Trade PDF

A guideline to explain subject matters. The process of exchanging the ownership of goods and services on a particular consideration between the buyer and seller can be interpreted as trade. The types of trade can be presented in the following flow chart...

A guideline to explain subject matters. The process of exchanging the ownership of goods and services on a particular consideration between the buyer and seller can be interpreted as trade. The types of trade can be presented in the following flow chart Trade Home Trade Foreign trade Retail trade Wholesaletrade Import trade Export trade Trade within the boundaries of a particular country is known as home trade. The types of home trade are o Whole sale trade o Retail trade The trade affairs created by a particular country with one or many other countries is known as foreign trade. The types of foreign trade are as follows o Import trade o Export trade  Methods of distributing consumer goods. 1. Manufacturer → consumer 2. Manufacturer → retailer → consumer 3. Manufacturer → wholesaler → retailer → consumer 4. Manufacturer → agent → whole saler → retailer → consumer The above chart denotes that there are many ways of distributing the goods from producer to the consumer. Note the one indicates that the manufacturer distributes his products directly to the consumer (direct distribution) Note that in two three and four indicate that intermediaries are involved in the process of distribution.  Intermediaries are the parties who are involved in the process of distributing products from the manufacturer to the consumer. The following parties can be introduced as intermediaries o Wholesale seller o Retailer o Agent 1  Those who are involved in selling goods for re-sale are known as whole salers. Those who sell goods and services to the end costumer are known as retailers. A person who is involved in any activity on the authority of a head is known as an agent. The agent undertakes responsibilities on behalf of his head. He gains a commission for his service. Agents can be categorised according to the services rendered by them in the following way. Agents Commission Broker Del credere Factor Auctioneer Agent Agent The commission agent is the one who purchases or sell on his personal desire on behalf of his master (head) for his head’s benefit and earns a reasonable amount as commission. A broker is the person who facilitates a transaction between a buyer and a seller by providing necessary information to one another in order to conclude the transaction through a contract by receiving a broker fee from the buyer or seller or sometimes from both the parties for his services. The agent who buys or sells goods under his personal name on behalf of the head is called del credere agent. The agent who sells goods on credit and is responsible for the collection of debts from the relevant parties is a factor agent. In addition to the commission he is also entitled to a factor fee. As auctioneer is the agent who arranges the sales of the head’s goods for the public to the highest bidder. He is entitled to an auction fee for his service  Advantages and disadvantages of getting intermediaries involved in trade are as follows Advantages o Accumulating different types of goods from different manufactures or suppliers in a convenient location and making them available for consumers when necessary. o Introducing new goods and services being convenient. o Ability of obtaining market information easily through relevant parties. o The process of exchange will be simple Disadvantages 2 o The possibility of unnecessary shortage of an essential good in the market. o The possibility of the prices of goods being increased. Competency 11 : Inquires the contribution of trade in distributing the products. Competency level 11.2 : Inquires how retail trade takes place No of periods : 04 Learning Outcomes -: Defines ‘’Retail trade’’ Explains the characteristics of retail trade. Lists out the retail outlets available in your area. Lists the services rendered by the retailer separately to the producer, wholesaler and the consumer. Reveals the trends in retail trade. Instructions for lesson planning: Define retail trade and explain its characteristics.  Inquires the names of some retail outlets in the area and put them up on the white board. Hold a discussion taking the views of the students into consideration and focus on the following points ; o Reasons for identifying those markets as retail outlets. o The parties who are being served by the respective retail outlets. o The services gained by each party. Explain the services rendered by the retailer for the producer, the wholesaler and the consumer. Explain the trends in retail sale using examples A guideline to explain subject matters: Selling goods for the end consumer is known as the retail trade. The person who sells goods in that manner is known as the retailer. Some of the characteristics of retail trade are given below :o Selling goods and services for end consumption. o Presenting a miscellaneous set of goods for sale. o Facilitating the end consumer to buy the required goods, in adequate quantities, where it is necessary, o Most probably credit sales may take place. o Maintain a close relationship with the end consumer 3  Services rendered by the retailers To the