IBAT Group 5: Foreign Trade Potential of Emerging Economies PDF

Summary

This document presents an overview of the foreign trade potential of emerging economies. It analyzes key factors impacting trade, including competitiveness, absorption ability, and efficiency. The document also touches upon the role of factors like direct investment and trade agreements in driving future trade.

Full Transcript

International Business and Trade Group 5 FOREIGN TRADE POTENTIAL OF THE Every sector is good for doing business as EMERGING ECONOMIES long as it generates sustained profitability and...

International Business and Trade Group 5 FOREIGN TRADE POTENTIAL OF THE Every sector is good for doing business as EMERGING ECONOMIES long as it generates sustained profitability and enjoys gaining market shares. Foreign Trade Turnover It reflects the state of the economy and its What is a major concern for the emerging export and import potential. countries in general? Important Criteria for the Size and the Patterns 1. Higher export supposes higher import of International Business Activities 2. Price Fluctuation 3. Import Structure 1. Absorption Ability - refers to the market's capacity to handle Decisive Factors which Accelerated the Trade large trades without causing significant price Augmentation: changes. 2. Development Trends 1. Higher economic growth - refer to patterns that show how the market 2. Liberalization of the economic policy and is evolving, driven by shifts in demand, particularly the import regime technology, or regulation. 3. Successful bilateral and multilateral trade agreements between the WTO members Direct Investment Inflow 4. Trade preferences for the emerging It strengthens and improves industrial economies, including the status of most capacity which further boosts the export. favorable nation (MFN) There is a strong interdependence between 5. Establishment of regional customs unions the development of export potential and direct 6. Enlargement of the aggregate demand in investments. the developed countries 7. Export-oriented economic policies Decisive Factors for Improving Competitiveness The most crucial criteria for foreign business: 1. Privatization - the transfer of a business or service from 1. Volume of Export Potential: The volume of government to private ownership. export potential refers to the overall capacity of a 2. Green Field Operations foreign market to absorb exports. - when a company builds a new facility from scratch in a foreign market. Factors under the volume of export potential: Market Size: A larger market means more Mono Developed Economies potential customers, leading to higher These are economies that rely heavily on a export volumes. single industry or resource for growth and revenue, Demand for Products: High demand in a making them vulnerable to market fluctuations in market indicates a higher likelihood of sales. that sector. Market Growth: Fast-growing markets represent expanding sales opportunities.. Export Structure It mirrors the economic capacity of a country 2. Efficiency: Efficiency focuses on the ability of a and gives an impression of the most appropriate business to produce and deliver goods sectors for investments. cost-effectively, ensuring profitability. International Business and Trade Group 5 Factors under Efficiency: WTO clearly distinguishes between trade with services and regulation of services Production Cost Ratio: It determines how profitable an export can be in different The WTO or World Trade Organization countries. makes a clear distinction between commerce with Comparative Advantage: Some countries services and service regulation, which is an have unique advantages in producing important factor to take into account. This certain goods due to factors like climate, clarification is crucial since the service industry as a resources, or specialized labor. whole requires proper regulation for a number of Infrastructure and Logistics: Efficient reasons, including the "natural monopoly" infrastructure reduces delivery costs, phenomenon. Therefore, the need for trade allowing quicker and cheaper transport of liberalization of services and their regulation do not goods. clash. The WTO does not currently mandate that service firms be commercialized or privatized. The GROWING POTENTIAL OF THE MARKET OF government authorities are in charge of making SERVICES such choices. The most open and profitable sectors for Growing potential of the market of services foreign investments are telecommunications, refers to the expanding opportunities for transportation services, financial services, business businesses to provide and profit from services, consulting, software, and marketing. Less open yet driven by a combination of economic, technological, are the port facilities, the energy sector, TV and and social trends. radio broadcasting, publishing, and some others. However, these restrictions vary for different Key points: countries. SLOW LIBERALIZATION - process of opening up a country's economy to greater competition and Commercial Service Trade free trade is happening at a gradual and measured The closing gap between the exported and pace. the imported service in the developing countries WTO’S ROLE AND DISTINCTION - The World indicates that the competitiveness of the emerging Trade Organization (WTO) has been instrumental economies in this particular sector is gradually in promoting the liberalization of the service sector, increasing. also The WTO distinguishes between trade with services and regulation of services. It recognizes Traditional Services vs. Other Services that the service sector often requires appropriate The share of “traditional services”, such as regulation due to factors like "natural monopoly”. transportation and travel, remains inferior to the OPEN AND PROFITABLE SECTORS - The most share of “other services”, such as financial, open and profitable sectors for foreign investment communications, business, medical, educational, in services include telecommunications, etc. The value of traditional services is growing due transportation, financial services, business to the increase in foreign trade turnover and consulting, software, and marketing. improvement in the standard of living, which GLOBAL GROWTH - Global growth in national increases the demand for tourist services. The high business and trade refers to the overall increase in dynamics of development of other services is economic activity across countries, encompassing based on the structural changes of the world both domestic business operations and economy and the introduction of new business international trade. services. International Business and Trade Group 5 Which are the advantages of the foreign trade business in the emerging economies? Ongoing liberalization of the trade regime Excellent opportunities for re-exporting from the special free trade zones Increasing purchasing power and higher demand of consumer durable and nondurable goods Large-scale industrialization and strong demand for capital goods, including the most sophisticated technologies Economic restructuring, oriented toward preferable development of the sector of services. It opens opportunities for both import and export of services An opportunity for the producers from the developed countries to extend their product's life cycle by entering new markets or new market niches Good options to combine the product export with direct investments and production cooperation, including exploitation of sub-contracting systems with local producers. It may reinforce the price competitiveness of the finished product on the host country or on the world market Enhanced terms of trade with the developed countries Import of healthier, organic agro products.

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