign currency shortages. 6. Surrendering political sovereignty.

7.Largest countries by international trade.

Rank Country Total International Trade (Billions of USD) World 27,567.0 4,475.0 3,825.0 3,561.0 2,882.0 1,595.5 1,263.0 1,150.3 1,091.0 1,084.0 1,050.1 944.8 910.2 818.8 808.7 792.3 715.2 678.2 664.4 623.7 607.9 502.3 470.4 Date of information 2010 est. 2011 est.[28] 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. 2011 est. - European Union (Extra-EU27) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 United States China Germany Japan France United Kingdom Netherlands South Korea Italy Hong Kong Canada Singapore Russia India Spain Mexico Belgium Taiwan Switzerland Australia Brazil

Rank

Commodity Mineral fuels, oils, distillation products, etc. Electrical, electronic equipment Machinery, nuclear reactors, boilers, etc. Vehicles other than railway, tramway Plastics and articles thereof Optical, photo, technical, medical, etc. apparatus Pharmaceutical products Iron and steel Organic chemicals Pearls, precious stones, metals, coins, etc.

Value in US$('000)

Date of information 2010

$2,183,079,941

$1,833,534,414

2010

3
4 5

$1,763,371,813
$1,076,830,856 $470,226,676

2010
2010 2010

$465,101,524

2010

7 8 9 10

$443,596,577 $379,113,147 $377,462,088 $348,155,369

2010 2010 2010 2010

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