producer o Introducing the new products of the producer to the consumer. o Assisting in the promotion of the manufactured products by displaying banners, posters, distribution of samples etc. o Provide after – sale consumer feedback about the product to the producer. To the wholesaler o Distribution of goods stored by the wholesaler to the consumer. o Provide information on the market, consumer taste. o Contributing to the promotion of wholesale activities. To the consumer o Provision of the required goods in adequate quantities when necessary. o Make credit sales. o Introducing new products and providing instructions when necessary. o Providing various types of goods based on customer requirements. o Providing various facilities to the consumer (E.g. : transport facilities , electronic payment methods ) Trends in retail trade o Spreading of supermarkets throughout the country. Spreading of super markets that were limited to urban areas in the past are now in rural areas at present. o Functioning of retail outlets using modern technology. Examples : Recording of prices using barcode Digital flashes of prices Using digital scales in weighting/ measuring Use debit/ credit cards in making payments. Application of CCTV camera systems in supervision o Extending opening hours. Example : Ability to carry out transactions till late at night and at any time on holidays. o Combining retail outlets with the supply of services. Examples : Laugfs fuel stations and supermarkets. Commercial mini bank and cargills supermarkets. o Non store retailing 4  This is where the consumer is able to purchase goods without visiting a retail outlet by placing orders through the telephone, fax, and internet and with the aid of catalogues. There are two methods: 1. Online retailing - The electronic retail trade that takes place through the internet. 2. Direct marketing - Products being supplied to the consumer without the aid of intermediaries. E.g : Direct mail Catalogue Through the telephone and the TV o Automatic vending machines For sweets, chocolate, soft drinks o Using of modern management techniques. 5 Competency 11 : Inquires the contribution of trade in distributing the products. Competency Level 11.3 : Inquires about how wholesale trade takes place. No. of periods : 04 Learning Outcomes -: Defines “wholesale trade”. Explains the characteristics of the wholesale trade Lists out the wholesale trade centres in the area States separately, the services to the producer and to the retailer rendered by wholesalers. Instructions for lesson planning -: Define wholesale and explain its characteristics.  Build up a list of names of the wholesale trade centres in your area on the black/white board. Hold a discussion highlighting the following facts taking the responses of the students’ into consideration. o Reasons for naming the identified shops as wholesale centres. o Parties who receive services from these shops o The services received by each party  A guideline to explain subject matters -: Wholesale trade can be defined as the sale of goods to the purchasers who purchase with the intension of resale. The party involved in this trade is the wholesaler. The following characteristics can be observed in wholesale trade. Purchasing of goods with the purpose of resale. Selling goods in lots/batches Providing trade discounts Storage of goods in large quantities Conduct of sales promotion activities Carrying out marker researches Providing transport services when distributing goods in bulk.  Service rendered by the wholesaler 6 To the producer Purchasing the products of the producer in bulk/lots/batches Providing information about the market Providing various services to the producer E.g.: Financial facilities, obtaining raw materials To the retailer Supplying goods in bulk/lots/batches Transporting goods to the retail trade centre it self Providing loan facilities Engage in storing out, mixing up and packaging of goods 7 Competency 11 : Inquires the contribution of trade in distributing the products. Competency Level 11.4 : Inquires the foreign trade, its benefits and obstacles No. of periods -: 06 Learning Outcomes -: Introduces “foreign trade. Describes the factors on which foreign trade is based. Describes the types of foreign trade separately. Evaluates the benefits of foreign trade. Defines what “free trade” is. Categorizes the barriers to free trade as tariff and non-tariff and explain them. Instructions for lesson planning. : Inquire about the various goods used by the students from the time they wake up in the morning until they come to school and list them out on the black/white board. Give instructions to separate the items listed on the black/white board as local products and foreign products. Inquire about the countries from where the foreign products were imported and explain that it is impossible for any country alone to produce all their requirements and confirm that this results in the necessity of carrying out transactions with foreign countries. Give a definition for foreign trade based on the above information and explain the factors on which the foreign trade was initiated using examples.  Describe the types of foreign trade separately.  