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By: Meinrad C. Bautista

To know about International

To understand the effect of

Economic, Political-legal, and Cultural
OBJECTIVES Environment in a company’s
international marketing decisions

To be aware of the advantages

and disadvantages of
International Trade
International trade is the exchange of capital,
goods, and services
across international borders or territories. In
most countries, such trade represents a
significant share of gross domestic product
International Trade refers to the exchange of
products and services from one country to WHAT IS
another. In other words, imports and exports. INTERNATIONAL
International trade consists of goods and TRADE?
services moving in two directions: 1. Imports –
flowing into a country from abroad. 2. Exports –
flowing out of a country and sold overseas.
Visible trade refers to the buying and selling of
goods – solid, tangible things – between
countries. Invisible trade, on the other hand,
refers to services.
Most economists globally agree that
international trade helps boost nations’
When a person or company purchases
a cheaper product or service from
another country, living standards in WHAT IS
both nations rise. INTERNATIONAL
There are several reasons why we buy TRADE?
things from foreign suppliers. Perhaps,
the imported options are cheaper.
Their quality may also be better, as well
as their availability.
With international trade, there is greater competition and more
competitive pricing in the market. This means that consumers have
more choice and more affordable options. The economy of the world
– which is driven by supply and demand – also benefits.

Imagine one world in which every single country traded

internationally. Now imagine another world where international trade
did not exist. In which world would consumers be better off? Also, in WHAT IS
which world would the countries be richer.
In the world with international trade, both the consumers and the
countries would be better off.
Not every single entity, however, gains from international trade.
Let’s suppose there are two countries – Country A and
Country B. What happens if it costs more for Country A
producers to make something than for Country B producers?
Specifically, what happens if the two countries trade?

Producers in Country A will subsequently lose out because

consumers will buy the Country B option. They choose that
option because it is cheaper. TRADE WINNER
However, the consumer gains more than the domestic
producer loses, economists say.
Nations trade internationally when there are not the
resources or capacity to satisfy domestic needs and wants
By developing and exploiting their domestic resources,
countries can produce a surplus. They may use this surplus to
buy goods they need from abroad, i.e., through international
International trade has existed for more than 9,000 years. Long
distance trade – before the existence of nation states and WHY DOES
national borders – goes back much further. In fact, it goes back INTERNATIONAL
to when pack animals and ships first came onto the scene. TRADE EXIST?
Our modern industrialized world would not exist if countries
did not import and export. Put simply; international trade is at
the heart of today’s global economy. Global interdependence is
a fact of life for every country today.
We import goods and services for several reasons. Below are
some reasons:
1. Price: a foreign company can produce something more
2. Quality: may be superior abroad. For example, Scotch whisky
from Scotland, in most people’s opinion, is superior to any local
alternative. That is why Scotland exports about 37 bottles of
Scotch every second.
3. Availability: it might not be possible to produce the item
locally. Therefore, the only way consumers can buy it is by
importing it. TRADE EXIST?
A raw material, such as oil, iron, bauxite, gold, etc. might not
exist at home. Japan, for example, has no domestic reserves of
oil. However, it is the fourth largest consumer of oil in the
world. Japan imports virtually all its oil.
4. Demand: might be greater than local supply. To satisfy the
difference, it is necessary to import.
Comparative Advantage: trade encourages a nation to specialize in
producing or supplying only those goods and services which it can
deliver more effectively and at the best price, after taking into
account opportunity cost.
1. Economies of Scale: if you sell your goods globally, you will have
to produce more than if you sold just domestically. Producing in
higher volumes provides greater economies of scale. In other
words, the cost of producing each item is lower.

2. Competition: international trade boosts competition. This, in

turn, is good for prices and quality. If suppliers have to compete ADVANTAGES OF
more, they will work harder to sell at the lowest price and best INTERNATIONAL
quality possible. Consumers benefit by having more choice, more
money left over, and top-quality goods. TRADE
3.Transfer of Technology: increases thanks to international trade.
Transfer of technology goes from the originator to a secondary
user. In fact, that secondary user is often a developing nation.

