International Trade Chapter 6

Chapter 6: Importing, Exporting, and Trade Relations

• Importing, exporting, and international trade relations are covered

• Sections include importing procedures, exporting procedures, the importance of trade relations, and the nature of competition

• Importing is buying services or products from businesses in other countries

• Goals for importing include explaining its importance and identifying steps in the process

• Key reasons to import include product demand, lower costs, and production inputs

• Product demand: Customers want unique items or high-quality products foreign-made

• Lower costs: Goods or services in certain countries are cheaper than in other countries. (e.g., electronic goods from Asia)

• Production inputs: Companies buy raw materials from other countries for production or assembly (e.g., car parts from other countries)

• Steps to importing:

  • Determining demand
  • Contacting suppliers
  • Finalizing the purchase
  • Receiving the goods

• Types of import assistance include Customs and Border Protection (CBP), Food and Drug Administration (FDA), and U.S. Department of Agriculture (USDA).

• Case studies to predict success of imports in the Philippines - Shampoo with foreign labels - Clothing with inconsistent sizes - Dinner entrée with blue pasta

• Exporting Procedures:

  • Identifying the steps in the exporting process
  • Describing the exporting of services

• Steps to exporting:

  • Finding potential customers
  • Meeting customer needs
  • Agreeing on sales terms
  • Delivering products or services
  • Completing the transaction

• Types of sales terms include FOB, CIF, and C&F

• Export documents include bills of lading and certificates of origin

• Obstacles to exporting include lack of foreign representatives, inappropriate products for foreign consumers, insufficient production facilities, high business costs abroad and problems with payment from foreign customers

• Commonly Exported Services:

  • Hospitality
  • Hotels, food services
  • Entertainment (movies, music, television, theme parks)
  • Financial services (insurance, real estate)

• Importance of trade relations:

  • Identifying the economic effects of foreign trade
  • Describing different trade agreements between countries

• Economic effects of foreign trade include:

  • Balance of trade (trade deficit or trade surplus)
  • Balance of payments (positive or negative)

• Trade agreements encourage economic development and promote international business

• The World Trade Organization (WTO) deals with trade rules and encourages international trade.

• Regional cooperation includes:

  • Economic community
  • Common market

• Barter agreements:

  • Direct barter
  • Countertrade

• Free trade zones are designated areas for duty-free entry into a country.

• The nature of competition:

  • Identifying factors affecting international business competition
  • Explaining different competitive market situations

• Factors affecting international business competition:

  • Number of companies
  • Business costs
  • Product differences

• Different market structures:

  • Pure competition
  • Monopolistic competition
  • Oligopoly
  • Monopoly

• Key characteristics of each market structure is provided in the notes.