Group the students in a suitable manner and involve them in the following activity. Organize a debate to argue ‘for’ and ‘against’ on the topic “Foreign trade is essential to a country”. Get the students, who are not participating in the debate to make notes on the important points that support and do not support, the necessity of foreign trade for a country. Hold a discussion on the points that have been noted down and point out the benefits of foreign trade. 8  Define ‘free trade’ and differentiate its barriers as tariffs and non-tariffs and explain them.  A guideline to explain subject matters-: The trade that is carried out by one country with another country/countries is foreign trade. There are several factors that provide the basis for foreign trade. o The inequality distribution of natural resources Because some countries have been endowed particular natural resources significantly the products associated with those resources can be produced only by those countries themselves. E.g : Middle East _ Crude oil South Africa _ Gold Sri Lanka _ Tea o Relative cost advantage If a particular country is able to manufacture a product at a low cost relatively to import then it must be manufactured by them in order to export and where a product can be imported at a low cost relatively to manufacturing, such products must be imported. E.g : Sri Lanka – Garment industry o Retaining a legal monopoly in some countries with regard to some products. Patents and Copyrights The required competency and technology for some products being unavailable in every country or limited to some countries. E.g : Robotic technology Motor vehicle technology o Goods promotion Using various sales promotion strategies to gain a worldwide market for one’s own products. o Trade barriers being minimised The removal of many sanctions/embargoes, that exist as tariff and no-tariff barriers to trade.  There are several types of foreign trade. 9  o Import trade o Export trade o Re-exports o Entrepot trade Buying goods and services by a particular country from another country/countries is called import trade. E.g : Purchasing of motor vehicles from Japan by Sri Lanka. Selling goods or services manufactured in a particular country to another country/ countries is called export trade. E.g : Shipping of tea from Sri Lanka to Iraq. Re-export trade is where goods imported from one country being exported to another country in its original form or having been subjected to many changes. Here, any tariffs paid at the point of import can be reimbursed. E.g : Where cloth and other accessories are imported and finished garments being exported to another country. Where goods are imported from another country and kept in a warehouse at the point of entry without being brought into the country and re-exported to another country with or without any changes to the goods is called entrepot trade. As this transaction takes place within the port premises itself tariffs are inapplicable. E.g : Sri Lanka imports tea from India and exports to Iran.  A country can engage in foreign trade and gain many benefits as follows. o Ability to export the surplus of production o Ability to import products that cannot be manufactured locally o Ability to earn foreign exchange o Ability to obtain economic gains As a result of foreign trade, products are manufactured not only for the local market but for the global market as well. When goods are manufactured to meet the demands of a wide market, it becomes a large scale production resulting in economic gains. o International trade relations and international co-operation being enhanced and strengthened. o New technological and management skills being upgraded. o Becoming a support for economic development E.g : Employment opportunities, Upliftment of living standards of the people Obtaining maximum benefits of resources Free trade is having the necessary space for various parties to engage in the import and export of goods without any barriers. The barriers to free trade are categorized as tariff and non-tariff barriers. 10  In the trade between countries, the imposition of tariff is a barrier to free trade. Barriers other than the imposition of tariff, to free trade are known as non-tariff barriers. E.g : Limiting imports – quotas Limiting exports – quotas The prohibition of imports/exports Trade agreements Stringent exchange policies Competency 11 : Inquiries the contribution of trade in distributing the product. Competency Level 11.5 : Demonstrates the readiness to engage in foreign trade inquiring the import and export producers. No. of periods -: 06 Learning Outcomes -: Describes the import and export procedure. Lists the documentation used in the import/export trade. Lists the institutions related to the import/export trade. Tabulates the institutions involved at each stage of the import/export procedure, the documents used at each stage and their necessity. Explains the different ways of making payment separately in foreign trade. Instructions for lesson planning : Describe the import/export procedure.  Explain the documents used in the import/export trade, the necessity of those documents and the institutions from where they are issued.  