4. Jobs: great trading nations such as Japan, Germany, the UK, the
USA, and South Korea have one thing in common. They have much
lower levels of unemployment than protectionist countries.
• 1. Over-Specialization: employees might lose their jobs in
large numbers if global demand for a product declines.
• 2. New Companies: find it much harder to grow if they
have to compete against giant foreign firms.
• 3. National Security: if a country is totally dependent on
imports for strategic industries, it is at risk of being held to
ransom by the exporter(s). Strategic industries include food,
energy and military equipment. DISADVANTAGES
Blocking trade in the hope of giving domestic infant companies
a chance to grow hurts the national economy. Specifically, it
harms the country’s economy’s long-term prospects.
When governments adopt a protectionist policy, other nations
retaliate. Subsequently, there are tit-for-tat responses and
sometimes even trade wars. Eventually, unemployment rises,
and the creating of wealth declines.
Since the turn of the century,Venezuela has pursued a policy of
nationalization and protectionism. Protectionism refers to
taking measures to reduce imports. BLOCKING
Venezuela has the world’s largest oil reserves. However, its TRADE HARMS
economy has been shrinking for years. There are alarming THE ECONOMY
shortages of basic items, and electric power is frequently cut
across vast regions. In fact, there are now signs of serious
social unrest.
In every single case, the world’s greatest trading nations are
also by far the richest. Germany, the Netherlands, Singapore,
Japan and Hong Kong are considerably wealthier than, for
example Cuba, North Korea, Zimbabwe, and Venezuela.
Although international trade exists across
the world, imports and exports are
regulated by quotas and mandates from each
country’s customs authority. The importing
nation may impose a tariff – a tax – on
certain products.
This involves promoting products or
services in multiple countries and/or across
international borders.

• In the last two decades, the economy of the Philippines, which was
previously relatively closed, has opened up, partly due to
its membership in ASEAN (the Association of Southeast Asian
Nations). Trade represents almost 70.7% of the country's GDP
(WTO, 2017). Its main export partners are Japan (15.8% of total
exports), the U.S. (14.1%), Hong Kong (13.1%) and China (11.7%).
• The main export commodities are electronic and electrical
equipment (44.8% of total exports), nuclear reactors and boilers
(14.8%), technical and medical apparatus (4.1%), copper (3.2%) and
ships (2.7%). Its three main import partners are China, the EU and OF THE
the U.S. The main import commodities are electronics and PHILIPPINES :
electrical equipment (12.5%), petrochemicals ( 9%), motors and
other vehicles (6 %) and machinery (3.1%). INTERNATIONAL
• Traditionally, the country's trade balance has been in deficit due to TRADE
high imports of raw materials and intermediate goods. The trade
deficit in 2016 doubled to USD 26.7 billion from USD 12.24 billion
in the previous year, and in 2017 the country recorded its largest
trade deficit to USD 29.8 billion. According to leading economists,
the deficit is expected to rise continuously in the following years
due to a slowing down of the rise of exports and to the need for
imports of infrastructure-related goods as the government pushed
ahead its ambitious Development Plan 2017-2022.
Primary exports include semiconductors and electronic
products, transport equipment, garments, copper
products, petroleum products, coconut oil, and fruits.
Major trading partners include Japan, China, the United
States, Singapore, South Korea, the Netherlands, Hong
Kong, Germany, Taiwan, and Thailand. The Philippines has
MAJOR IMPORT been named as one of the Tiger Cub Economies
AND EXPORTS OF together with Indonesia, and Thailand. It is currently
one of Asia's fastest growing economies. However,
major problems remain, mainly having to do with
alleviating the wide income and growth disparities
between the country's different regions and
socioeconomic classes, reducing corruption, and
investing in the infrastructure necessary to ensure
future growth.
The economy of the Philippines is the world's 34th largest economy
by nominal GDP according to the 2017 estimate of the International
Monetary Fund's statistics, it is the 13th largest economy in Asia, and
the 3rd largest economy in the ASEAN after Indonesia and Thailand.
The Philippines is one of the emerging markets and is the sixth richest
in Southeast Asia by GDP per capita values, after the regional
countries of Singapore, Brunei, Malaysia, Thailand and Indonesia.
The Philippines is primarily considered a newly industrialized country,
which has an economy transitioning from one based on agriculture to
PHILIPPINE one based more on services and manufacturing. As of 2017, GDP by
Purchasing power parity was estimated to be at $1.980 trillion.
The Philippine economy is projected to be the 5th largest in Asia and
16th biggest in the world by 2050. According to the
PricewaterhouseCoopers, it estimates that it will be the 12th to 14th
richest economy in the world by 2060. While this opposes other
reports from HSBC Holdings PLC, that by the year 2050, the
Philippines will have been stated to surpass the economy of Indonesia
due to its yearly higher GDP growth rate of 6.5% (Second, after
China). However, the economic statistics may still vary depending on
the performance of the government every year.