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INTERNATIONAL TRADE

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Yuriy Kozak, Teimuraz Shengelia

Tbilisi
Publishing House „ Universal“
2016
ISBN 978-9941-22-391-4

International trade. Yuriy Kozak, Teimuraz Shengelia – Tbilisi :

In this training manual the essence and the role of international trade in
economic development, the basic theories of international trade exchange, the
trade policy, the organizational and financial aspects of international trade, the
normative legal regulation and the practice of the conclusion of international
trade agreements are examined.
For students and academics.

© Yuriy Kozak, Teimuraz Shengelia 2016

Preface 8
Part I. International trade: economic essence and development
theories…………………………………………………………………………. 9
Chapter 1. General characteristics of international trade………………….. 9
1.1. The notion of international trade, structure and specific features…….. 9
1.1.1. Geographical and commodity structure of international trade……….. 11
1.1.2. The main types of markets and products……………………………… 14
1.1.3. Specific features of international trade………………………………... 18
1.2. Main stages of international trade development………………………. 21
1.3. The system of indicators of monitoring the impact of international
trade…………………………………………………………………… 25
1.4. Expediency of international trade exchange………………………… 36
1.4.1. The gain from international trade at the country and consumers levels. 36
1.4.2. Benefits of export and import activities for domestic firms………….. 38
Chapter 2. International trade and economic development….…………….. 40
2.1. Determinants of promotion of economic development and
international trade…………………………………………………..…. 40
2.2. Role of international trade in economic growth………………………. 44
2.2.1. Types of economic growth……………………………………………. 44
2.2.2. Competitive export as a component of the dynamization of growth…. 47
Chapter 3. International trade theories……………………………..…......... 50
3.1. Classical international trade theories………………………………….. 50
3.1.1. Mercantilism theory…………………………………………………… 50
3.1.2. Absolute advantage theory……………………………………………. 51
3.1.3. Comparative advantage theory………………………………………... 52
3.1.4. Factor proportions theory and its testing by W. Leontief…………….. 54
3.2. Standard model of international trade………………………………… 56
3.3. Alternative concepts of international trade……………………………. 57
3.3.1. The technology gap theory……………………………………………. 58
3.3.2. Product life cycle theory………………………………………………. 58
3.3.3. Representative demand theory………………………………………... 59
3.3.4. Economies of scale theory……………………………………………. 59
3.3.5. Intra-industry trade theory…………………………………………….. 60
Part II. Trade policy……………………….………………………………….. 62
Chapter 4. National level of international trade regulation ……………..… 62
4.1. The main types of trade policy……………….……………………….. 62
4.2. Tariff methods of international trade regulation……………………… 66
4.2.1. Types of duties………………………………………………………... 66
4.2.2. The economic implications of the imposition of duties……………..... 71
4.2.3. Optimal tariff………………………………………………………….. 73
4.3. Nontariff methods of international trade regulation…………………... 75
4.3.1. Quantitative restrictions.......................................................................... 75
4.3.2. The hidden trade restrictions ……………………………………...….. 78
4.3.3. Financial methods of trade policy…………………………………….. 79
4.4. Trade discrimination…………………………………………………... 82
4.4.1. Trade blocks…………………………………………………………... 83
4.4.2. Trade embargo………………………………………………………… 84
4.4.3. Trade wars…………………………………………………………….. 85
Chapter 5. Supranational level of international trade regulation. The
international organizations for the international trade regulation ………... 87
5.1. International trade regulation in the WTO system……………………. 87
5.1.1. Goals, objectives, principles of the WTO…………………………….. 87
5.1.2. Regulation of international trade in goods……………………………. 91
5.1.3. Regulation of international trade in services………………………….. 92
5.1.4. Regulation of international trade in intellectual property products…... 93
5.2. The regulation of international trade in the UN system………………. 95
5.2.1. Facilitation of international trade development by UNCTAD………... 95
5.2.2. Specificity of ITC activity in the sphere of international trade……….. 97
5.2.3. Activity directions of UNCITRAL in the field of international trade
law…………………………………………………………………….. 100
Part III. The European Union’s trade policy. .…………………….….......... 103
Chapter 6. The common EU's trade policy as a basis of the European
integration …………………………………………………………………….. 103
6.1. The formation and organization of the common trade policy………… 103
6.2. The features of the common EU's trade policy……………………….. 107