A guideline to explain subject matters Most probably the import and export business transactions take place through the involvement of an agent. However, there are instances that the orders are placed directly and the transactions are made. Whichever method is used, there is no difference in the documentation required in the import/export procedure. Import procedure ▪ Selection of foreign suppliers Selecting a suitable foreign supplier through a study of information available in the Chamber of Commerce magazines and publications, embassy offices, trade exhibitions, web sites etc. 11  ▪ Submitting a price inquiry Having selected a suitable supplier, the prices of the goods to be imported are inquired. For this purpose, the selected supplier will be requested for a price list. ▪ Receiving a quotation The supplier (exporter) will submit a quotation that includes the prices at which he is willing to supply the goods, and other terms and conditions, to the importer with response to the price inquiry. ▪ Obtaining import license When certain products are imported, it is necessary to obtain an import license. This is issued by the Import and Export Control Department. The products for which the import licenses are required is decided by the Commissioner of Import and Export. ▪ Issuing an Indent If the importer is in agreement with the quotation he has received, he should submit a purchase order. This purchase order is also known as an Indent. ▪ Making arrangements with regard to the payment to the exporter. Most probably Letter of Credit and Credit cards are used for making payment to the exporter. ▪ Clearing of the goods After the relevant payment is made, the goods can be cleared by producing the relevant documents. N.B: The necessary documentation is explained later. Export procedure ▪ Getting registered as an exporter. ▪ Finding a foreign purchaser ▪ Obtaining an export license if necessary. ▪ Responding to the price inquiry received from the importer by submitting a quotation. ▪ Obtaining the indent from the importer. ▪ Reservation of shipping space and preparing the necessary documents. ▪ Packing the goods in an appropriate manner for shipping ▪ Insuring the batch of goods to be exported. ▪ Obtaining the bill of lading once the goods have been handed over to the shipping agent. ▪ Making necessary arrangements for the receipt of the consideration.  12  The documentation used in the import/export trade can be briefly introduced as follows: Import/Export License : The products for which a license is required in import/export trade are announced (published) by the Export and Import Controller. Some of the institutions involved for this as follows Examples : Tea – Sri Lanka Tea Board Gem and Jewelry – State Gem and Jewelry Authority Vegetables, spice and betel – Department of import and export control Indent/Order If the importer is in agreement with the quotation provided by the exporter and willing to purchase the goods from him, an order should be placed with the relevant supplier (exporter). This order is known as an Indent. Placing of this order can be done through the internet. This indent which is sent to the foreign supplier by the importer contains the details of the goods required, price, relevant shipping conditions etc. Bill of Lading (B/L) This is issued to the exporter by the ship-owner or his agent on behalf of a shipping company. This confirms that the goods relevant have been received by the ship and that the shipping company is responsible to transport the said goods to the relevant port of destination and hand over appropriately. A copy of the Bill of Lading is sent to the importer by the exporter and this becomes an essential document for the importer to confirm that he is the rightful owner of the goods when the ship reaches to the port of destination. This contains details such as a description of the goods, exporter’s name, importer’s name, the name of the ship and the port of discharge etc. Invoice This is a document which contains details of goods that are being exported. It includes details of goods, pricing details, conditions of payments, shipping route, terms for rejection of the goods etc. Letter of Origin This is a document which is issued by a recognized board of trading, or any other state authority, certifying that the goods handed over for shipping have been manufactured in the exporting country. This document is very important for claiming tariff commission. Example : when Sri Lanka exports goods to the European Union the letter of origin is issued by the Board of Investment or the Ministry of Industries Letter of Credit (L/C) In the Import/Export trade, very often this method is used to settle the payment to the exporter. The letter of credit is issued by the importers bank to the exporter’s 13 bank on behalf of the importer on his request. This is a confirmatory document issued by the importer’s bank stating that payment for the goods shipped by the exporter will be made definitely. Import entry This is the document that must be submitted to the Customs by the importer or his agent confirming the importer’s ownership to the goods that have been received at the port of destination. This is prepared using the Bill of Lading or Invoice. Export entry This is the document submitted to the Customs of the exporter’s country by the exporter giving full details of the goods that are anticipated to be exported. Insurance certificate This is the certificate of insurance obtained by the exporter or importer when exporting the relevant batch of goods. This certificate