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International Trade:

Paul Martin

Summary of the course


History and main economic theories and
situations.
Export and international trade techniques
Legal and cultural differences
Students projects presentations

Students presentations

Make your group


Choose a project related to international trade
Be ready for the defined date
Prepare a 15 to 20minutes presentation
About 20 slides
Search everywhere and give your sources
Include progressively subjects seen in class
Do not read during the presentation

International economy

1.

2.
3.
4.

5.
6.

Keep informed of economic evolution in the


world:
Globalization origins and key factors.
Main economic theories
Countries economic development strategies.
What is WTO
Analysis of the main causes of economic crisis.
Analysis of recent economic measures and
their consequences.

International trade
Build your business plan:
7. Incoterms.
8. Payments and financing exports techniques.
9. Factoring and securitization.
10. Logistic choices and inventory financing.
11. Quality certification.
12. Environment: a worldwide and economical
issue.
13. Company global responsibility.

Legal and cultural differences


From a business plan to a commercial success:
14. The origins of international trade laws.
15. The main international trade legal issues.
16. International distribution choices.
17. Parallel market
18. Intercultural marketing.
19. Intercultural management.
20. Intercultural negotiation.

The final touch:


What makes a good presentation:
Your plan.
Your illustrations.
Your key messages.
Also prepare your speech: who is speaking, how
do you organize your timing, which question
should be prepared

Globalization

Many questions on this point:


What does globalization mean?
What is the starting point of
globalization?
Which are it's main criteria?

Definition of globalization

Globalization is the increase of mobility of goods,


services, work, technology and capitals around the
world.
It is a process of increase of connections and
interdependance of the markets.
Its main reasons come from technological progress
(transport and communication) and from a
reduction of customs tarifs and barriers.

Key definitions to understand


economic laws:
Households: consumption and saving.
Companies and banks: commercial and
payments balances.
Public organisms: budget.
Main problem: help economic growth
without inflation.

Globalization history
A dominant system: capitalism
Specialization internationalization
globalization: evolution of capitalism.
First step: Europ economy is widened by
main geographical discoveries during the
XVth century.

Starting point: transatlantic trade


Influence of UK and liberal economic
theories
Main explanations to Europ economic
expansion:
According to economists: extension of
national economic growths (natural trend
to exchange, specialization).

For sociologists, the main explanation

comes from the geographical location


of resources and the complementarity
between nations.
Europ domination is not due to a technical
advance (Zheng He), neither to the strength
of businessmen but mainly to hereditary
transmission of land and cities development.

Domination will change from:


XVI th century: southern cities: Spain,

Portugal, Italy.
XVII th and XVIII th centuries: northern
countries (connection between local
market and long distance trade,
mercantilism)
XIX th century: classical liberal theory,
UK.
XX th century : USA.

The european economic model is a


hierarchical space.
Periphery is subjugated: Central and
Southern America, Africa, Asia.
Free trade is promoted by the world's
leading economic power.

Extension of European economic model is

related to production factors mobility:


Work: European emigration = 33 million
people between 1880 and 1915: one third
of Irish , 6% in Norway etc.
Capital: 20% of French Gross Domestic
Product is invested abroad ( Russian
public loans!)

After world war II , a Worlwide economy:


International trade negotiations:
Havana 1946
GATT (1947): transitory agreement
1950, GATT becomes an international

organisation.
Main principles:
No discrimination between countries.

8 negociation cycles :
No discrimination between local and

imported products.
Reciprocity

1995 World Trade Organisation has a

widened ground of action :


Improve free trade for goods and
services.
Reinforce international regulations
Protect trade stability
Improve conflicts resolution system.

Main principles:
Unique commitment

Differenciated treatment for

underdevelopped countries.
Promote sustainable development.
Open negociations
Permanent forum.

The concept of globalization appears in the

1960's:
McLuhan global village
Levitt global firm
Ohmae triade

The worldwide market:


XX th century : End of european
domination.
Globalization = Bretton Woods overruled
(Nixon 1961).
From a fordist to a flexible system of
accumulation.

Trade figures :

International exchanges growth is way over


production growth:
3.5% production growth and 8% exports
growths.
25% of worldwide production is currently
exchanged (8% in the 50's)

Exchanged products are more diversified :


Raw materials share is decreasing:
60% of international trade before

world war 2.
20% after 1945 which increases
underdevelopped countries debt.
Industrial goods and services share is
rising.
Services count for 63% of worldwide
GDP in 2011 against 2,1% in 1970.

Exchanges are concentrated in the triangle :

USA, Europe, Southern Asia (Keniche


Ohma) :
50% of manufactured goods exchanges
are made inside the three regions.
30% between them.
13% between them and the rest of the
world.
Major importance of multinational firms:
exchanges are mainly done inside
multinational firms.

Importance of southern Asia : Japan and more


recently China .
Importance of regional networks.(UE, ALENA,
ASEAN, MERCOSUR...)

Two main reasons for globalization:

1-International specialization based on

complementarity (Smith, Ricardo)


2-Competition:get market shares through
productivity advantage, with state intervention in
education, research...

Direct Investments Abroad:


DIA: are productive and not speculative
investments.
Objective: creation, participation and
development of a company outside the
origine country.
During Les 30 glorieuses (J. Fourasti)
DIA do not increase as quickly as
international trade.

From the 80's DIA do increase quicker than

international trade because:


In the 70's recession reduces
international trade.
Financial markets extending fast.
European and Japanese companies
becoming multinational.
Regional integrations (UE; ALENA,
ASEAN, MERCOSUR etc.)
Fusions and acquisitions of companys
increase in all sectors.

End of USSR and multiple privatizations.


Development of Southern Asia.

In 2000, DIA count for 20% of the World

GDP instead of 6,1% in 1980.


Production today is managed on a
worldwide scale.For underdevelopped
countries, choice made between: import
substitution, export substitution, heavy
industry.

70% to 80% of DIA are made between

countries of the dominant triangle.


Reduction of japanese share.
Europe, is first worldwide investor.
Underdevelopped countries play a minor
role:
Receiving only 20% of DIA
First reason: reduction in value of
agricultural and raw materials exchanges.

End of decolonization
Multiple debt and financial crisis.
Repartition of DIA towards Southern

countries:
54% are going to China.
0,1% are going to sub-saharian Africa.
DIA's are diffusing technologies, working
rules and social systems, cultural values...
Is it the end of cultural differences?

The share of services is more important

because they are produced and consumed at


the same time, often requiring a local
company implementation.
Reasons for local implementation:
Easier access to a market.
No exchange risk.
Cost of labour can be competitive.

Multinational companies:
Their value creation can be as important as

a country GDP.
Out of first 100 entities: 71 are states and 29
Private Companies.
Out of 100 entities to protect a patent, 97
are private companies.
Their political and lobbying influence is
rising.

Companies are looking for competitivity

through:
Use of subcontractors.
Reduction of fixed wages.
Flexibility of work: part time,
temporary...
Inventory control.
Flexibility is the answer to market segments
with high level of demand fluctuation.
End of market regulations.

At the same time huge cities are becoming

the real leaders of world economy:


They concentrate all kind of
competencies
They also are huge markets.
Capital market is available
Communication is easy.

Three worlwide leaders are: New York,

London and Tokyo


Fourty other main cities follow.
Cities = dots in the new economic network:
Archipel Mgalopolitain Mondial

Conclusion
Interdependant networks are replacing
countries.
International trade is dematerializing:
services, intellectual property and patents,
technological flow, virtual exchanges etc.
Economy is switching from property to
access.
Political and economic borders are different.