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International Economics
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International
Trade: Encyclopedia of Business
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International
Trade |
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The world has a long, rich history of
international trade among nations that
can be traced back to early Assyrian,
Babylonian, Egyptian, and Phoenician
civilizations. These and other early
civilizations recognized that trade
can be tied directly to an improved
quality of life for the citizens of
all the partners. Today, the practice
of trade among nations is growing by
leaps and bounds. There is hardly a
person on earth who has not been influenced
in some way by the growing trade among
nations.
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Source and
Copy Right Information:
Encyclopedia
of Business information about international
trade. Encyclopedia of
Business and Finance. Copyright
© 2001 by
The Gale Group, Inc. All rights
reserved.
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from
Encyclopedia of Business
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International
Trade: Wikipedia
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International
Trade |
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International trade is the exchange
of goods and services across international
boundaries or territories. In most countries,
it represents a significant share of
GDP. While international trade has
been present throughout much of history
(see
Silk Road,
Amber Road), its economic, social,
and political importance has been on
the rise in recent centuries.
Industrialization, advanced
transportation,
globalization,
multinational corporations, and
outsourcing are all having a major
impact. Increasing international trade
is the usually primary meaning of "globalization".
International trade is also a branch
of
economics, which, together with
international finance, forms the
larger branch of
international economics.
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Source and
Copy Right Information:
Wikipedia
information about international trade.
This article is licensed
under the
GNU Free Documentation License.
It uses material from the
Wikipedia article "International trade".
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Wikipedia
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International
Trade Theories
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Several different models have been proposed
to predict patterns of trade and to
analyze the effects of trade policies
such as tariffs.
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Ricardian model |
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The
Ricardian model focuses on
comparative advantage and is perhaps
the most important concept in international
trade
theory. In a Ricardian model, countries
specialize in producing what they produce
best. Unlike other models, the Ricardian
framework predicts that countries will
fully specialize instead of producing
a broad array of goods. Also, the Ricardian
model does not directly consider factor
endowments, such as the relative amounts
of labor and capital within a country.
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Hecksher-Ohlin
model |
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The
Heckscher-Ohlin model was produced
as an alternative to the Ricardian model
of basic comparative advantage. Despite
its greater complexity it did not prove
much more accurate in its predictions.
However from a theoretical point of
view it did provide an elegant solution
by incorporating the neoclassical price
mechanism into international trade theory.
The theory argues that the pattern of
international trade is determined by
differences in
factor
endowments. It predicts that countries
will
export those
goods that make intensive use of
locally abundant factors and will
import
goods that make intensive use of factors
that are locally scarce. Empirical problems
with the H-O model, known as the
Leontef paradox,
were exposed in empirical tests by
Vasylj Leontef,
Ukrainian who found that the
United States tended to export labor
intensive goods despite having a capital
abundance.
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Specific Factors
model |
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In this model, labour mobility between
industries is possible while capital
is immobile between industries in the
short-run. The specific factors name
refers to the given that in the short-run
specific factors of production, such
as physical capital, are not easily
transferable between industries. The
theory suggests that if there is an
increase in the price of a good, the
owners of the factor of production specific
to that good will profit in real terms.
Additionally, owners of opposing specific
factors of production (i.e. labour and
capital) are likely to have opposing
agendas when lobbying for controls over
immigration of labour. Conversely, both
owners of capital and labour profit
in real terms from an increase in the
capital endowment. This model is ideal
for particular industries. This model
is ideal for understanding income distribution
but awkward for discussing the pattern
of trade.
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Gravity
model |
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The
Gravity model of trade presents
a more empirical analysis of trading
patterns rather than the more theoretical
models discussed above. The gravity
model, in its basic form, predicts trade
based on the distance between countries
and the interaction of the countries'
economic sizes. The model mimics the
Newtonian
law of gravity which also considers
distance and physical size between two
objects. The model has been proven to
be empirically strong through
econometric analysis. Other factors
such as income level, diplomatic relationships
between countries, and trade policies
are also included in expanded versions
of the model.
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Source and
Copy Right Information:
Wikipedia
information about international trade.
This article is licensed
under the
GNU Free Documentation License.
It uses material from the
Wikipedia article "International trade".
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from
Wikipedia.
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Regulation of
International Trade
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Regulations
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Traditionally trade was regulated through
bilateral treaties between two nations.
For centuries under the belief in
Mercantilism most nations had high
tariffs and many restrictions on
international trade. In the 19th century,
especially in
Britain, a belief in
free trade became paramount and
this view has dominated thinking among
western nations for most of the time
since then. In the years since the
Second World War
multilateral treaties like the
GATT and
World Trade Organization have attempted
to create a globally regulated trade
structure.
Free trade is usually most strongly
supported by the most economically powerful
nations in the world, though they often
engage in selective
protectionism for those industries
which are politically important domestically,
such as the protective
tariffs applied to
agriculture and
textiles by the
United States and
Europe. The
Netherlands and the
United Kingdom were both strong
advocates of free trade when they were
economically dominant, today the
United States, the
United Kingdom,
Australia and
Japan are its greatest proponents.
However, many other countries (such
as India, China and Russia) are increasingly
becoming advocates of free trade as
they become more economically powerful
themselves. As tariff levels fall there
is also an increasing willingness to
negotiate non tariff measures, including
foreign direct investment, procurement
and
trade facilitation. The latter looks
at the
transaction cost associated with
meeting trade and
customs procedures.
Traditionally agricultural interests
are usually in favour of free trade
while manufacturing sectors often support
protectionism. This has changed somewhat
in recent years, however. In fact, agricultural
lobbies, particularly in the United
States, Europe and Japan, are chiefly
responsible for particular rules in
the major international trade treaties
which allow for more protectionist measures
in agriculture than for most other goods
and services.
During
recessions there is often strong
domestic pressure to increase tariffs
to protect domestic industries. This
occurred around the world during the
Great Depression leading to a collapse
in world trade that many believe seriously
deepened the depression.
The regulation of international trade
is done through the World Trade Organization
at the global level, and through several
other regional arrangements such as
MERCOSUR in South America, NAFTA between
the United States, Canada and Mexico,
and the European Union between 25 independent
states. The 2005 Buenos Aires talks
on the planned establishment of the
Free Trade Area of the Americas (FTAA)
failed largely due to opposition from
the populations of Latin American nations.
Similar agreements such as the
MAI (Multilateral
Agreement on Investment) have also
failed in recent years.
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Source and
Copy Right Information:
Wikipedia
information about international trade.
This article is licensed
under the
GNU Free Documentation License.
It uses material from the
Wikipedia article "International trade".
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from
Wikipedia.
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Risks
in International Trade
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The risks that exist in international
trade can be divided into two major
groups:
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Economic Risks |
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Risk of insolvency of the buyer,
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Risk of protracted default - the
failure of the buyer to pay the
amount due within six months after
the due date
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Risk of non-acceptance
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Surrendering economic sovereignty
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Political Risks
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Risk of cancellation or non-renewal
of export or import licences
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War risks
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Risk of expropriation or confiscation
of the importer's company
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Risk of the imposition of an import
ban after the shipment of the goods
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Transfer risk - imposition of exchange
controls by the importer's country
or foreign
currency shortages
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Surrendering
political sovereignty
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Source and
Copy Right Information:
Wikipedia
information about international trade.
This article is licensed
under the
GNU Free Documentation License.
It uses material from the
Wikipedia article "International trade".
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from
Wikipedia.
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