will be obtained by the importer or exporter based on the terms of the sales agreement. Wharfinger’s Receipt This is the document issued to the exporter by the Customs confirming that the goods were received and undertaken by them. Letter of Indemnity This is the document issued to the Ship’s Captain by the exporter to obtain a pure Bill of lading confirming that the exporter accepts full responsibility for any risk for breakages or damages or any future risk to the consignment or any part thereof in a situation where the ship’s captain may consider to issue an impure Bill of Lading. A pure Bill of Lading is issued when the goods loaded to the ship are in a good condition. If all the goods or any part of the goods loaded to the ship are broken or damaged, an impure Bill of Lading will be issued. Sanitary Certificate/Health Certificate Depending on the requirements of the importing country, some agro products of the exporting country may require a certificate from an accepted authority to confirm the suitability of the product for consumption. Example : For agro products – Agriculture Department For fisheries product – Ministry of Fisheries and Aquatic Resources Warehouse Certificate The storage in close proximity to the port is known as Warehouse. A warehouse certificate is issued by the warehouse authority to the importer to confirm that the goods have been stored there. While the goods are in the warehouse they may be transferred to another party by transferring the ownership of the Warehouse Certificate. Therefore, the Warehouse Certificate is a transferable document. 14  The methods used to settle the payments in foreign trade can be explained in the following manner: o Through opening Letter of Credit o Through Bank Order This is the statement of order given to the bank of the receiver of the money or to the agent bank of the receiver by the bank of the sender stating to pay the mentioned money to the mentioned recipient according to the given conditions. This can be used for fireign trade payment as well as for home parment Electronic payment methods This includes the modern techniques of settling payments using internet facilities. Examples : Credit cards This is the most frequent method used to make payments. Visa, master, American Express are some types of cards that can be obtained from the banks and are used as a payment method through the internet, Internet prepaid cards Internet pre-paid cards can be used on a temporary basis by depositing a sum of money to be used for a particular purpose. Internet prepaid facilities Payments are made through one’s own bank account and required directions are provided with internet banking. Most of the banks at present facilitate their accounts holders in this manner. Those who are in need of this service can get registered and access the relevant website using the user name and the password.. Payment through Electronic Payment entities : Without making direct payments to the institute from where particular product was purchased the relevant payment is made through a recognized payment making institute in this method. Example : www.paypal.com Before making payments in this manner it is necessary to register with the PayPal portal and provide with information about the bank account and credit cards. In this manner external parties do not have access to the credit card information. Competency 11 : Inquires the contribution of trade in distributing the product. Competency Level 11.6 : Inquires how the functions of international unions, trade agreements and organisations contribute to the uplift the foreign trade. No of periods : 08 15 Learning Outcomes -: Provides examples for trade unions, trade agreements and international organisations that contribute to foreign trade. Appreciates the contribution of trade societies (trade zones) to the upliftment of international trade. Analyses the impact of trade agreements and international organisations on foreign trade. Inquires about the trends in foreign trade. Instructions for lesson planning: Display the following flash cards one by one to the students. Increase in customs duties on imported vehicles. GSP+ concessions once again to Sri Lanka Price hikes in the world oil market. Low cost loans from IMF to Sri Lanka. Hold a discussion highlighting the following facts. o That increasing customs duties is a barrier to imports. o That the exports will be enhanced due to GSP+ Concessions. o That international organisations provide finance facilities for trade. o That events taking place in the world market affects the Sri Lankan market as well. Explain that there must be agreements with international organisations in order to overcome difficulties, to uplift international trade and to enhance co-operation among the other countries. Discuss the examples for such organisations agreements, and trade unions. Point out the impact of such societies (unions), organisations and agreements on foreign trade and discuss the new trends in foreign trade. A guideline to explain subject matters: A free trade zone in which few countries work together with co-operation in accordance to a treaty in connection with tariff, duties and trade is known as a trade block. Trade blocks are also known as free trade zones, trade associations and trade partnerships. Trade zones: Some