Chapter 7. The main instruments of the EU's trade policy ……………….. 111
7.1. Instruments of tariff regulation in the EU…………………………….. 111
7.2. The use of quantitative restrictions in the EU's foreign trade………... 114
7.3. The system of protective measures in the EU's trade policy….………. 116
7.4. Financial methods of the EU's trade policy…………………………… 118
Part IV. Organizational aspects of international trade……………………... 123
Chapter 8. Forms of international trade: essence and features……….…… 123
8.1. Forms of international trade in accordance with the subject of trade…. 123
8.1.1. International trade classifications……………………………………... 124
8.1.2. The international trade in manufactured goods, machinery and
equipment……………………………………………………………... 128
8.1.3. The international trade in raw commodities…………………………... 132
8.1.4. World prices for manufactured and raw commodities………………... 138
8.1.5. International trade in services…………………………………………. 141
8.1.6. International trade in intellectual property products………………….. 152
8.2. The forms of international trade on the type and organization of the
relationship between the partners……………………………………... 161
8.2.1. International countertrade……………………………………………... 161
8.2.2. E-commerce………………………………………………………….... 164
8.2.3. International leasing…………………………………………………... 166
8.2.4. International industrial cooperation………………………………….... 167
Chapter 9. Methods of export and import operations …………………..….. 170
9.1. Trade on the basis of direct links between contractors (direct method). 170
9.1.1. Essence of direct method……………………………………………… 170
9.1.2. Features of intra-firm trade……………………………………………. 171
9.2. Trade through the mediatory link (indirect method)………………….. 173
9.2.1. Essence of indirect method……………………………………………. 173
9.2.2. Trading-intermediary operations……………………………………… 175
9.2.3. Trading-intermediary firms…………………………………………… 184
Chapter 10. Organized international commodity markets……..…………... 189
10.1. International commodity exchanges…………………………………... 189
10.1.1. Essence of international exchange trade………………………………. 189
10.1.2. Types and procedure of exchange business transactions……………... 193
10.2. International commodity auctions…………………………………….. 197
10.3. International biddings…………………………………………………. 201
10.4. International fairs and exhibitions…………………………………….. 204
Part V. International trade agreements…………………………………........ 208
Chapter 11. Legal regulation of international trade agreements…………... 208
11.1. Essence of international trade agreements……………………………. 208
11.2. Regulation's unification of the conclusion of the international trade
agreements…………………………………………………………….. 211
11.3. International trade terms (INCOTERMS -2010)……………………… 216
Chapter 12. International purchase and sale contracts………………….… 222
12.1. Types and content of international purchase and sale contracts………. 222
12.1.1 Characteristic of international purchase and sale contracts …………... 222
12.1.2. The influence of trade traditions on the terms of contract…………….. 223
12.1.3. Basic terms of international purchase and sale contract………………. 224
12.2. Preparation for the conclusion of international purchase and sale
contract 231
12.3. Conclusion of international purchase and sale contract………………. 233
12.3.1. Stages in conclusion of international contract………………………… 233
12.3.2. Form, moment and language of contract……………………………… 236
12.4. Performance of international purchase and sale contract……………... 236
12.4.1. Preparation of commodities for shipment…………………………...... 236
12.4.2. Foreign trade documentation………………………………………….. 237
12.4.3. Liability of the parties for violation of contract obligations………….. 241
Chapter 13. Settlement of international trade disputes……………………. 242
13.1. Settlement of international trade disputes by international commercial
arbitration……………………………………………………………... 242
13.2. Settlement of international trade disputes within the WTO…………... 245
Part VI. Payment operations under international trade contracts………... 248
Chapter 14. Essence and basic forms of international payments………….. 248
14.1. Characteristic of international payments……………………………… 248
14.2. International payments via letter of credit…………………………….. 249
14.3. International payments via encashment……………………………….. 250
Chapter 15. Tools and methods of international payments………………… 251
15.1. Tools of payment in international trade……………………………….. 251
15.1.1. Payments by bills……………………………………………………… 251
15.1.2. Payments by checks…………………………………………………… 252
15.1.3. Payments by plastic cards……………………………………………... 253
15.1.4. Bank transfer………………………………………………………….. 253
15.2. Methods of payment in international trade……………………………. 253

References…………………………………………………………………… 257

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