examples for trade zones are as follows : o European union (EU) 16 o Association of South East Asian Nations (ASEAN) o Group of 8 (G8) European Union (EU) This consists of 26 European countries. The origin of this was the European Economic Community established on the treaty of Rome signed by 6 European countries in 1957. While its members maintain a common trade policy, agriculture and fisheries policy, zonal development policy, it also has introduced a common currency unit called Euro in 1999. EU member countries Austria Belgium Bulgaria Finland Cyprus Czech republic Denmark Estonia France Iceland Italy Lithuania Latvia Germany Luxembourg Malta Netherland Poland Greece Portugal Romania Slovakia Slovenia Hungary Spain Sweden Association of South East Asian Nations (ASEAN) This is a society of 10 South East Asian countries which was established for Political and Economic co – operation. ASEAN was proceeded by an organisation formed in 1961 called the Association of South East Asia (ASA), a group of countries consisting of Philippines, Malaysia and Thailand. These three countries joined with Indonesia and Singapore and ASEAN was established in 1967. The ASEAN member countries are Philippines Malaysia Thailand Indonesia Singapore Brunei Vietnam Laos Myanmar Cambodia Group of 8 (G8) This is an International organisation founded by 8 main stream countries in the world. The oil crisis in 1973 and the global economic recession were the reasons for the origin of this organisation in 1974. Amalgamated with United States of America (USA), West Germany, Japan and France unofficially with three other countries was the origin of this organisation.Once Russia joined the group in 1997 this was officially named as the Group of 8 (G8). G8 member countries are: United states of America United Kingdom France West Germany Italy Japan Canada Russia Trade agreements 17 An agreement created between two or more countries for the trade and exchange of goods during a specific period is known as a trade agreement. An agreement between two countries is known as a Bi – lateral agreement whereas an agreement between three or more countries is called as a multilateral agreement. Some examples of trade agreements are given below o North American Free Trade Agreement (NAFTA) o South Asian Free Trade Agreement (SAFTA ) o Asia Pacific Trade Agreement (APTA) North American Free Trade Agreement (NAFTA) This is an agreement in which of the USA, Canada and Mexico partnered and which was commenced on the 1st of January 1994. Conditions for the abolition of trade barriers among these three countries, removal of tariffs, Exchange of labour are included in this agreement. A specific characteristics of this agreement is that it will be limited to the goods manufactured within these countries only. When the goods manufactured outside these three countries are exchanged among them and tariffs are applicable. Goods will be free of tariff only when the terms such as Made in USA, Made in Canada, and Made in Mexico are stated. South Asian Free Trade Agreement (SAFTA) The agreement which was made with the intention of spreading trade co-operation within the SAARC zone, creating a free zone within South Asia and making economic policies of the SAARC zone countries on line with globalisation. This agreement was signed at the 12th SAARC summit held in Islamabad in 2004. With the different states entering into this agreement, they made a collective agreement to benefit through the removal of tariffs on all imports among the countries, ports and transport facilities, provision of services with regard to trading etc. Asia – Pacific Trade Agreement (APTA) This agreement commenced as the Bangkok agreement in 1975 and was named as the Asia – Pacific Trade Agreement (APTA) on the 2nd November 2005. The member countries of this agreement are Bangladesh, China, India, Laos, Mongolia, Sri Lanka and South Korea. This is the oldest and preferred trade agreement in the Asia Pacific region. The objective of this agreement is to expedite the economic development of the member countries through minimising tariff and barriers as far as possible to import goods and services rather than importing goods and services from other countries. International organisations : Organisations that have been established to minimize barriers of tariff, exchange control regulations, customs rules and regulations that impose restrictions on foreign trade are known as international organisations. 18 Some examples for such organisations are given below: o World Trade Organisation (WTO) o South Asian Association for Regional Co-operation (SAARC) o Asian Development Bank (ADB) o International Bank of Reconstruction and development (IBRD ) o International Monetary Fund (IMF) World Trade Organisation (WTO) This is an international organisation established to ease and monitor the international trade. Having commenced on the 1st January 1995, this organisation operates globally in connection with the trade rules and regulations among nations. The head office of the WTO is located at Geneva in Switzerland. The main purpose of the WTO is to facilitate discussions among member states for trade promotion, to look down on trade barriers, and to raise the welfare of the people in the member counties. South Asian Association for Reginal Co-operation (SAARC) This is an economic and political association of eight South Asian countries. It was established on December 8th 1985. The co-operative activities within SAARC is performed across five areas. o Agriculture and rural development. o Tele communication, Science technology and climatology. o Health and population affairs o Transport o Human resource development. SAARC member countries Sri Lanka India Pakistan Bangladesh Nepal Maldives Bhutan Afghanistan Asian Development Bank (ADB) The Asian development Bank commenced its operations on 19th December 1966. The Head office is situated at Manila in Philippines. Out of 67 member countries at present, 48 are from the Asian region while the rest 19 from the pacific region. Its main objective is to promote economic and social development of the member countries. This bank takes steps to provide loans and grants to its member countries for implementing poverty eliminating projects. International Bank for Reconstruction and Development (IBRD/ World Bank) The IBRD was commenced on the 27th of December 1945 with the Bretton Woods agreement to re-build the European economy that was destroyed in the 2nd world war. This bank is known as the bank which provides loan facilities for the development projects implemented in developing countries with the purpose of eliminating poverty. 19 The establishment of sustainable development and elimination of poverty are the main objectives of the World Bank, It has been established with the objectives of improving global finance co-operation, ascertaining financial stability, facilitating for the international trade, widening employment opportunities, providing for sustainable economic development and reducing poverty. International Monetary Fund (IMF) The IMF can be introduced as the international organisation that provides financial and technical assistance as well as observes the balance of payment and exchange ratios. Its head office is situated at Washington in USA. It has been established with the objectives of improving global finance co- operation, ascertaining financial stability, facilitating for the international trade, widening employment opportunities, sustainable economic development and reducing poverty. Trade associations, trade agreements and international organisations have numerous impacts on foreign trade. Examples: o Removal of tariff and non-tariff barriers that affect free trade. o Promotion of co- operation among countries. o Gaining stable market for the country’s own products through trade agreements. o Minimise disadvantages of price changes since a stable price is gained. o Ensuring all member countries gaining equal rights. o Promotion of global financial co-operation and confirmation of financial stability. o Expansion of employment opportunities, sustainable development and reduction of poverty etc... Some of the trends in foreign trade are as follows : o Spread of foreign trade all over the world through E-commerce. o Establishment of new trade zones and trade partnerships to accelerate the economic development and to face the economic challenges/ crisis effectively. o To channel a country’s resources towards a diversification of production followed by an advanced technology instead of being restricted to traditional exports. o Leaning towards foreign trade policies to encourage higher value added products. o Attention being placed currently towards the Sri Lankan export packages. Assessment and Evaluation Divide the students into suitable groups and engage them in the following activity. 20 Given below are 3 groups consisting of international trade association, trade agreement and organisations. A Association - EU ASEAN G8 B Agreements – NAFTA SAFTA APTA C Organisations WTO IBRD IMF Concentrate on the group that you have received. Through discussion gather the following information about the association, agreements, organisations included in the group o The full name o Its establishment o Member countries o Objectives and functions briefly. o Impact on the upliftment of foreign trade. Prepare a booklet creatively with the information that you have gathered. Lead the students to exchange their findings among the group and to study the information contained therein Competency 11 : Inquires the contribution of trade in distributing the product. Competency Level 11.7 : Points out how electronic commerce (e-commerce) contributes for the upliftment of trade. No. of periods -: 06 Learning Outcomes -: Introduces electronic business and electronic commerce. Defines “electronic commerce”. Describes the procedure of electronic trade. Lists the advantages and disadvantages of electronic trade. Describes separately how electronic trade takes place. Instructions for lesson planning -: 21  If a particular jewellery item in the latest style is required to be bought, ask from the students about optional ways through which, it can be purchased and write them on the black/white board. Such as buying from a jewellery shop, jewellery exhibition on a foreign tour or through an internet ordering.) Conduct a discussion highlighting the following facts. o Based on students’ responses point out that there are various ways available, through which goods or services can be purchased or sold. o That the entire set of affairs related to purchase or sale of goods and services is known as trade and once such transaction takes place through the internet, it is known as electronic trade/(e-trade) o If the internet is used for supportive services such as communication, transportation, warehousing etc. as well as for trade affairs, that is known as e-commerce. o If all the business affairs such as marketing, delivery, financial affairs, and administration affairs etc. are committed using internet, those businesses are known as e-businesses. Group the students appropriately and introduce them to the following activity: Given below are four types of products and the countries where they are produced. Product Country of production A laptop computer Japan A pair of Sports shoes Singapore A set of jewellery Malaysia A handbag France Concentrate on the product that your group has received. Imagine that the product your group has received should be imported from the relevant country. Collect the necessary information to complete the transaction through a group discussion and record them under the following topics. o How a supplier is found o How the purchase transaction should be organized o How the affairs related to purchasing and selling are expected to occur. o How the settlement of payment for the transaction would take place. If the transaction was made electronically, list the benefits that you would receive. Present your findings creatively to the entire class. Taking the findings of the students into consideration, describe the procedure of electronic trade. Discuss the advantages and disadvantages of electronic trade with the students. Explain to the students the various types of e-trade affairs with instances. A guideline to explain subject matter Where a business uses computer networks for all the internal procedures such as production, marketing, accounting, human resource management affairs etc. 22  besides trade affairs they are known as electronic businesses. Information technology is used in an electronic business for the activities exchanging of information and for feedback. Electronic commerce is only one part of the electronic businesses. E commerce is the support services like transportatuon, communication, banking take place through electronic networks. Electronic businesses and electronic commerce can be depict diagrammatically as follows. Electronic business Electronic business Production Suppliers → Purchase section Financial Marketing → Consumers Human resources Conducting of buying and selling of goods and services through computerized information systems followed by internet is known as electronic trade. The procedure of electronic trade can be stated as follows: o Meeting of buyers and sellers through the internet. o Organizing of the trade transaction. o Conducting of buying and selling affairs. o Settling the payment relevant to the transaction. The advantage of electronic trade gained by the businessman, customer and the society can be stated as follows: The advantages to the businessman ▪ Since more efficient and effective service can be rendered the profits and goodwill being enhanced. ▪ The availability of cost benefits Examples : Cost related to stock being minimized Minimizing cost of stationery and communication Minimizing the cost as a result of less intermediaries ▪ The market being expanded as there are no geographical boundaries Advantages to the customer o Availability of a broader range for selection of goods. o Ability to place the order quickly and easily o Ability to make transactions throughout the 24 hours o The price level of the production relatively being reduced 23  Social benefits gained o Upliftment of living conditions of the consumers o Opportunity for consuming modern products o Approach to new markets and employment opportunities Few limitations of electronic commerce are as follows o Internet facilities not being available everywhere o Lack of knowledge in consumers about the use of internet o Problems arising in payment systems o Legal restrictions like payment of taxes o Lack of trust electronic systems o Malpractices through computerised networks The methods in which electronic trade takes place can be stated as follows: o B2B – Business to business These are transactions from one business to another Example : Recieving orders from one business to another through the internet. o B2C – Business to Customer A business selling some product or service to the customer through the internet. This is also known as electronic retailing E-retailing. o C2C – Customer to customer A customer selling goods or services to another customer through the internet. Example : Transactions that take place through e-bay. o G2C – Government to citizen Payment for government services and obtaining such services through internet. Examples : Ability of citizens in the Western Province to renew their motor vehicle licenses with the access of www.motortraffic.wp.gov.lk o B2G – Business to Government Business making various payments to government through the internet and providing with services. Example : Payment with the contribution for Employees Provident Fund. o G2B – Government to Business Example : SLIPS _ Sri Lanka Inter-banking paying system o C2G – Citizen to Government Examples : Payment of bills, exam fees, and license fees etc. Application for University entrance 24